IRS Reportedly to Issue Guidance on Several PPA Items

November 29, 2006 – Industry journals are reporting that the IRS intends to issue guidance by the end of December on several items in the Pension Protection Act of 2006 (PPA). This is said to include temporary relief from the requirement that certain plans with publicly-traded employer securities provide right-to-diversify notices to participants 30 days prior to the date a participant may exercise this right. PPA’s provisions that guarantee the right to diversify investments out of employer securities take effect in 2007 plan years, meaning January 1, 2007, for calendar plans.  Under a strict interpretation of the requirements, employees who would be eligible to diversify as of January 1, 2007, would have to receive the notice by December 2, 2006. Reports suggest that the IRS will delay the notice requirement to January 1, 2007. No mention has been made of delaying the actual right to diversify, however. 

Guidance is also expected in December on the PPA provision allowing tax-free treatment of certain IRA distributions made directly to qualified charities.