Restoring Pension Benefits that Should Not Have Been Suspended: Extension for Compliance with the U.S. Supreme Court's Decision in Heinz

The Internal Revenue Service, in Revenue Procedure 2005-761¹, has extended to January 1, 2007, the date by which retirement plans must be in operational compliance with a reforming amendment in order to be eligible for the compliance relief relating to the U.S. Supreme Court decision in Central Laborers' Pension Fund v. Heinz, which the IRS granted earlier this year.

BACKGROUND

On June 7, 2004, the U.S. Supreme Court ruled in the Heinz case that amendments tightening suspension of benefit rules for credit already accrued violated the anti-cutback provisions of ERISA. In response, the IRS issued Revenue Procedure 2005-232² providing guidance about what plans that have adopted such amendments must do to retain their tax-qualified status. In accordance with this guidance, plans were required, by January 1, 2006, to adopt a reforming amendment, pay retroactive benefits to affected participants and permit certain participants to apply for benefits retroactively.³

EXTENSION OF TIME FOR OPERATIONAL COMPLIANCE

Under Revenue Procedure 2005-76, affected plans will have until January 1, 2007 to adopt a reforming amendment and comply operationally with the amendment. This means that plans will have an additional year to identify affected participants and make retroactive payments for months after June 7, 2004 in which benefits were impermissibly suspended based on the Heinz decision.

The Revenue Procedure also extends to January 1, 2007 the date for notifying participants who were eligible for benefits but failed to apply for (or were denied) benefits because they were in employment prohibited by a more restrictive suspension rule.

Segal Company consultants can be retained to work with pension plan sponsors and their administrators and attorneys to draft reforming amendments and participant notices, identify affected participants, and determine retroactive payments.

1	To see Revenue Procedure 2005-76, click here. (To return to the Compliance Alert text, click here.)
2	To see Revenue Procedure 2005-23, click here. (To return to the Compliance Alert text, click here.)
3	For more information about the Heinz decision and Revenue Procedure 2005-23, see The Segal Company's August 2005 Bulletin, "IRS Guidance on Complying with the U.S. Supreme Court Decision in Heinz: Restoring Pension Benefits that Should Not Have Been Suspended." (To return to the Compliance Alert text, 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.

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