Code Section 436

Code Section	Effective Date	Name of Act	Name of Provision	10yr Revenue Estimate ($millions)
436	*10/1/2008	Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ¹⁰⁵⁵	Lookback for certain benefit restrictions	**See section 430

* Notes on Effective Date

The provision generally is effective for plan years beginning on or after October 1, 2008. In the case of a plan for which the valuation date is not the first day of the plan year, the provision applies to plan years beginning after December 31, 2007.

**Notes on Revenue Estimate

See section 430, provision: Extended period for single-employer defined benefit plans to amortize certain shortfall amortization bases.

Lookback for certain benefit restrictions

1. Limitation on future benefit accruals

The provision extends the temporary modification of the limitation on benefit accruals under section 203 of WRERA to the plan year beginning during the period of October 1, 2009 through September 30, 2010 and provides a special rule for any plan for which the valuation date is not the first day of the plan year. Under the provision, in the case of any plan year beginning during the period of October 1, 2008, through September 30, 2010, the future benefit accrual limitation rules under section 436 are applied by substituting the plan’s adjusted funding target attainment percentage for any such plan year with the plan’s adjusted funding target attainment percentage for the plan year beginning on or after October 1, 2007,¹⁰⁹⁵ and before October 1, 2008, as determined under rules prescribed by the Secretary. In the case of a plan for which the valuation date is not the first day of the plan year, for any plan years beginning after December 31, 2007, and before January 1, 2010, the future benefit accrual limitation rules under section 436 are applied by substituting the plan’s adjusted funding target attainment percentage for any such plan year with the plan’s adjusted funding target attainment percentage for the last plan year beginning before November 1, 2007, as determined under rules prescribed by the Secretary.

This substitution only applies if it results in a greater adjusted funding target attainment percentage for a plan for the relevant plan year. Thus, the future benefit accrual limitation of section 436 is avoided if the plan’s adjusted funding target attainment percentage for the plan year beginning on or after October 1, 2007,¹⁰⁹⁶ and before October 1, 2008, is 60 percent or greater (or, in the case of a plan for which the valuation date is not the first day of the plan year, if the adjusted funding target attainment percentage for the plan year beginning before November 1, 2007 is 60 percent or greater). Because the provision applies to the same period as section 203 of WRERA, it explicitly provides that section 203 of WRERA applies to a plan for any plan year in lieu of the provision only to the extent that such section produces a higher adjusted funding target attainment percentage for such plan for such year.

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2. Prohibited payments

Under the provision, in the case of any plan year beginning during the period of October 1, 2008, through September 30, 2010 (or, in the case of plan where the plan’s valuation date is not the first day of the plan year, for any plan years beginning after December 31, 2007, and before January 1, 2010), the same substitution of the plan’s adjusted funding target attainment percentage as applies for purposes of the limitation on benefit accruals also applies for purposes of determining whether a plan can pay a prohibited payment in the form of a social security leveling option. For this purpose, a social security leveling option is a payment option which accelerates payments under the plan before, and reduces payments after, a participant starts receiving social security payments in order to provide substantially similar payments before and after such benefits are received.

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1055- H.R. 3962. The bill originated as the Affordable Health Care for America Act and passed the House on November 7, 2009. The Senate passed the bill with an amendment substituting the text of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 by unanimous consent on June 18, 2010. The House agreed to the Senate amendment on June 24, 2010. The President signed the Act on June 25, 2010.
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1095- A technical correction may be needed to make clear that the plan’s adjusted funding target attainment percentage that is substituted is the percentage for the plan year beginning on or after (rather than after) October 1, 2007.
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1096- A technical correction may be needed to make clear that the plan’s adjusted funding target attainment percentage that is substituted is the percentage for the plan year beginning on or after (rather than after) October 1, 2007.
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