Last week, both the House and the Senate passed H.R. 7327, also known as the "Worker, Retiree, and Employer Recovery Act of 2008" ("Act"), with unanimous consent.

H.R. 7327 provides numerous technical corrections to the Pension Protection Act of 2006 and other relief applicable to governmental plans. The following is a brief summary of some of the Act's provisions of interest to governmental plans.

• Act § 103(b) amends IRC § 415(b)(2)(E)(v) to clarify that the mortality table required to be used in calculating the minimum value of optional forms of benefit is also used in adjusting benefits and limits for purposes of applying the IRC § 415 limitation on benefits that may be provided under a defined benefit plan. Mandatory for plan years beginning after Dec. 31, 2008; discretionary for plan years beginning after December 31, 2007, and before January 1, 2009.

• Act § 108(d) amends IRC § 408A(c)(3)(B) to provide that rollovers from a Roth 401(k) or designated Roth account in a 401(a) or 403(b) plan to a Roth IRA are exempt from the requirement to include recognition of the distribution in gross income and from the adjusted gross income limitations. For distributions after Dec. 31, 2007.

• Act § 108(e) makes minor corrections to the effective date of the exemption from the 10% early withdrawal penalty for "qualified reservist distributions." For distributions after September 11, 2001, and on or before Dec. 31, 2007. Made permanent after December 31, 2007, by the HEART Act.

• Act § 108(f) amends IRC § 402(f)(2)(A) to require plans to permit rollovers by non-spousal beneficiaries. For plan years beginning after Dec. 31, 2009.

• Act § 108(j) amends IRC § 402(l) to clarify that the $3,000 HELPS exclusion (for amounts paid to an eligible retired public safety officer by a governmental plan) applies to amounts paid to an insured or self-funded health plan. Years after Dec. 31, 2006.

• Act § 123 amends ADEA § 4(i)(10)(B)(i)(III) to generally treat a rate of return or method of crediting interest established pursuant to any provision of Federal, State, or local law (including any administrative rule or policy adopted in accordance with any such law) as a "market rate of return" for statutory hybrid plans (i.e. defined benefit plans with interest crediting provisions). For plan years after Dec. 31, 2007.

• Act § 124 amends IRC § 105 to permit a State or local government HRA to provide health care expense reimbursements to a designated non-spouse or non-dependent beneficiary of a deceased participant without converting all reimbursement paid by the HRA to taxable income. Applicable only to plans that provided for reimbursements to deceased member's beneficiaries on or before Jan. 1, 2008 and are funded by a medical trust established in connection with a public retirement system if the trust was authorized by a state legislature or a trust that received a favorable IRS 115 ruling. Effective for payments before, on or after the Act's enactment date.

• Act § 201 provides a one-year moratorium on 2009 required minimum distributions from 403(a) plans, 403(b) plans, eligible 457(b) plans, and individual retirement plans. (This moratorium also affects the calculation of the "five-year rule" for payments to beneficiaries.) However, amounts distributed during 2009 which would have been required minimum distributions if not for this moratorium are not treated as eligible rollover distributions for purposes of the direct rollover requirement, the written notice requirement, and the 20% mandatory withholding. However, a plan may offer a direct rollover for this amount. For 2009 required minimum distributions only.  Minimum required distributions for 2008 must still be made even if they are subject to payments in 2009.

For more information about the Act, please contact Mary Beth Braitman, Terry A.M. Mumford, Lisa Erb Harrison, Katrina M. Clingerman, or the Ice Miller LLP Employee Benefits attorney with whom you work.