§4980F Failure of applicable plans reducing benefit accruals to satisfy notice requirements

Summary

A tax applies when a pension plan cuts the rate at which future benefits grow but does not give the required notice about that change. The tax is $100 for each day that each affected person goes without the notice. The daily tax runs from the day the notice was missed until the notice is given or the problem is fixed. No tax is charged if the person who would pay it didn’t know about the missed notice and acted with reasonable care. No tax is charged if that person acted with reasonable care and then gave the required notice within 30 days after they knew (or reasonably should have known) about the problem. If the responsible person showed reasonable care, the total tax for the year cannot be more than $500,000. The IRS can reduce or cancel the tax if the failure was for a good reason and not on purpose. The employer is responsible for the tax for single-employer plans. For multiemployer plans, the plan itself is responsible. When a plan is changed to cut future accruals, the plan administrator must give a clear written notice to each affected person, to any union that represents them, and to each employer who must contribute. The notice must be easy to understand and give enough details under IRS rules. The IRS can allow a simpler notice or exempt small plans (fewer than 100 people with accrued benefits) and plans that let people pick the old or new formula. The notice must be given a reasonable time before the change takes effect, can be sent to a person someone designates in writing, and will count as given early if the change is not materially changed before it is adopted. "Applicable individual" means plan participants and certain alternate payees. "Applicable pension plan" means certain defined benefit plans or account plans that must meet funding rules. The IRS may allow use of new technologies to send the notice.