Headlines about "Actuarial - funding of pensions"
Gathered from the web by the editors at BenefitsLink.com.
Pension Finance Update, November 2009
Excerpt: "In our monthly pension finance update, we review changes in market-driven assets and liabilities during the month of October. While both asset levels and discount rates generally fell during the month, funded ratios for many plans will be very similar to those that they experienced at December 31, 2008." (JPMorgan)
[Official Guidance] Funding Yield Curve Segment Rates Updated for November 2009
Excerpt: "The 24-month segment rates are used for minimum funding requirements if a plan's first plan year begins after 2007, or if an election is made not to use the transitional rule of ?430(h)(2)(G) of the Code. The following rates are the 24-month segment rates for use with respect to the applicable month and year listed." (Internal Revenue Service)
State and Local Pension Gap May Be $1 Trillion
Excerpt: "U.S. state and local government pensions are underfunded by $1 trillion and may need to seek federal guarantees for their debt, according to Orin Kramer, chairman of New Jersey's Investment Council." (Bloomberg)
[Guidance Overview] Defined Benefit Plan Funding Relief Bill Introduced; Implications for Plan Sponsors
Excerpt: "Congressmen Pomeroy (D-ND) and Tiberi (R-OH) have introduced the Preserve Benefit and Jobs Act of 2009, a bill implementing many of the defined benefit plan funding relief proposals being advocated by sponsor and participant groups. In this article we review the bill and its implications for plan sponsors." (J.P. Morgan)
Springfield Missouri Voters Approve Tax to Top Up Underfunded Firefighter Pensions
Excerpt: "The city's proposed 3/4-cent sales tax to bolster the underfunded Police and Fire Pension Fund passed with 54.6 percent of the vote." (Springfield Business Journal)
Christie Victory Could Mean Reform for New Jersey Pensions
Excerpt: "The pending arrival of the first Republican governor in New Jersey since 1997 also has renewed hope among some Democratic lawmakers that they can overhaul the state's pension system for public employees, which is underfunded by more than $34 billion." (Bloomberg)
[Official Guidance] Court Says Participant in Overfunded Defined Benefit Plan Has No Standing to Sue for Fiduciary Duty Breaches
Excerpt: "[The 8th Circuit majority] held that plan participants 'would if anything be adversely affected by subjecting the Plan and its fiduciaries to costly litigation.'" (PLANSPONSOR)
[Guidance Overview] Pension Plan Amendments Required to Reflect Section 436 Contingent Limitations on Benefits
Excerpt: "Time is running out for sponsors of defined benefit pension plans to adopt amendments that must be made by the end of the year to provide for limits on benefit payments and benefit accruals as required under section 436 of the Internal Revenue Code. These limits apply in the event that the plan falls short of funding targets established under the Pension Protection Act of 2006 (PPA). Limits start to apply if the plan's adjusted funding target attainment percentage (AFTAP), as certified by the plan's actuary, falls below 80 percent, and additional and stricter limits apply if the plan's AFTAP falls below 60 percent." (Faegre & Benson)
Will Rising Required Benefit Plan Contributions Encourage Collapse of the Municipal Bond Market?
