Pension plans can claim funding relief after filing Form 5500

Defined benefit pension plans that intend to seek funding relief under a recent tax law should not delay filing the annual information return required for the plan (Form 5500, Annual Return/Report of Employee Benefit Plan), the IRS advised in recent guidance. Employers and plans will not be harmed by filing their Form 5500 on time, even though they will not yet have an opportunity to claim relief.

Form 5500 is generally due at the end of the seventh month following the end of the plan year. For calendar year plans, the filing deadline for the 2009 Form 5500 was August 2, 2010, the first weekday after July 31 (the end of the seventh month). Many plans apply for a 2 ½ month extension to file their form, which the IRS generally grants. Form 5500 includes information on the funding status of the plan.

Congress provided funding relief in the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (2010 PRA Act, P.L. 111-192), enacted June 25, 2010. The law provides relief, for up to two years, from tighter funding requirements enacted by Congress in 2006 for underfunded plans. The IRS has not yet issued guidance on how plans can claim relief.

Defined benefit pension plans have annual funding requirements to pay for current benefits and for the costs of projected benefits. As plans became underfunded, Congress tightened the funding requirements, beginning with 2008 plan years. The 2010 PRA Act provides relief by giving plans longer payment periods over which they can make up shortages in required funding. The IRS relief applies to both single-employer and multiemployer plans and assures the plans that will be entitled to elect relief for particular plan years (such as 2008 or 2009) even if they have already filed Form 5500 for that year.