The Markets December 29, 2006

Private Equity Group Sets its Sights on Capitol Hill

Ten private equity firms have teamed up to educate policymakers in Washington, DC about their business.
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The Private Equity Council (PEC) will begin its operations in February 2007 and will provide information about how the industry works to policy makers and others, according to a press release from the group.

In particular, the group will direct research and public affairs and government outreach initiatives to explain the contributions private equity makes to investors, to companies and their employees and to public employee pension funds.

Douglas Lowenstein, now president of the Entertainment Software Association and a 30-year Capitol Hill veteran, will lead the new group as its president and chief executive officer.

The inaugural roster of PEC members include:
  • Apollo Management,
  • Bain Capital,
  • The Blackstone Group,
  • The Carlyle Group,
  • Hellman & Friedman,
  • Kohlberg Kravis Roberts & Co.,
  • Madison Dearborn Partners,
  • Providence Equity Partners,
  • Silver Lake Partners,
  • Texas Pacific Group, and
  • Thomas H. Lee Partners.
Compliance December 29, 2006

IRS Calls for Comment on PPA In-Service Payout Provision

Federal regulators have turned to the public for comment on how to formulate guidance on “phased retirement″ in-service plan distributions as provided for by the Pension Protection Act (PPA).
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In Notice 2007-8, the US Treasury Department and the Internal Revenue Service (IRS) requested the input about Section 401(a)(36), which was added by the PPA’s Section 905(b).

According to the PPA, for plan years beginning after December 31, 2006, “a pension plan does not fail to qualify under §401(a) solely because the plan provides that a distribution may be made to an employee who has attained age 62 and who has not separated from employment at the time of the distribution,” the notice stated.

The regulators are asking for comments on a series of issues relating to Section 401(a)(36), including:
  • whether an in-service distribution to a participant who is at least age 62, but not yet the normal retirement age, should be capped at the actuarial equivalent of the normal retirement age benefit;
  • how to characterize subsidized benefits that are distributed to a participant who has attained age 62, but still is in-service and younger than normal retirement age, for purposes of Section 411; and
  • whether final regulations permitting in-service distributions at age 62, under a bona fide phased retirement program, still are needed given the ability of plans to permit such distributions under the newly enacted section.
Regulators first proposed the idea of a phased retirement in November 2004 with suggested regulations that would allow a qualified pension plan to make in-service distributions before normal retirement age under a bona fide phased retirement program.

The latest IRS notice said written comments are due by April 16, 2007, and should be sent to: CC:PA:LPD:DRU (Notice 2007-8), Room 5203, Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, D.C. 20044.

Comments may be hand delivered between the hours of 8 a.m. and 5 p.m., Monday through Friday, to the courier’s desk at IRS Building and marked: Attn: CC:PA:LPD:DRU (Notice 2007-8), 1111 Constitution Avenue, NW, Washington D.C. Comments also may be submitted via the Internet at notice.comments@irscounsel.treas.gov (Notice 2007-8).

Text of the latest notice is here. More information about the tax implications of PPA’s new provisions is here.

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