Excerpt: "[In a report entitled 'Dark Vision: The Coming Collapse of the Municipal Bond Market', Frederick J. Sheehan] notes that 'spending is rising and revenue is collapsing' for all levels of government. Pension fund losses will require governments to double their contributions to pension plans . . . ." (Phillip Greenspun)
[Opinion] Jobs in Peril: Assessing the Impact of Increases in Defined Benefit Plan Funding Obligations on Employment During an Economic Recession (PDF)
25 pages. Excerpt: "[C]ash-strapped companies are faced with the challenge of diverting to their defined benefit plans substantial amounts of money that could be used by these companies for productive capital investment. The employers who have made a long-term commitment to provide a defined benefit plan for their employees now face increases in their defined benefit funding obligations that threaten both the existence of these employers and the jobs of their employees. These extraordinary pension funding requirements potentially threaten the continued viability of those employers who sponsor defined benefit plans and could derail the economic recovery by forcing these employers to either severely curtail their capital investments or make further reductions in their workforces." (American Benefits Council)
Stock Gains Don't Rescue Pension Funding
Excerpt: "The stock market's 15% leap in the third quarter helped out companies on two fronts: their share prices rose, and they got a good return on their own equity investments. But one thing the bull run did not do was trigger a rise in the funded status of defined-benefit pension plans. Counter intuitively, the average funding level for plan sponsors among the S&P 1,500 companies actually fell one percentage point in the quarter, to 81% of what would be needed to pay for expected future pension obligations . . . ." (CFO.com)
Key Characteristics of Public Employee Pension Funds, Revised October 2009 (PDF)
22 pages. Excerpt: "The Public Fund Survey is an online compendium of key characteristics of the nation's largest public retirement systems and is sponsored by the National Association of State Retirement Administrators and the National Council on Teacher Retirement for the purpose of increasing knowledge and understanding of the public pension community. . . . This year's Summary is the first following the sharp drop in global investment markets that occurred in 2008. . . . The fall in asset values has caused aggregate funding levels to move downward from 86.7 percent in FY 07 to 85.3 percent in FY 08." (National Association of State Retirement Administrators)
Report Links Pension Funding Obligations to Layoffs
Excerpt: "Companies and business groups are telling lawmakers that the stepped-up pension funding is coming at the worst possible time -- in the middle of a severe economic downturn." (Workforce Management)
[Guidance Overview] Bill to Ease Multiemployer Pension Funding Is Introduced in Congress (PDF)
2 pages. Summarizes the multiemployer features of newly proposed pension funding relief legislation: the Preserve Benefits and Jobs Act of 2009 (PB&J Act), which was introduced by Congressmen Pomeroy and Tiberi. (Segal Company)
U.S. Census Bureau Report: Finances of Selected State and Local Government Employee Retirement Systems
Excerpt: "Finances of Selected Public Employee Retirement Systems is a quarterly survey that provides national summary data on the revenues, expenditures, and composition of assets of the largest public employee retirement systems. This survey currently consists of a panel of 100 retirement systems, which comprise 89.4 percent of financial activity among such entities. After a census has been taken, it is considered best practice to reselect the largest 100 retirement systems." (U.S. Census Bureau)
Ways and Means Committee Holds Hearing on DB Plan Funding and Investment Advice
Excerpt: "On Oct. 1, 2009, two panels testified before the House Committee on Ways and Means on retirement-related matters. The first focused on, and lobbied for, defined benefit (DB) pension funding relief. The six panelists, including Watson Wyatts director of Retirement Research, Mark Warshawsky, Ph.D., provided a wide range of experience and expertise. While it was universally accepted that pension relief is necessary, panelists disagreed about its form and who should receive it. Some advocated temporary relief from certain provisions of the Pension Protection Act of 2006 (PPA), while others argued for permanent changes to the law. The second panel focused on investment advice provided to defined contribution (DC) participants, specifically who can give investment advice to employees and how it should be provided." (Watson Wyatt Worldwide)
DB Plan Funding Update: Extending the Analysis Period Shows the Need for Smoother Funding Relief
Excerpt: "In a series of studies since the global financial crisis began, Watson Wyatt has projected the regulatory funded status and minimum required contributions for single-employer defined benefit (DB) plans, in the aggregate.1It has serially updated the analysis to reflect changing market conditions, new regulations and enacted or proposed temporary legislative relief. The studies have contributed to fruitful discussions with sponsors, regulators and legislative staff in the pension community; indeed, the article published in the October 2009 Insider underlay Mark Warshawsky's Oct. 1 testimony to the House Ways and Means Committee. This new study continues that effort by incorporating market conditions to Oct. 15, 2009, adding two proposed legislative relief provisions and extending the funding horizon out to 2013." (Watson Wyatt Worldwide)
[Opinion] Bill to Ease Multiemployer Pension Funding Is Introduced in Congress (PDF)
2 pages. Excerpt: "Funding relief legislation for multiemployer pension plans was introduced in the U.S. House of Representatives on October 27. H.R. 3936, the Preserve Benefits and Jobs Act (PB&J Act), sponsored by Representatives Earl Pomeroy (D-ND) and Patrick Tiberi (R-OH), includes extensive relief for single employer plans as well. This is a notable starting point, but Congress is still a long way from passing legislation to make it easier for trustees, employers and unions to deal with the impact of the 2008 market losses on pension plan funding." (The Segal Group, Inc.)
