Worker, Retiree, and Employer Recovery Act of 2008
On December 23, 2008, President Bush signed into law the Worker, Retiree, and Employer Recovery Act of 2008 (the “Act”). Among other things, the Act:
- temporarily suspends during 2009 the minimum distribution requirement under Internal Revenue Code Section 401(a)(9), which requires taxpayers over 70½ years of age to take a minimum distribution from their retirement plan accounts each year;
- allows employers to “smooth” the value of pension plan assets over a 24-month period rather than require employers to use the Treasury’s mathematical average;
- allows plans to use the previous plan year to determine their funded status for purposes of calculating their workers’ ability to accrue benefits;
- allows certain multiemployer plans (i.e., plans started between October 1, 2008 and October 1, 2009) to “freeze” their status as “endangered” or “critical” for one year based on their prior year’s funding level; and
- provides an election for sponsors of multiemployer plans in endangered or critical status to extend their funding improvement or rehabilitation plan for three years.
The Act also makes certain technical corrections to the Pension Protection Act of 2006, including the requirement that company-sponsored plans offer nonspouse beneficiaries a rollover option for plan years beginning after 2009; that employers in multiemployer plans retain certain pension plan information; and that the termination of a hybrid defined benefit/defined contribution plan be effectuated on a separate plan basis. The Act also allows pension plans that offer a lump sum benefit to use a discount interest rate assumption of 5.5%.