Sutherland Legal Alert: IRS Extends and Expands Relief, Seeks Comments on Puerto Rico Plans and Group Trusts

Sutherland Legal Alert: IRS Extends and Expands Relief, Seeks Comments on Puerto Rico Plans and Group Trusts

By Mark Smith and Jamey Medlin

IRS Notice 2012-6, to be published on January 17, 2012, extends and expands the transition relief provided under Rev. Rul. 2011-1 and Rev. Rul. 2008-40 for certain retirement plans that qualify under the Puerto Rico Internal Revenue Code and group trusts holding investments by such Puerto Rico-qualified plans. Specifically, Notice 2012-6:

  • Provides that Rev. Rul. 81-100 group trusts (now sometimes referred to as 2011-1 trusts) holding investments by Puerto Rico-only qualified plans will continue to qualify for tax-exempt status under the U.S. Internal Revenue Code (IRC) pending additional guidance from the IRS;
  • For qualified plans that participated in a group trust on January 10, 2011, extends the deadline for spinning off Puerto Rican participants to a Puerto Rico-only qualified plan to a date to be announced in future IRS guidance. This additional guidance is also expected to address the permissibility of participation by Puerto Rico-qualified plans in a group trust;
  • Extends the deadline for spin-offs to Puerto Rico-only qualified plans by one year - to December 31, 2012 - regardless of whether the transferor plan participates in a group trust. This extension is intended to provide sponsors of qualified plans benefitting Puerto Rico residents additional time to determine whether to spin off the portion of the plan benefitting Puerto Rico residents to a Puerto Rico-only qualified plan given the changes to the Puerto Rico Internal Revenue Code enacted in 2011; and
  • Extends the deadline for amending a governmental retiree benefit plan to comply with the applicable requirements of Rev. Rul. 2011-1 to the earlier of January 1, 2015, or the close of the first regular legislative session of the legislative body with plan amendment authority that begins on or after January 1, 2012.

The IRS also requests comments regarding whether eligibility for participation in a group trust should be extended to other employee plans exempt under IRC section 501 or a similar rule. Comments are due by April 16, 2012.

If you have any questions about this Legal Alert, please feel free to contact any of the attorneys listed below or the Sutherland attorney with whom you regularly work.

Adam B. Cohen 202.383.0167 adam.cohen@sutherland.com
Jamey A. Medlin 404.853.8198 jamey.medlin@sutherland.com
Alice Murtos 404.853.8410 alice.murtos@sutherland.com
Joanna G. Myers 202.383.0237 joanna.myers@sutherland.com
Robert J. Neis 404.853.8270 robert.neis@sutherland.com
Vanessa A. Scott 202.383.0215 vanessa.scott@sutherland.com
W. Mark Smith 202.383.0221 mark.smith@sutherland.com
William J. Walderman 202.383.0243 william.walderman@sutherland.com
Carol A. Weiser 202.383.0728 carol.weiser@sutherland.com

© 2012 Sutherland Asbill & Brennan LLP. All Rights Reserved.
This communication is for general informational purposes only and is not intended to constitute legal advice or a recommended
course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in
making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent
counsel before making any decisions or taking any action concerning the matters in this communication. This communication does
not create an attorney-client relationship between Sutherland and the recipient.

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