Bill Would Extend Time to Fund Pension Plans
Excerpt: "A bill introduced on Tuesday in the House would give struggling employers the option of spreading out required contributions to retirement plans over nine years, rather than the seven years they are now allowed. Under the proposal, companies would make only token payments for the first two years. To discourage companies from joining the many businesses that have frozen pension benefits for workers, Congress would also give employers up to 15 years to fully fund their plans if they agreed not to freeze benefits." (The New York Times; free registration required)
[Guidance Overview] Notice of Funding-Based Restriction on Lump-Sums Not Required for Participants in Pay Status
Excerpt: "CCH Note: The Treasury Department was authorized by the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458) to prescribe rules (in consultation with the Labor Department) governing the ERISA-required notice of funding based limitations on distributions. The instant guidance has been issued pursuant to this authority. In addition, the IRS has further indicated that it will set forth (and presumably expound upon) the relief in upcoming guidance." (Wolters Kluwer)
Pension Funding Relief, PBGC Improvements Called for in HELP Committee Hearing
Excerpt: "In testimony Thursday before the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP), witnesses urged legislators to loosen up funding rules for defined benefit pension plans. Richard Jones, Chief Retirement Actuary at Hewitt Associates, said the perils that DB plans are facing today are not only due to the struggling economy, but are exacerbated by regulatory changes that limit the flexibility in how and when companies fund their plans. 'The imminent need is for temporary relief to help employers solve the funding problems exacerbated by the recession,' he said." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS's Final Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
9 pages. Excerpt: "Guidance is still needed on related important areas not addressed in the final regulations. The IRS indicates that future regulations will be issued covering many of these areas, such as participant notices about benefit restrictions, quarterly contributions, mergers/spinoffs, and expenses to be included in target normal cost." (Buck Consultants)
Pension Funding Relief Bill Makes Congressional Debut
Excerpt: "Rep. Earl Pomeroy, D-North Dakota, introduced a bill Tuesday, October 27, that would give businesses some breathing room from the strict funding rules imposed by a landmark pension reform bill than went into effect last year. . . . 'Without additional action, January 1, 2010, will bring to bear very significant additional funding requirements,' said Pomeroy, a member of the House Ways and Means Committee. 'This is going to put extraordinary pressure on companies to freeze their pension plans.'" (Workforce Management; free registration required)
Fact Sheet on the Preserve Benefits and Jobs Act Introduced by Congressmen Earl Pomeroy and Pat Tiberi (PDF)
1 page. Excerpt: "Congressman Pomeroy and Tiberi believe Congress should pass reasonable pension funding relief to keep employees working and give them security in knowing their pensions will be there when they need them." (American Benefits Council)
House Members Introduce Pension Funding Relief Measure
Excerpt: "U.S. House Representatives Earl Pomeroy (D-North Dakota) and Pat Tiberi (R-Ohio) have introduced a bill to further ease funding requirements for defined benefit plan sponsors. The Preserve Benefits and Jobs Act expands pension funding relief provided in the Worker, Retiree and Employer Recovery Act (WRERA) in 2008 and the Department of the Treasury regulatory guidance for 2009 reducing employer contributions. The Congressmen said the funding relief would continue worker and retirees' protections against pension benefit accruals being frozen in 2009 and 2010, as enacted by WRERA, and would protect future retirees by prohibiting pension plans from being drained by lump sum ad hoc benefits to certain individuals." (PLANSPONSOR.com; free registration required)
[Guidance Overview] IRS Regulations on Pension Funding and Benefit Restrictions (PDF)
2 pages. Excerpt: "The Internal Revenue Service and the Treasury Department recently published final funding regulations for single-employer pension plans, which will generally first take effect for the 2010 plan year. Employers can also rely on these regulations for 2008 and 2009, if they choose. The regulations contain a large amount of technical details. This Bulletin gives a high-level summary of key provisions that might be of interest to private sector employers. It notes highlights of the following: The rules for determining minimum required contributions and The rules for how benefit restrictions are administered." (The Segal Group, Inc.)
