This list of interim and discretionary amendments for 2007 is based on the 2006 Cumulative List¹. Interim amendments are required to keep a written plan document up to date between a plan’s submission periods during the applicable remedial amendment cycles.

The general deadline for timely adoption of an interim or discretionary amendment can be found in section 5.05 of Rev. Proc. 2007-44, which clarifies, modifies, and supersedes Rev. Proc. 2005-66 . For a disqualifying provision or a provision that is integral to a disqualifying provision, an interim amendment must be adopted by the later of (1) the due date (including extensions) for filing the income tax return for the employer’s taxable year that includes the date on which the remedial amendment period begins² or (2) the last day of the plan year that includes the date on which the remedial amendment period begins. A discretionary amendment must be adopted by the end of the plan year in which the plan amendment is effective.

Section 5.06 of Rev. Proc. 2007-44 provides special amendment deadlines for tax-exempt employers and government entities.

Final regulations under § 401(a) regarding low normal retirement age [Interim]:
Under the provisions of § 1.401(a)-1(b)(2), a plan’s normal retirement age (NRA) cannot be earlier than what is reasonably representative of the typical retirement age for the industry in which the covered work force is employed. An NRA of age 62 or later is deemed to satisfy this requirement. An NRA under 55 is presumed not to satisfy this requirement unless the Commissioner determines that the facts and circumstances show otherwise. Whether an NRA between 55 and 62 satisfies this requirement depends on the facts and circumstances, but a plan sponsor’s good faith, reasonable determination will generally be given deference. For qualified public safety employees, see the age 50 safe harbor at § 1.401(a)-1(b)(2)(v).  Notice 2007-69 provides temporary relief, until the first day of the first plan year that begins after June 30, 2008, for certain pension plans under which the definition of normal retirement age may be required to be changed to comply with the regulations.  In general, sponsors of plans that will have to be amended to comply with § 1.401(a)-1(b)(2) and that are eligible for the relief under Notice 2007-69 will not have to adopt an interim amendment before the later of (a) the last day of the first plan year beginning after June 30, 2008, or (b) the due date (including extensions) for filing the employer’s income tax return for the employer’s taxable year that includes the first day of the first plan year beginning after June 30, 2008.

Final regulations under § 409(p) regarding ESOPs holding S Corp stock [Discretionary]:
The final regulations include changes in the triennial methodology to permit the ability, during the 3-year period, to accelerate a determination date prospectively in the event of a change in the plan year or any merger, consolidation, or transfer of ESOP assets under § 414(l). A determination date may not be changed retroactively and the change must be effectuated by a plan amendment adopted before the new determination date.

Amendments to § 1.411(d)-3 of the final regulations [Interim]:
The provisions under § 1.411(d)-3(a)(3) provide guidance with respect to the interaction between the anti-cutback rules of § 411(d)(6) and the nonforfeitability requirements of § 411(a). 

Final regulations under § 415:
The final regulations under § 415 generally apply to limitation years beginning on or after July 1, 2007. Although no specific plan provision is required under § 415 in order for a plan to establish or maintain its qualification, the plan provisions must preclude the possibility that any distribution (or accrual, in the case of a plan subject to § 411) under a defined benefit plan or an annual addition under a defined contribution plan will exceed the § 415 limitations.

Defined Benefit Plans

• The grandfather provisions of the regulations preserve benefit accruals prior to the effective date under plan provisions adopted and effective before April 5, 2007. 
  (§ 1.415(a)-1(g)(4)) 
  
  
• In the case of a participant who has had a severance from employment with the employer maintaining the plan and who is subsequently rehired by that employer, the period of the participant’s high-3 years of service is calculated by excluding any years for which the participant performs no services for and receives no compensation from the employer (the break period), and by treating the year of service immediately prior to and the year of service immediately after the break period as if the years were consecutive. (§ 1.415(b)-1(a)(5)(iii))
  
  
• The calculation of the actuarially equivalent straight life annuity determined using the plan’s assumptions for actuarial equivalence has been simplified for a form of benefit that is not subject to the minimum present value rules of § 417(e)(3). Under the simplified calculation, instead of first determining the actuarial assumptions used under the plan and then applying those assumptions to convert an optional form of benefit to an actuarially equivalent straight life annuity, the regulations use the straight life annuity, if any, that is payable at the same age under the plan. This straight life annuity is then compared to the straight life annuity that is the actuarial equivalent of the optional form of benefit (determined using the standardized assumptions), and the larger of the two straight life annuities is used for purposes of demonstrating compliance with § 415. (§ 1.415(b)-1(c)(2))
  
  
• See § 1.415(b)-1(d) and (e) regarding changes to the rules for age adjustments to the applicable limitations under defined benefit plans, under which the dollar limitation is adjusted for commencement before age 62 or after age 65. For example, if the plan so provides, for purposes of adjusting the dollar limit for commencement prior to age 62, a plan is permitted to make a mortality adjustment for ages below 62, even if the plan does not provide for a forfeiture upon the participant’s death before the annuity starting date where it is before age 62. 
  (§ 1.415(b)-1(d)(2))
  
