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February 4, 2008
IRS Delays Effective Date of Regulations on Funding and Benefit Restrictions for Single-Employer Pension Plans
On January 31, 2008, the Internal Revenue Service released Notice 2008-21,1 which changes the proposed effective date of certain recently proposed regulations on funding and benefit restrictions for single-employer pension plans.
When adopted in final form, the proposed regulations will be effective starting with plan years beginning on and after January 1, 2009. In the meantime, plans must follow the law. This Notice confirms that it is not necessary to comply with the proposed regulations for the 2008 plan year; a reasonable, good faith interpretation of the statutory provisions is generally allowed, with the proposed regulations as a safe harbor.
The Notice does not delay the effective date of the new pension funding provisions of the Pension Protection Act of 2006 (PPA’06), although some initial press reports on the delay may have given a different impression.
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The delay in the effective date of the regulations and the opportunity to use a reasonable interpretation of the law is welcome. This is especially true for the benefit restriction rules, which would be difficult to administer following the detailed requirements of the proposed regulations. Of course, any legal interpretations, whether under the proposed regulations or as an alternative good-faith interpretation, should be reviewed with counsel.
- To see the Notice, click here.
Compliance Alert, The Segal Company’s periodic electronic newsletter summarizing important developments affecting benefit plan compliance, is for informational purposes only. It is not intended to provide authoritative guidance. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.