December 4, 2007
As another year comes to a close, employers must take a number of actions to (i) address Section 409A of the Internal Revenue Code for deferred compensation plans, (ii) comply with the Labor Department’s "qualified default investment alternative" ("QDIA") fiduciary safe harbor for defined contribution retirement plans, and (iii) begin operating their qualified retirement plans in compliance with new rules that become effective on January 1, 2008. In addition, employers whose employer identification numbers end with "2" or "7" need to file their tax-qualified plans for an IRS determination letter by January 31, 2008.
Section 409A Actions
Notice 2007-86 extended most of the Section 409A transition rules to December 31, 2008. See our October 23, 2007 client alert . However, the following actions need to be taken by December 31, 2007 in order to comply with Section 409A:
In addition, on December 3 the IRS released a new voluntary correction program for certain Section 409A violations. We plan to send out a client alert addressing the program later this week.
QDIA Safe Harbor
On October 23, 2007, the Labor Department issued final regulations setting forth the standards applicable to QDIAs. If the regulations’ requirements are satisfied, a fiduciary of a defined contribution plan that permits participants to direct investment of their accounts generally will be relieved of liability for losses experienced by participants whose account is invested in the QDIA due to the participant’s failure to elect another investment alternative. The regulations generally become effective on December 23, 2007. See our October 24, 2007 client alert.
Tax-Qualified Retirement Plans
A number of actions need to be taken both to bring plans into compliance with law changes made by final regulations under Section 415 of the Internal Revenue Code and the Pension Protection Act of 2006:
Determination Letter Applications
In Revenue Procedure 2005-66, the IRS implemented a system of staggered five-year remedial amendment cycles for individually designed plans and opened the determination letter program for changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001 and subsequent legislation. The filing deadlines generally vary based on the last number in the employer’s identification number ("EIN"). Plan sponsors whose EINs end in "2" or "7" must file applications for their plans no later than January 31, 2008 in order to be protected by the "remedial amendment period." The program then opens from February 1, 2008 through January 31, 2009 for employers whose EINs end in "3" or "8".
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or
Stephen W. Fackler (650-849-5385, email@example.com),
Charles F. Feldman (212-351-3908, firstname.lastname@example.org),
David West (213-229-7654, email@example.com),
David I. Schiller (214-698-3205, firstname.lastname@example.org),
Michael J. Collins (202-887-3551, email@example.com),
Sean Feller (213-229-7579, firstname.lastname@example.org),
Amber Busuttil Mullen (213-229-7023, email@example.com),
Jennifer Patel (202-887-3564, firstname.lastname@example.org),
Chad Mead (214-698-3134, email@example.com),
Kimberly Woolley (415-393-8225, firstname.lastname@example.org),
Jonathan Rosenblatt (650-849-5317, email@example.com), or
John C. Cook (202-887-3665, firstname.lastname@example.org).
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