  
• If a participant has or will have distributions commencing at more than one annuity starting date, the limitations of § 415 must be satisfied as of each annuity starting date, taking into account the benefits that have been or will be provided at all of the annuity starting dates. (§ 1.415(b)-1(b)(1)(iii))
  
  
• If the plan provides for the adjustment of a participant’s compensation limit in accordance with § 415(d) for limitation years following the limitation year in which the employee severs employment, the rehired employee’s compensation limit under § 415(b) is the greater of 100% of the participant’s average compensation for the period of the participant’s high-3 years of service, as determined prior to the employer’s severance from employment and as adjusted pursuant to § 415(d), or 100% of the participant’s average compensation for the period of the participant’s high-3 years of service, taking into account service both before and after rehire. 
  (§ 1.415(d)-1(a)(2)(iii))
  
  
• Certain automatic cost-of-living increases to a form of benefit that is not subject to § 417(e)(3) are not taken into account in determining the annual benefit that is actuarially equivalent to the form of benefit. (§ 1.415(b)-1(c)(5))
  
  
• See § 1.415(d)-1(a)(5) for a safe harbor for annual adjustments to distributions and § 1.415(d)-1(a)(6) for a safe harbor for periodic adjustments to distributions.
  
  
• See § 1.415(f)-1 for several changes that have been made to the employer aggregation rules.

Defined Contribution Plans

• The regulations do not contain the correction methods for excess annual additions that were in § 1.415-6(b)(6) of the 1981 regulations, although a plan eligible for self-correction under Rev. Proc. 2008-50, 2008-35 I.R.B. 464, may be able to implement corrections using these methods.
  
  
• Restorative payments allocated to a participant’s account, which include payments made to restore losses to a plan resulting from actions (or a failure to act) by a fiduciary for which there is a reasonable risk of liability under Title I of ERISA or under other applicable federal or state law, where similarly situated participants are similarly treated, do not give rise to an annual addition for any limitation year. 
  (§ 1.415(c)-1(b)(2)(ii)(C))
  
  
• Section 1.401(k)-1(e)(8) provides that with respect to compensation that is paid (or would have been paid but for a cash or deferred election) in plan years beginning on or after July 1, 2007, a cash or deferred election can only be made with respect to amounts that are compensation within the meaning of §§ 415(c)(3) and 1.415(c)-2.  A plan amendment for 2007 is required only if the plan does not provide that cash or deferred elections can only be made with respect to amounts that are compensation within the meaning of §§ 415(c)(3) and 1.415(c)-2.

All Plans

• For limitation years beginning on or after July 1, 2007, a plan's definition of compensation for a year that is used for purposes of § 415 may not reflect compensation for a year greater than the limit under § 401(a)(17) that applies to that year.  (§ 1.415(c)-2(f))
  
  
• Amounts that are includible in the gross income of an employee under the rules of § 409A or § 457(f)(1)(A) or because the amounts are constructively received by the employee are items includible as compensation.  (§ 1.415(c)-2(b)(7))
  
  
• A plan may provide that compensation for a limitation year includes amounts earned during that limitation year but not paid during that limitation year solely because of the timing of pay periods and pay dates if –
  
  (1) These amounts are paid during the first few weeks of the next limitation year;
  (2) The amounts are included on a uniform and consistent basis with respect to
        all similarly situated employees; and
  (3) No compensation is included in more than one limitation year.
       (§ 1.415(c)-2(e)(2))
  
  
• Compensation for a limitation year includes compensation paid by the later of (1) 2½ months after an employee’s severance from employment with the employer maintaining the plan or (2) the end of the limitation year that includes the date of the employee’s severance from employment with the employer maintaining the plan, if – (a) the payment is regular compensation for services during the employee’s regular working hours, or compensation for services outside the employee’s regular working hours (e.g., overtime or shift differential), commissions, bonuses, or other similar payments and the payment would have been paid to the employee prior to a severance from employment if the employee had continued in employment with the employer; or (b) the payment is for unused accrued bona fide sick, vacation, or other leave, but only if the employee would have been able to use the leave if the employee had continued in employment, and the plan provides that the payment is included in § 415(c)(3) compensation; or (c) received by an employee pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid to the employee at the same time if the employee had continued in employment with the employer and only to the extent that the payment is includible in the employee’s gross income, and the plan provides that the payment is included in § 415(c)(3) compensation. (§ 1.415(c)-2(e)(3))
  
  
• The rule that otherwise excludes post-severance pay from compensation does not apply to (1) payments to an individual who does not currently perform services for the employer because of qualified military service or (2) to compensation paid to a participant who is permanently and totally disabled. (§ 1.415(c)-2(e)(4))

Katrina Emergency Tax Relief Act (KETRA) of 2005 [Discretionary]: Conforming plan amendments relating to Katrina distributions and/or loans must be made on or before the last day of the first plan year beginning on or after January 1, 2007. For governmental plans, the plan must be amended on or before the last day of the plan year beginning on or after January 1, 2009. 