Sustainable Funding Practices of Defined Benefit Pension Plans, 2009 (PDF)
3 pages. Excerpt: "Recommendation. The Government Finance Officers Association (GFOA) recommends that state and local government officials ensure that the costs of the benefits promised in public employee DB plans are properly measured and reported, in accordance with generally accepted accounting principles (GAAP)1. The GFOA believes sustainability requires that governments that sponsor or participate in a defined benefit pension plan contribute the full amount of their actuarially determined annual required contribution (ARC) each year. Failing to fund the ARC during recessionary periods impairs investment returns by depriving the fund of its opportunity to invest when stock prices are low. Long-term investment performance will suffer and ultimately require higher contributions." (Government Finance Officers Association of the United States and Canada)
[Opinion] The Colorado Public Pension Fund's Board Needs to Attach Financial Values to Complex Recovery Plan It Is Presenting to Lawmakers
Excerpt: "The board of the state's financially troubled retirement fund has come up with a rescue plan that involves a good bit of fiscal pain and sacrifice. It appears to be a commendable starting point for state lawmakers in that it involves the sort of shared sacrifice we've supported in the past. Predictably, governments -- meaning taxpayers -- would be on the hook for what could be a significant part of the bailout. And while that's concerning, a more troubling element, we think, is the failure of the Colorado Public Employees Retirement Association pension board to attach financial values -- real dollars -- to the various components of the complex plan it's presenting to state lawmakers. PERA officials told us they couldn't supply such figures. The legislature ought to demand the information before moving forward with a plan to prop up PERA, which is facing $27.5 billion in unfunded liabilities." (The Denver Post)
[Guidance Overview] IRS's Final Rule on Pension Funding and Benefit Restrictions (PDF)
2 pages. (Milliman)
[Guidance Overview] Final Regs on Benefit Restrictions for Underfunded Plans, Measurement of Plan Assets and Liabilities
Excerpt: "Underfunding presumptions: The regulations set forth a series of presumptions that are used to apply the Code Sec. 436 benefit limitations in situations where the plan's enrolled actuary has not yet issued a certification of the plan's AFTAP for the plan year and that describe the interaction of the application of those presumptions on plan operations with plan operations after the plan's enrolled actuary has issued a certification of the plan's AFTAP for the plan year. The rules in the final regulations have been revised from those in the proposed regulations." (Wolters Kluwer)
Market Decline Could Affect Public Pensions for Several Years, According to Report
Excerpt: "The Public Fund Survey sponsored by the National Association of State Retirement Administrators and the National Council on Teacher Retirement indicates that the market decline in 2008 resulted in a median investment return for public pension funds of -25.3% for the year. According to the report, the fall in asset values has caused aggregate funding levels to move downward from 86.7% in FY07 to 85.3% in FY 08. However, the report notes that because public pension actuarial methods are designed to temper the effect of market volatility, public pensions will recognize the investment losses incurred in 2008 over several years. During this recognition period, funding levels are expected to decline, although losses may be partially offset with investment gains." (PLANSPONSOR.com; free registration required)
A Call for Papers: Funding Strategies for Single Employer Defined Benefit Plans under PPA
Excerpt: "The Pension Section Research Team is seeking papers outlining effective funding strategies under PPA. It is not expected that there is a one-size fits all approach. As such, authors are encouraged to share their opinions and perspectives. Primary considerations of interest include what conditions make a given strategy appropriate, when strategies need to be reviewed and/or revised, and how robust a single strategy can be. Papers considering stochastic methodology and issues are also of interest. . . . Please submit an abstract or outline of your proposed paper by December 15, 2009 . . . ." (Society of Actuaries)
In Louisiana, Information on Current Public Retirement Plan Differs
Excerpt: "Legislators studying changes to the state employees retirement systems received contradictory information Monday on the cost and effects of closing the pension plan. However, the systems' benefit structure and debt load could be too costly to change at this time anyway, national retirement experts said. . . . The state House and Senate retirement committees heard from the systems and other national groups about defined-contribution plans, which are similar to 401(k)s and require employees to manage their own investments. . . . The meeting stems from a study resolution by House Speaker Jim Tucker, R-Terrytown, which seeks to determine the feasibility of establishing a defined-contribution plan for all new employees hired on and after July 1, 2010, in the four state public retirement systems." (The Advocate)
A ''Tipping Point'' for Public Pensions?
