President Signs Pension Funding Relief Measure

By Harold G. (Buzz) Hartsig III
Carroll Consultants, Ltd.

The two-year omnibus highway transportation bill (H.R. 4348), passed by Congress on June 29, 2012, and signed into law by President Barack Obama on July 6, includes long-sought funding relief for employer-provided defined benefit pension plans. The measure, known as the Moving Ahead for Progress in the 21st Century Act (MAP–21), also raises the premiums

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that plans pay to the federal Pension Benefit Guaranty Corp. (PBGC).

Under the Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 (PPA), defined benefits plans are subject to minimum funding rules that require employers to make contributions to the plan in order to fund the plan’s benefits. When interest rates are low, pension plan liabilities are estimated to be higher and employers are required to contribute more money to meet their minimum funding obligations.

Under the new law (section 40211), employers can put less money into their pension plans by using calculations that allow them to value liabilities using higher interest rates than the prevailing low rates.

Read the 25-Year Average Segment Rates and Adjusted 24-Month Average Segment Rates Used for Pension Funding Here