IRS Proposes Changes to DB Minimum Funding Rules

The Internal Revenue Service (IRS) has released proposed rule, Determination of Target Normal Cost and Funding Target for Single-Employer Defined Benefit Plans. According to the rule's explanation of provisions, these proposed regulations would facilitate the adoption of amendments that increase benefits. Such amendments adopted after the end of the plan year can be taken into account in determining the actuarial results for a plan year which, in turn, will result in an increased deductible limit for the taxable year for the plan sponsor.

The proposed regulations would also

• Clarify the plan related expenses that are includable in target normal cost.

• Provide rules for plans that are adopted after the end of a plan year.

• Provide rules for when certain plan amendments must be taken into account in the actuarial results for a plan year.

• Extend the deadline for making certain changes in actuarial assumptions or funding methods.

• Make minor changes to the rules for actuarial assumptions to eliminate references to statutory provisions that are no longer applicable and to conform them to other regulatory provisions.

Comments regarding the proposed rule can be submitted to the IRS within 60 days of publication in the Federal Register.