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ARPA Relaxes Funding Requirements for Single Employer Defined Benefit Pension Plans

Section 9705 of the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) extends the amortization period for prior year shortfalls from seven to 15 years, beginning with the 2022 plan year (or, at the election of the plan sponsor, the 2019, 2020, or 2021 plan year). Section 9706 of the ARPA both modifies and extends the funding stabilization percentages for single employer defined benefit pension plans through 2029 and allows plan sponsors to elect whether to have these modified percentages apply for all purposes or solely for the purpose of determining the plan?ÇÖs adjusted funding target attainment percentage.?á The plan sponsor may further elect whether to apply the modified percentages beginning with the 2020, 2021, or 2022 plan year.?á The ARPA is available here.?á

Employee Benefits Regulations Potentially Impacted by the Biden Administration?ÇÖs Regulatory Freeze

On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) announcing a regulatory freeze on regulations that have not taken effect as of the date of the Memo. Specifically, the Memo recommends postponing the effective date of any regulation that has been issued, but has not taken effect, for 60 days from the date of the Memo. The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review. Listed below are some of the proposed and final regulations related to employee benefits that may be subject to withdrawal or postponement under the Memo: Prohibited Transaction Exemption 2020-02 ?Çô Improving Investment Advice for Workers & Retirees. Final Rule. Application of the Employer Shared Responsibility Provisions and Certain Nondiscrimination Rules to Health Reimbursement Arrangements and Other Account-Based Group Health Plans Integrated with Individual Health Insurance Coverage or Medicare. Final Rule. Pension Benefit Statements-Lifetime… Continue Reading

IRS Releases Guidance on Floor Segment Rates Available Under Recently Passed Pension Reforms

Notice 2012-55 provides guidance on the 25-year average segment rates that are applied to adjust the otherwise applicable 24-month average segment rates that are used to compute, among other things, funding targets under defined benefit plans.?á The guidance reflects changes to the Internal Revenue Code and ERISA made by the recently enacted Moving Ahead for Progress in the 21st Century Act (?Ç£MAP-21?Ç¥).?á MAP-21 included a pension funding stabilization provision which effectively puts a floor on the segment rates used for funding purposes, based on a historical 25-year average of segment rates (effectively decreasing the current funding costs).?á In the past, employers had to make pension fund liability calculations based on the segment rate average over the past two years.?á These rates have been historically low, which increases the amount employers need to commit to meet pension funding obligations.?á Under MAP-21, generally effective for plan years beginning on or after January… Continue Reading

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