Gulf Opportunity Zone Act of 2005 (GOZA) § 1400Q [Discretionary]:
GOZA extends some of the provisions of KETRA to victims of Hurricanes Rita and Wilma.  Any amendment which is made pursuant to any provision of GOZA § 1400Q must be made on or before the last day of the first plan year beginning on or after January 1, 2007. For governmental plans, the plan must be amended on or before the last day of the first plan year beginning on or after January 1, 2009.

PPA ’06 Provisions 

Under section 1107 of PPA ’06, a plan sponsor is permitted to delay adopting a plan amendment pursuant to statutory provisions under PPA ’06 or pursuant to any regulation issued under PPA ’06 until the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011 in the case of governmental plans).  This amendment deadline applies to both interim and discretionary amendments that are made pursuant to PPA ’06 or any regulation issued under PPA ’06. See, Rev. Proc. 2007-44, section 5.07(2).

§ 401(a)(35) [Interim]: § 401(a)(35) was added by PPA ’06 901(a)(1) requiring that defined contribution plans provide employees with the freedom to divest publicly traded securities. See, Notice 2006-107.

§ 401(k) [Discretionary]: PPA ’06 § 828 modified the rules relating to distributions from a § 401(k) plan on account of a participant’s hardship to permit the plan to treat a participant’s beneficiary under the plan the same as the participant’s spouse or dependent. See, Notice 2007-7.

§ 401(k)(2)(B)(i)(V) [Discretionary]: PPA ’06 § 827 permits reservists called to active duty after September 11, 2001 and before 2008 to take in-service distributions from a § 401(k) plan.

§ 402(c)(2)(A) [Discretionary]: PPA ’06 § 822(a) amended § 402(c)(2)(A) to permit nontaxable 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.

§ 402(c)(11) [Discretionary]: PPA ’06 § 829(a)(1) added § 402(c)(11) to allow nonspouse beneficiaries to roll over distributions from a qualified plan to an individual retirement plan. Nonspouse beneficiary rollovers are an optional plan provision for 2007. See, Notice 2007-7. Pursuant to an impending technical correction, nonspouse beneficiary rollovers will be required for plan years beginning on or after January 1, 2008.  See, section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007, as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the Pension Protection Technical Corrections Act of 2007, as introduced in the House of Representatives on August 3, 2007.

§ 411 [Interim]: PPA ’06 § 701 provides rules for cash balance plans and other hybrid defined benefit plans. See, Notice 2007-6.

§ 411(a)(11) [Interim]: § 411(a) was amended by PPA ’06 § 904 to provide for faster vesting of employer nonelective contributions. See, Notice 2007-7.

§ 415(b)(2)(E)(ii) [Interim]:  Section 415(b)(2)(E)(ii) was amended by § 303 of PPA ’06 regarding the interest rate assumption for applying benefit limitations to lump sum distributions.  See, final regulations under § 415 and Notice 2007-7.

§ 415(b)(11) [Interim]: PPA ’06 867(a) removed the 100% of compensation limitation for a church plan participant if the participant has never been a highly compensated employee of the church. See, final regulations under § 415.

§§ 402(f), 411(a)(11), 417 [Discretionary]: PPA ’06 § 1102(a) provides that notice required to be provided under §§ 402(f), 411(a)(11), or 417 may be provided as much as 180 days before the annuity starting date. See, Notice 2007-7.

§ 417 [Interim]: PPA ’06 § 1102(b) directs the Secretary to modify the regulations under § 411(a)(11) and § 205 of ERISA to provide that the description of a participant’s right to defer a distribution must also include a description of the consequences of failing to defer receipt of a distribution. See, Notice 2007-7.

Note regarding § 415(b)(2)(E)(ii): The Pension Funding Equity Act of 2004 (PFEA) amended § 415(b)(2)(E)(ii), applicable for plan years beginning in 2004 and 2005. Under § 101(c) of PFEA, the deadline to amend plans to comply with the changes to § 415(b)(2)(E)(ii) was the last day of the first plan year beginning on or after January 1, 2006. Section 301(c) of PPA ’06 extended the deadline to amend plans to comply to the last day of the first plan year beginning on or after January 1, 2008. An impending technical correction would extend the deadline to amend plans to comply to the last day of the first plan year beginning on or after January 1, 2009. See, section 4(a) of S. 1974, the Pension Protection Technical Corrections Act of 2007, as introduced in the Senate on August 2, 2007 and section 4(a) of H.R. 3361, the Pension Protection Technical Corrections Act of 2007, as introduced in the House of Representatives on August 3, 2007.

¹The Service has been asked if an interim amendment is required for gap-period income based on the final regulations under § 402(g). There is currently a pending technical correction regarding gap-period income. The Service is looking at this issue and will address as soon as possible the question of whether an interim amendment is required.

²The remedial amendment period begins on the date on which the change becomes effective with respect to the plan or, in the case of a provision that is integral to a qualification requirement that has been changed, the first day on which the plan is operated in accordance with the provisions as amended.