IRS Provides Limited Relief From Relative Value Disclosure Deadline on February 1, 2006
01/18/2006In the Winter 2006 issue of the Employee Plans News, the IRS quietly announced limited "relief" by delaying relative value disclosure compliance until December 31, 2006 from the original February 1, 2006 deadline. However, the announced delay in fact provides little relief for plan sponsors from the February regulatory deadline.
Under final IRS regulations published on December 13, 2003, new disclosure requirements apply to all defined benefit plans and to defined contribution plans subject to qualified joint and survivor annuity (QJSA) rules. These regulations require all defined benefit plans to provide QJSA explanations that include new quantitative and relative value comparisons of the available optional payment forms and other new explanatory text (see May 25, 2004 On the Subject. Plan sponsors must comply with the December 2003 quantitative and relative value requirements for February 1, 2006 and later annuity starting dates. Many plans with optional benefit forms subject to Code Section 417(e)(3), such as a lump sum distribution, must comply with an earlier October 1, 2004 deadline.
According to the Winter 2006 issue of Employee Plans News (http://www.irs.gov/pub/irs-tege/win06.pdf), the IRS will provide limited relief until December 31, 2006 from the original February 1, 2006 deadline for full compliance. A good faith effort to comply with the December 2003 final IRS regulations will satisfy the requirements for QJSA explanations provided before January 1, 2007. Since this delay only provides relief for "substantial" rather than "full" regulatory compliance for an additional 11-month period, plan sponsors may not rely upon 1988 IRS regulations for QJSA explanations provided to participants with annuity starting dates on or after February 1, 2006. Finally, since this limited relief applies to QJSA explanations provided before January 1, 2007, and since QJSA explanations are often provided as far as 90 days in advance of a retirement or annuity starting date, the announced limited relief may extend to retirement benefits that commence well after January 1, 2007.
