From the Executive Director

By Judy Miller • September 17, 2015 • 0 Comments

We’ve had more than the usual amount of guidance coming out in August and September — 2016 mortality tables, final IRC §430 regulations originally proposed in 2008, and final PBGC reportable events regulations. No surprise that we did not get everything we asked for in our §430 comment letter, but we did get standing elections for using credit balances to meet quarterly contribution obligations, and guidance on end of year valuations — including automatic approval for changing the valuation date to the plan termination date in the year of termination. There will definitely be new material for the DB regulatory update at Annual Conference in October. 

I hope this flurry of activity leads to even more. There are some critical items still on our IRS/Treasury wish list, including additional automatic approval of changes in funding method and resolution to the disqualification and deduction issues surrounding IRC §412(d)(2). 

ASPPA and ACOPA sent a letter to the IRS regarding the need for additional automatic approvals in June 2012. We had asked for automatic approval for: 

  • Changes in asset valuation method from fair market value to smoothed or smoothed to fair market value. 
  • Changes in valuation date for small plans which have discretion regarding the choice of such date. 
  • Changes in the actuarial organization performing the valuation and changes in valuation software. 
  • Changes in the valuation interest rate set from segment rates to the full yield curve, or the reverse, as well as changes in the look-back period for determining the interest rates.

Earlier this year, we were provided with guidance on automatic approval where there is a change in actuary or valuation software. The need for automatic approvals is always on the agenda at our ASPPA/ACOPA May government affairs meeting with IRS and Treasury. IRS understands the need for the additional automatic approvals, but it is unclear where it stands on their priority list. 

IRC §412(d)(2) has been a frustrating issue. You may recall that the 2011 Gray Book, Q&A 4, appeared to say that §412(d)(2) is not really available anymore. (This was a hot topic of discussion on our listserve at the time.) The law seems terribly clear, and we wrote our first letter.   

A few years after that first letter, we became aware of some IRS reps threatening disqualification for retroactive amendments adopted within 2-1/2 months of the end of the year when reviewing determination letter applications for plan terminations. That, and the lack of a formal response to our first letter, led to a second letter being filed in June 2014. 

We have discussed both the deduction and qualification concerns atour face-to-face meetings with IRS and Treasury in May. We were told that the determination letter requests would be put on hold, and it appears that has been the case. Discussion about the election to consider the amendment for §430 purposes has been more lively. We have been told that they are working on both the qualification and §430 issues, but not sure if guidance will be out sooner or later. Meanwhile, my understanding is that the determination letter requests will remain in suspense. I am not aware of any taxpayers being denied a deduction because of IRS’s position on §412(d)(2). If you hear of anyone, please let me know at jmiller@usaretirement.org.