SECTION 3. BACKGROUND — RICS

.01 Section 851(b) provides that certain requirements must be satisfied in order for a domestic corporation to be taxed as a RIC under subchapter M, part 1, of the Code.

.02 Section 851(b)(3)(A) requires that, in order for a corporation to qualify as a RIC, at the close of each quarter of the taxable year, at least 50 percent of the value of the corporation’s total assets must be represented by cash and cash items (including receivables), Government securities and securities of other RICs, and other

October 5, 2009 459 2009–40 I.R.B.

alternative approaches available if the plan sponsor determines, as described in section 432(e)(3)(A)(ii), that the plan cannot reasonably be expected to emerge from critical status by the end of the rehabilitation period using all reasonable measures). A funding improvement plan or rehabilitation plan, as applicable, must be adopted by the 330 ^th day of the plan year ( i.e., not later than 240 days after the due date for the certification of status, which is the 90 ^th

day of the plan year).

Section 432(d)(1) provides that, during the funding plan adoption period (described in section 432(d)(8) as the period beginning on the date of the plan’s certification for the initial determination year and ending on the day before the first day of the funding improvement period), the sponsor of a plan that is in endangered status may not take certain actions that would adversely affect the plan’s funded status, such as accepting a collective bargaining agreement that provides for a reduction in the level of contributions for any participants. Section 432(f)(4) provides similar rules for sponsors of critical status plans during the rehabilitation plan adoption period (described in section 432(e)(5) as the period beginning on the plan’s certification for the initial critical year and ending on the day before the first day of the rehabilitation period). For plan years following the initial endangered or initial critical year, section 432(c)(6) and section 432(e)(3)(B) require that the funding improvement plan or rehabilitation plan, as applicable, be updated to reflect the experience of the plan.

The Worker, Retiree, and Employer Recovery Act of 2008, P.L. 110–458 (WRERA), provides, in part, funding relief for multiemployer plans in endangered or critical status. Section 204(a) of WRERA provides that a multiemployer plan sponsor may elect, notwithstanding the actuarial certification of the plan’s section 432 status under section 432(b)(3) for the plan year for which the election is made (“election year”), to temporarily freeze the plan’s section 432 status so that it is the same as the plan’s section 432 status for the plan year immediately prior to the election year (“prior year”). Specifically, section 204(a)(1) of WRERA provides that a multiemployer plan sponsor may elect that the plan’s section 432 status for