Excerpt: "Any discussion of the serious issues affecting public pension funds today must begin with talking about what's going on in our nation. Public pensions exist within a broader societal context and are not immune from factors affecting society in general. Further, taxpayers pay for public pensions. Therefore the mood and plight of our society and taxpayers is important to take note of in discussing the challenges facing public pensions." (Benchmark Financial Services, Inc.)
Preserving Financially Sound Defined Benefit Pensions in Challenging Market Environments (PDF)
6 pages. Excerpt: "The severe decline in the financial markets has resulted in significantly higher contribution rates for many public plans at a time when sponsoring governments are under substantial fiscal stress.As a result, many governments are looking for strategies to mitigatethis impact by managing contribution rates, changing benefits, or changing actuarial methods and assumptions. This paper discusses the advantagesand disadvantages of several approaches. However, care should be taken to understand the downside of these strategies and their likely long-term impact on plan funding." (Gabriel Roeder Smith & Company)
[Guidance Overview] 2010 Dollar Limitations for Pension Plans Unchanged
Excerpt: "The IRS has announced the cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2010. The dollar limits that apply to qualified plans (and the 403(b) and 457(b) plan deferral limits) remain unchanged from 2009. Recently, practitioners had speculated whether any of the dollar limits actually would decrease for 2010, since the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008. However, the IRS interpreted the applicable statutory provision (Code ?415(d)) to mean that any decline in the applicable index cannot result in a reduced limitation. The . . . table summarizes the key dollar limits." (SunGard Relius)
Virginia Retirement System Defers Accounting Rule to Cut Costs
Excerpt: "The board of the Virginia Retirement System agreed to an accounting change that will save the government from large contribution rate increases to fund the plan for state employees, teachers, and other public employees. The Richmond Times-Dispatch reports that the Board of Trustees voted unanimously to suspend an accounting rule that requires the state to fund the retirement plan within 20% of its fair market value. Without the change, the state would have had to raise its contribution rate for state employees and public school teachers by almost 50%." (PLANSPONSOR.com; free registration required)
Proposed Colorado Public Employees Retirement Association Pension Fund Fix Includes Greater Contributions from Workers
Excerpt: "Government workers would have to contribute more of their salaries while getting less in benefits under a plan proposed Friday to rescue the foundering Colorado Public Employees Retirement Association pension fund. PERA is facing $27.5 billion in unfunded liabilities, threatening the long-term existence of the retirement plan. The proposal unanimously approved by the PERA board Friday would require association members -- who include teachers, state-government workers, judges, college employees and municipal workers -- to contribute an additional 2 percent in the form of smaller salary hikes in the future." (The Denver Post)
[Guidance Overview] Short Summary of Final IRS Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
3 pages. (American Benefits Council)
[Official Guidance] Flat-Rate PBGC Premium for Plan Year 2010 Rises to $35 for Single-Employer Plans; Unchanged at $9 for Multiemployer Plans
Excerpt: "Flat-Rate Premium Increase for Plan Year 2010: The per-participant flat-rate premium for plan year 2010 is $35.00 for single-employer plans (up from $34.00 for plan year 2009) and $9.00 for multiemployer plans (unchanged from plan year 2009). By law, the premium rates are adjusted for inflation each year based on changes in the national average wage index." (Pension Benefit Guaranty Corporation)
Most California Voters Back Proposed Public Pension Changes to Reduce Benefit Costs
Excerpt: "Californians favor changing the pension system for newly hired state and local government employees, and most back three possible scenarios that could reduce benefits, a new poll finds." (The Press-Enterprise)
