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Total Articles: 4

Treasury Department Rejects Central States Pension Fund's Benefit Reduction Proposal

Treasury Department Rejects Central States Pension Fund's Benefit Reduction Proposal

IRS Proposes Permanent Nondiscrimination/Coverage Relief for Closed Pension Plans

The Internal Revenue Service (IRS) has issued proposed regulations that would provide permanent relief from certain coverage and nondiscrimination testing requirements to defined benefit plans that are closed to new participants, but that provide ongoing accruals to “grandfathered” employees, i.e. some or all employees who were participants in the plan as of a specified date. In recent years, many employers have closed their defined benefit plans to new participants except to groups of grandfathered employees, who continue accruing benefits in the closed plan (this is often referred to as a “soft freeze”). Over time, a soft-frozen plan may become more concentrated with highly-compensated employees (since longer-service employees tend to be higher paid on average). This often makes it difficult for closed plans to pass the Internal Revenue Code’s nondiscrimination/coverage testing requirements.

New Federal Spending Bill Includes Extensive Pension Related Provisions

Both houses of Congress recently passed and President Obama recently signed comprehensive spending legislation that includes an amendment with the provisions of the Multiemployer Pension Reform Act of 2014 (MPRA) along with a number of other pension related provisions. Much attention has been given to a controversial provision in the MPRA that allows multiemployer pension fund trustees to reduce vested benefits for active workers as well as benefits being paid to current retirees. But the broader spending bill also includes a number of other important changes that will impact both multiemployer and single employer pension plans. Some of the changes that that Congress included in the legislation are detailed below.

Pension Funding Relief Legislation Becomes Law

On Friday, the Moving Ahead for Progress in the 21st Century Act, or “MAP-21” Act, became law. The Act increases the interest rates that are used for valuing single-employer, non-governmental pension liabilities. For many pension plan sponsors, this will significantly reduce the amount of required annual contributions in the short term. And in some cases, plan sponsors that are currently restricted from paying lump sum distributions to participants will be able to remove those restrictions.
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