Highlights of Recent Pension Legislation

August 21, 2012

The following are Highlights of Recent Pension Legislation including: Moving Ahead for Progress in the 21st Century Act (MAP-21), Pension Relief Act of 2010 (PRA), Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) and Pension Protection Act of 2006 (PPA).

Moving Ahead for Progress in the 21st Century Act (MAP-21)
(enacted July 6, 2012)

Beginning with the 2012 plan year, Moving Ahead for Progress in the 21st Century Act (MAP-21)  increases the three segment interest rates used for valuing participant liabilities for minimum funding purposes for single-employer pension plans, thereby reducing the minimum funding requirements.  By improving the funded percentage of single employer plans, benefit restrictions under Section 436 of the Pension Protection Act of 2006 may also be avoided.  MAP-21 also includes PBGC premiums increases effective for plan years beginning in 2013 and after.

Pension Relief Act of 2010 (PRA)
(enacted June 25, 2010)

In view of the large asset losses of 2008, the Pension Relief Act of 2010 (PRA) includes special funding rules for reducing the minimum funding requirements for defined benefit pension plans.  Single-employer plans may elect to use an extended amortization period to pay off funding shortfalls. Multiemployer plans may elect to amortize the asset losses of 2008 and/or 2009 over 29 years instead of 15.  For multiemployer plans that use an asset averaging method to determine actuarial value of assets, investment losses can be spread over 10 years instead of 5 and the corridor for determining the actuarial value of assets is expanded from 80% to 120% of the market value of assets to 80% to 130% of the market value of assets for the plan years beginning in 2009 and 2010.   The IRS Notice 2010-83 (Funding Relief for Multiemployer Defined Benefit Plans Under PRA 2010) and IRS Notice 2011-3  (Funding Relief for Single-Employer Pension Plans Under PRA 2010) provide specific guidance related to the application of the special funding rules.

Worker, Retiree, and Employer Recovery Act of 2008 (WRERA)
(enacted December 23, 2008)

The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) provides technical corrections and additional amendments to the Pension Protection Act of 2006 (PPA).  In recognition of the impact of the large asset losses of 2008, WRERA provides delays or modifications in the implementation of certain rules under the PPA.  For multiemployer plans, the stringent requirements of the funding improvement plans and rehabilitation plans were delayed for one year or relaxed, at the election of the Boards of Trustees.

Pension Protection Act of 2006 (PPA)
(enacted August 17, 2006)

The Pension Protection Act of 2006 (PPA) implemented many significant changes to improve the funded position of defined benefit pension plans generally effective for plan years beginning in 2008.  Annual actuarial certifications of the Plan’s funding level (Adjusted Funding Target Attainment Percentage (“AFTAP”) certification for  single-employer plans and Actuarial Zone Status Certification for multiemployer plans) were introduced.  Certain benefit restrictions may apply depending on a plan’s funded status.  In determining minimum funding requirements for single-employer pension plans, conservative interest rates and mortality assumptions are required for valuing participant liabilities.  Shorter amortization periods for paying off funding shortfalls are required.   For underfunded multiemployer plans, funding improvement plans or rehabilitation plans (i.e contribution increases and/or benefit reductions) must be established to restore the plan to financial health within a specified time period.

Note:  The above highlights with brief explanations of the changes included in the recent new pension laws are provided for informational purposes.  Please contact us to determine how the laws specifically apply to your plan.  richard Gabriel associates does not practice law and therefore, cannot and does not provide legal advice.

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