[Official Guidance] Typeset Federal Register Version of Final IRS Regs on Measurement of Assets and Liabilities for Pension Funding Purposes; Benefit Restrictions for Underfunded Pension Plans (PDF)
82 pages. (Internal Revenue Service)
[Guidance Overview] Chart of 415, Etc., Limits Updated for News Release IR-2009-94
The chart of maximum limits subject to inflation indexing at Carol V. Calhoun's employee benefits site has now been amended to include the newly announced 2010 limits. Among other things, the chart shows limits under sections 415, 403(b), 401(k), and 457, as well as the Social Security wage base and Social Security and Medicare tax rates, for 1996-2010. (Calhoun Law Group, P.C.)
[Official Guidance] IRS 'Employee Plans News' - October 2009 Special Edition (PDF)
2 pages; contains hypertext links to the new final funding regulations, and a notice of an upcoming October 28 webcast about the required minimum distribution rules and the new 402(f) notice. (Internal Revenue Service)
Baltimore, MD, Police, Fire Pension Costs Could Double Next Year
Excerpt: "An unusual pension benefit for police and firefighters could cost Baltimore $164.9 million next year, nearly double what the city is now paying and a figure that the city's finance director says taxpayers cannot afford. After years of calls for pension reform, board members who oversee the nearly $2 billion system said their Tuesday vote that passes the whopping bill on to City Hall is a message that the fund is close to a breaking point and needs attention." (The Baltimore Sun)
[Guidance Overview] Final Funding Regs and Benefit Restriction Notices for Single Employer Defined Benefit Plans (PDF)
2 pages. Also, information on a Phone Forum on Retirement Plan Distributions will be held October 28, 2009; Join Martin Pippins and Rhonda Migdail, from IRS Employee Plans Rulings & Agreements, for a 90 minute forum on recent retirement plan guidance. The forum will cover: the new required ?402(f) notice; rollovers, including the expanded Roth rollover rules; the 2009 required minimum distribution (RMD) waiver; RMD rules for governmental plans; and paid time off contributions." (Internal Revenue Service)
Pensions and Corporate Financial Performance Are Intricately Linked (PDF)
20 pages. Excerpt: "To assist companies in navigating through these [financial] issues, Towers Perrin has developed this publication to update our 2003 guidebook, Pensions and Corporate Financial Performance -- Keeping Your Eye on the Ball. This new edition reflects the many changes that have since occurred in the environment of pension plan management. In addition, an upcoming companion publication will delve into more detail in each of the policy areas discussed here, focusing on specific actions thatcan be taken in these areas to achieve policy goals." (Towers Perrin)
[Guidance Overview] IRS Final Regulations on Defined Benefit Plan Funding and Benefit Restrictions (PDF)
1 page. Excerpt: "These regulations modify and finalize two sets of proposed regulations issued in 2007. The final regulations are quite lengthy, detailed, and complex, and provide much needed guidance including[:] automatic approval for changes in asset and interest rate methodology in 2008, 2009, and 2010; automatic approval for certain changes from using segment interest rates in years after 2010; rules regarding the establishment of, use of, and elections for credit balances; clarification of the calculation of target normal cost; rules regarding the use of special assumptions required for at-risk plans; extension of the deadline for final AFTAP certification when range certifications were issued; rules regarding the timing and issuance of AFTAP certifications; clarification of rules regarding partial restrictions on accelerated benefit payments (e.g., lump sum benefits)." (Buck Consultants)
[Opinion] Five Major Public Pension Problems: One Simple Solution
