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Compliance December 19, 2007
IRS Extends Relief for Employer Stock Account Diversification
December 19, 2007 (PLANSPONSOR.com) - The Internal
Revenue Service (IRS) has extended transitional relief for
defined contribution plans subject to the employer stock
diversification rights rules put in place by the Pension
Protection Act (PPA).
Reported by Rebecca Moore
In Notice 2008-7, the IRS said relief is extended until the regulations under § 401(a)(35) of the Internal Revenue Code become effective. The IRS is in the process of issuing proposed regulations and said it expects that when finalized, the regulations will not be effective before plan years beginning on or after January 1, 2009.
The PPA requires that a defined contribution plan that holds publicly traded company stock permit participants to diversify the stock accounts after three years of service. Plans must give participants a notice of their diversification rights as well as educational material about the importance of diversification no later than 30 days before they are eligible for diversification rights.
In Notice 2006-107, the IRS provided transitional relief in the 2007 plan year for notice to participants immediately eligible for diversification, as well as other transitional relief prior to plan years beginning January 1, 2008. The IRS guidance also included a model participant notice (See IRS Issues Guidance on Employer Stock Account Diversification ).
IRS Notice 2008-7 is here .