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Sept. 9 — Newly issued final regulations detailing how to determine minimum required contributions for single-employer defined benefit plans don't look that different from the proposed rules that were issued back in 2008, practitioners told Bloomberg BNA.
“It seems like they made few, if any, changes,” Judy A. Miller, director of retirement policy for the American Retirement Association, said Sept. 9.
On Sept. 8, the Internal Revenue Service and Treasury Department issued final rules on the determination of minimum required contributions for single-employer defined benefit plans. The final rules (T.D. 9732, RIN 1545-BH71) also address the excise tax under tax code Section 4971 for failing to satisfy the minimum funding requirements for defined benefit plans.
Heidi Rackley, a partner with Mercer LLC, said Sept. 9 that the rules weren't particularly controversial and most of the changes featured in the final rules are minor corrections or clarifications.
But there is one change that will make plan sponsors happy, she said.
“From my perspective, the biggest change is the new ability to make standing elections to apply credit balance toward quarterly contributions, and that really just cuts down a lot of paperwork that goes on between the actuary, the plan administrator and the plan sponsor,” Rackley said.
Under the proposed rules, employers that were subject to the quarterly contribution requirements and were using credit balances had to make an election of a specific dollar amount each quarter, which isn't really a “huge deal” except when someone misses a contribution, she said.
The final rules allow plan sponsors to elect a formula instead of a dollar amount, which allows much more flexibility and certainty, Kathryn L. Ricard, senior vice president for retirement policy with the ERISA Industry Committee, said Sept. 9.
Rackley added that the ramifications of missing a quarterly payment were bad, and it was actually fairly easy to do, so the change in the final rules is a welcome one.
Another change Ricard highlighted was that the IRS reserved a section for the definition of plan spinoffs and mergers. This can be a very uncertain area for sponsors, particularly for large employers, so the message there is “stay tuned,” she said.
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