Excerpt: "Unsolvable Problems: Expecting 8% returns in a 4% world. When 30 year treasury bonds are yielding 4%, the dividend yield of the S&P 500 is 2%, and the S&P 500 PE is 140 (26 if you use operating earnings), 8% returns are from Fantasyland. Pension benefits start too early. People are living longer. Private employees do not receive these kind of benefits. Public employees should not either, especially at taxpayer expense. Indeed, continuing to chase high-yield in a low-yield world is a guarantee those plans will blow up again down the road. Pension plans are so underfunded that it is virtually impossible to catch up, no matter what risks the plan managers undertake. When asked how long it would now take for its investments to put the fund back on track, Ohio officials simply said: 'Infinity.'" (Mike Shedlock)
[Guidance Overview] IRS Releases Funding and Benefit Restriction Regulations (PDF)
2 pages. Excerpt: "The IRS has released final regulations on certain aspects of minimum funding requirements and benefit restrictions. The regulations address many open issues and provide some approaches that will be welcomed by plan sponsors, but they also leave many issues open to be addressed by future regulations. The effective date of the regulations is plan years beginning on or after January 1, 2010, and they can be relied upon for earlier periods. The regulations are over 300 pages long and are quite technical in many areas. Based on our initial review, the key changes from the proposed regulations that should be of most interest to plan sponsorsare summarized . . . ." (Towers Perrin)
[Official Guidance] Final IRS Regulations -- 318 Pages -- on Use of Funding Balances for Single-Employer Defined Benefit Plans, and Benefit Restrictions for Certain Underfunded Plans (PDF)
Scheduled for publication in the Federal Register on October 15. Excerpt: "These regulations reflect provisions added by the Pension Protection Act of 2006, as amended by the Worker, Retiree, and Employer Recovery Act of 2008. . . . Section 412 provides minimum funding requirements that generally apply for pension plans (including both defined benefit pension plans and money purchase pension plans). PPA '06 makes extensive changes to those minimum funding requirements for defined benefit plans that generally apply for plan years beginning on or after January 1, 2008. Section 430, which was added by PPA '06, specifies the minimum funding requirements that apply to single employer defined benefit pension plans (including multiple employer plans) pursuant to section 412. Section 436, which was also added by PPA '06, sets forth certain limitations on benefits that may apply to a single employer defined benefit plan based on its funded status. Neither section 430 nor section 436 applies to multiemployer plans. . . . The final regulations under section 430 apply to plan years beginning on or after January 1, 2010, regardless of whether section 430 applies to determine the minimum required contribution for the plan year. For plan years beginning before January 1, 2010, plans are permitted to rely on these final regulations for purposes of satisfying the requirements of section 430. This reliance applies section by section under the final regulations. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . . The final regulations under section 436 apply to plan years beginning on or after January 1, 2010. For plan years beginning before January 1, 2010, plans are permitted to rely on the provisions set forth in these final regulations for purposes of satisfying the requirements of section 436. Alternatively, for plan years beginning before January 1, 2010, plans are permitted to rely on the proposed regulations . . . ." (Internal Revenue Service)
[Guidance Overview] IRS Clarification of Interest Rates That May Be Used Under Upcoming Final Regs, to Be Effective in 2010
Excerpt: "In advance of pending regulations under Code Secs. 430 and 436, the IRS has released guidance clarifying the interest rates that may be used by actuaries in issuing the certified adjusted funding target attainment percentage (AFTAP) for 2009. According to the IRS, the final rules will, effective for plan years beginning on or after January 1, 2010, authorize automatic approval of new interest rates for the first plan year beginning in 2010, but will not allow for the use of a full yield curve with a lookback month." (Wolters Kluwer)
[Opinion] Watson Wyatt Testifies in Support of Funding Relief for DB Plan Sponsors
Excerpt: "Testimony of Mark Warshawsky, Director of Retirement Research, Watson Wyatt Worldwide, presented to the House Committee on Ways and Means at the hearing 'Defined Benefit Pension Plan Funding Levels and Investment Advice Rules,' Oct. 01, 2009." (Watson Wyatt Worldwide)
