Get access to the exclusive HR Resources you need to succeed in 2018.
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 14 cities across the U.S. this fall.
Gain the skills you need to rise to the next level in your career. Jon us at SHRM's Leadership Development Forum, October 2-3 in Boston.
Many plans must furnish new annual funding notices by April 30, 2013
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Update: Field Assistance Bulletin 2013-01 (described in the article below) and subsequent guidance on annual funding notice requirements for defined benefit pension plans were superseded by a final rule issued by the Department of Labor in February 2015. See the
SHRM Online article
Final Rule Streamlines Pension Funding Notices.
On March 8, 2013, the U.S. Department of Labor (DOL) issued
Field Assistance Bulletin 2013-01, concerning new pension funding disclosure requirements mandated by the Moving Ahead for Progress in the 21st Century (MAP-21) Act, which was signed into law in July 2012.
Under the Employee Retirement Income Security Act (ERISA) and the Pension Protection Act (PPA), single-employer defined benefit pension 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—as they have been for the past several years—pension plan liabilities are estimated to be higher and employers are required to contribute more money to meet their minimum funding obligations.
Under MAP-21, 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. For instance, under the law's so-called "smoothing" or rate stabilization provision, the interest rates used to estimate pension liabilities and determine employer contributions, which statutorily have been based on the two-year average of interest rates, will be adjusted so that they are based on the average of interest rates for the 25-year period preceding the current year.
New Notice Requirements
MAP-21 also amended ERISA section 101(f) to require plan administrators to provide participants and others with information regarding the impact of MAP-21’s interest rate stabilization rules on the plan’s funding status. An estimated 12,000 single-employer plans covering approximately 33.5 million participants and beneficiaries are subject to the new disclosure requirements. Many of these plans must furnish their first annual funding notice under the new law no later than April 30, 2013.
The new bulletin includes technical questions and answers, and it provides
a model information table that plan administrators may use to fulfill their MAP-21 disclosure obligations. The model information table shows how the MAP-21 interest rates affect the plan’s funding target attainment percentage (a measure of how well the plan is funded on a particular date), funding shortfall (the amount by which liabilities exceed net plan assets) and minimum required contribution (the amount of money an employer is required by law to contribute to a plan in a given year).
In addition to following the guidance in the new bulletin, the DOL said it will treat plan administrators as in compliance if they have acted in accordance with a good-faith, reasonable interpretation of ERISA section 101(f) with respect to matters not specifically addressed in the bulletin.
Pension Underfunding Increases
Average funding ratios for U.S. corporate pension funds fell to 81 percent in 2012 from 89 percent in 2011, driven mainly by declining interest rates. More than 60 percent of all corporate defined benefit pension plans are now funded at 85 percent or less, and only 10 percent of plans are fully funded, according to Greenwich Associates latest
U.S. Investment Management Study.
Companies’ decisions about their defined benefit pension plans are being driven by the tension between desires to shed pension risk and the increasingly pressing need to generate enough investment returns to fund long-term liabilities, the study found.
is an online editor/manager for SHRM.
Related External Article:
Instructions Released for Annual Funding Notice MAP-21 Disclosures, Buck Consultants, March 2013
Related SHRM Article:
President Signs Pension Funding Relief Measure,
SHRM Online Benefits, July 2012
SHRM Online Retirement Plans Resource Page
Keep up with the latest news. Sign up for SHRM’s free
Compensation & Benefits e-newsletter
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 10,000 companies