SEC Reopens Comment Period on Application of Advisor
Act
August 20, 2004 (PLANSPONSOR.com) - The Securities
and Exchange Commission (SEC) reopened the comment period
yesterday on a 1999 rule proposal that focuses on the
application of the Adviser Act of 1940.
The proposed rule on the application of the Act has
to do with broker-dealers that offer certain full-service
brokerage services for an asset-based fee instead of
traditional commissions. Brokers who garner compensation
through asset-based fees may be the subject of regulation
under the Act. The rule proposed in 1999 would make the
nature of the services provided – rather than the form of
compensation – the principal factor in determining
whether the Act applies.
The comment period was reopened after a recent
surge in additional comments. The new deadline for
comments is now September 15
th
, with the SEC hoping to make a final ruling by the end
of the calendar year, according to an SEC press
release.
August 19, 2004 (PLANSPONSOR.com) - The Treasury
Department and Internal Revenue Service (IRS) have provided
guidance on the restrictions that are placed on plan
amendments following an employer's election of the
alternative deficit reduction contribution (DRC).
The Pension Funding Equity Act generally prohibits
benefit improvements under a plan that makes the
alternative deficit reduction contribution election, but
provides for certain exceptions.Notice 2004-59provides rules for the application of this
exception.
Oneexception laid out in the IRS’ document is where
the plan’s enrolled actuary certifies that theamendment provides for an increase in annual
contributions that willexceed the increase in annual minimum funding
requirements for theplan attributable to the plan amendment.
As the rules stood prior to the passage of the
Pension Funding Equity Act,
companies that offer defined benefit pension plans were
required to make additional contributions when they are
less than 90% funded. DRC rules require companies
to close an underfunded gap on an accelerated basis, but
that acceleration in funding flows can also impose a
significant cash flow burden on a financially troubled
employer since, during this period, they are also
required to make their normally required pension
contributions in addition to those imposed under the DRC
requirements.
The Act, which was passed on April 10, permitted
alternative arrangements to satisfy DRC
requirements
(See
Whew! Bush Signs Pension Relief
). Outlined in the Act, Section 412(I)(12) of the
Internal Revenue Code (IRC) was amended allowing
certain employers who are required to make additional
defined benefit contributions under Section 412(l) to
elect a reduced amount of those contributions for certain
plan years. More specifically, the alternative
arrangement applies to airlines and steel and iron
manufactures. Additionally, multiemployer plans
that can certify a likely funding deficiency would be
eligible to defer accounting for some investment losses
and thereby avoid payment of excise taxes for
underfunding
Companies that receive DRC relief will be required
to contribute at least the amount necessary to fund the
expected increase in current liability that results from
benefits that have accrued during the year. An
election to make the alternative DRC for any plan year
must be made by the end of the first quarter of that plan
year.