Many Pension Plans Facing Sharply Higher 2010 Contributions, Mercer Tells Congress
Excerpt: "Pension funding relief already provided by Congress and the IRS has reduced what would have been dramatically higher 2009 required contributions for many sponsors, but a cash crunch looms for the 2010 plan year, Mercer told a congressional panel. 'Barring an enormous market recovery, we expect that many plans will face significantly increased required contributions,' said Mercer Principal Craig Rosenthal in testimony before the House Ways and Means Committee. Rosenthal presented findings from an extensive new Mercer study on the status of plans' funding and credit balance levels." (Mercer LLC)
House Ways and Means Committee October 1 Pension Funding Hearing
Excerpt: "The committee hearing comes on the heals of a special edition of the Employee Plans News issued by the Internal Revenue Service on Sept. 25 that included information on impending funding regulations. In addition to stating that the regulations will be issued 'in the near future,' it also provided further guidance on determining the adjusted funding target attainment percentage (AFTAP). Specifically, the IRS concluded that a plan with a Jan. 1, 2009 valuation date could use the lower monthly yield curves from any of the four months immediately proceeding January 2009 and change the valuation in 2010 and after. The guidance also said that all of this could be done without having to wait for IRS approval. This move is expected to help assist pension plans achieve a smoothed valuation rate and provide more predictability." (Financial Executives International)
Economic Downturn Drains Pension Funds for Public Employees
Excerpt: "[Thousands of public employee pension funds] lost billions in the market crash. And fixing the problem, experts predict, may mean higher taxes, cuts in public services, reduced benefits, or even public bankruptcies. 'People are waking up to the fact that the public employees are getting a really good deal,' Jack Dean, a pension critic, said of public employees' benefits. 'And we're going to have to pay them,' said Dean, a California businessman who runs a Web site called PensionTsunami.com." (The Kansas City Star)
House Lawmakers Hear DB Funding, Advice Bill Pleas
Excerpt: "Witnesses appearing before the U.S. House of Representatives Ways and Means Committee regarding the continuing debate of how retirement plan advice should be delivered to millions of workers had a simple message for lawmakers: Don't break the current system." (PLANSPONSOR.com)
Public Pension and Retiree Healthcare Expense Problems Mount for Local California Governments
Excerpt: "Unless government officials muster up the political courage to implement reforms that would make government pensions and retiree health-care benefits sustainable, the cost of government services will continue to be inflated and growing pension costs could threaten the very solvency of state and local governments." (PublicCEO.com)
Funding for DB Pension Plans in 2010 and 2011 Under Relief Proposals
Excerpt: "In this analysis, Watson Wyatt projects funded status and required contributions for single-employer DB plans using an updated version of its comprehensive and realistic model of plan funding. It considers five scenarios: (1) the law prior to Sept. 24, 2009, including the Pension Protection Act of 2006 (PPA), the Worker, Retiree and Employer Recovery Act of 2008 (WRERA) and the March 2009 IRS guidance; (2) current law, including the IRS guidance released on Sept. 25, 2009; (3) House Education and Labor Committee bill (H.R. 2989) introduced in June 2009; (4) the main provisions of Representative Earl Pomeroy's (D-N.D.) discussion draft released in August 2009; and (5) House Minority Leader John Boehner's (R-Ohio) bill (H.R. 2021) introduced in April 2009." (Watson Wyatt Worldwide)
Companies Make Plea to Congress for Pension Funding Relief
Excerpt: "Pension funding requirements put in place by a landmark reform law that took effect during the recession threaten job creation and investment, a CEO told Congress on Thursday, October 1." (Workforce.com)
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