Guest Article

(From the March 19, 2012 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Senate Highway Bill Includes Provisions to Stabilize Pension Funding

The highway construction bill, which the Senate passed by a 74 to 22 vote on March 14, includes provisions that would stabilize the interest rates for determining the funding obligation for single-employer pension plans. The bill is now headed to the House where, despite its bi-partisan support in the Senate, passage is uncertain.

The funding stabilization provisions were added as part of a manager's amendment introduced by Barbara Boxer (D-CA) which was unanimously approved. The provisions would amend Code Section 430(h)(2) to restrict the volatility of the segment rates that are used to determine minimum funding. The rates would be restricted to a prescribed range of the average of the segment rates for the preceding 25-year period.

Under the bill, a segment rate would not be less than the applicable minimum percentage — or more than the applicable maximum percentage— of the 25-year average. The Treasury Secretary would be required to annually determine the 25-year average of the segment rates, while the applicable percentage would gradually expand from a 10 percent variant from the 25-year average in 2012 to a 30 percent variant in 2016 and later years. Under the bill, the applicable percentages would be:

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2012, Deloitte.