IRS Adds EGTRRA and PPA Provisions to Qualification Requirements

The Internal Revenue Service (IRS) issued Notice 2007-3 containing the 2006 Cumulative List of Changes in Plan Qualification Requirements for plan administrators to consider when submitting a request for opinion, determination or advisory letters.
The list contains provisions of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) that were made permanent with passage of the Pension Protection Act of 2006 (PPA). The list also includes provisions of the PPA, but the IRS said it will not consider in its review any provisions effective in 2008 or later or provisions effective in 2007 for which no guidance has been issued.

PPA provisions added to the list include:

  • the requirement that defined contribution plans provide employees with the freedom to divest publicly traded employer securities,

  • the rule permitting the plan to treat a participant’s beneficiary under the plan the same as the participant’s spouse or dependent for purposes of hardship withdrawals,

  • the provision permitting non-taxable distributions from a qualified plan to be directly rolled over tax free to either another qualified plan or a § 403(b) plan if the separate accounting requirements are met,

  • the provision allowing non-spouse beneficiaries to roll over distributions from a qualified plan to an individual retirement plan,

  • rules for cash balance plans and other hybrid defined benefit plans,

  • the rule providing for faster vesting of employer non-elective contributions, and

  • the new interest rate assumption for applying benefit limitations to lump sum distributions from defined benefit plans.

The notice said guidance would soon be issued for the hardship, non-spouse beneficiary rollover, cash balance plan, and interest rate assumption provisions. Terminating plans must include all law changes in effect at the time of termination, according to the notice.

Revenue Procedure 2005-66 established the list to be put out annually by the IRS; set forth procedures for issuing opinion, advisory, and determination letters; and established the five-year remedial amendment cycle for individually designed plans and the six-year remedial amendment cycle for pre-approved plans.

Notice 2007-3 is here.