Pension Bill that passed in the House

[Smash Puny Human]

As I understand it, the bill that just passed the house will have two major items-
1) Clarification of the single employer PPA 24 month asset smoothing
2) Interest rate relief for small plans

I haven't found much on the subject, though I haven't put forth much effort either.

Is the proposed asset smoothing now going to take into account some type of expected asset return? As I understand the current law, any positive or negative return is smoothed.

Any details on what the interest rate relief is all about?

Thanks.

[colby2152]

2) Interest rate relief for small plans

I am more interested in this. My guess is that small plans (n < 100) are allowed to use the 3rd Segment rate as the funding rate for all segments, i.e. it is the effective interest rate of the Funding Target.

[Gary Wright]

Originally Posted by Smash Puny Human

As I understand it, the bill that just passed the house will have two major items-
1) Clarification of the single employer PPA 24 month asset smoothing
2) Interest rate relief for small plans

I haven't found much on the subject, though I haven't put forth much effort either.

Is the proposed asset smoothing now going to take into account some type of expected asset return? As I understand the current law, any positive or negative return is smoothed.

Any details on what the interest rate relief is all about?

Thanks.

No details on the interest rate relief, but there are a couple of other interesting items:

1) the Target Normal cost is to include expected administrative expenses for the year (and subtract expected employee contributions - everyone is probably already doing that) - that's a departure from everything I've seen thus far, and the explanation isn't worded as if it's an option.

2) There is a comment in the technical explanation that "the quarterly installment rules require a higher rate of interest to be charged on required contributions".

what exactly does that mean? I'm assuming I'm just out of the loop a little and that means something previously clarified.

Statement about the asset smoothing in the language, as noted above, is that expected gains can be reflected - but as using a method determined by the Sec. of the Treasury - I guess we'll wait another year and a half or proposed regs about what that means?

I would think that those of us who went with market this year have a lot of incentive to examine using asset smoothing going into next year. A LOT if the market doesn't improve before the end of the calendar year. Anyone with 7/1 or 8/1 plan years already has plenty of incentive.

Also, did anyone see anything about an effective date? There are effective dates listed for some of the little stuff at the end of the explanation, but I didn't see any for the "big ticket items" at the beginning of the release.

[colby2152]

1) the Target Normal cost is to include expected administrative expenses for the year (and subtract expected employee contributions - everyone is probably already doing that) - that's a departure from everything I've seen thus far, and the explanation isn't worded as if it's an option.

I assume this is only if expenses are paid out of the plan?

[Gary Wright]

Originally Posted by colby2152

I assume this is only if expenses are paid out of the plan?

Yes, I agree.

[Duffer]

Also very important: The IRS will have authority to regulate AFTAPs without requiring a valuation during the plan year that occurs after the 436 freeze date.

[frisbbzepp]

Here's a little blurb: http://www.workforce.com/section/00/...e/25/64/10.php

[Gary Wright]

Disregard my comment earlier about quarterly interest. I neglected to refer to the subtitle of the section to see that the comment about quarterly interest applies only to 303(j) and 430(j)(3) (when you don't meet your minimum requirements).

[Mark Cavazos]

Originally Posted by Gary Wright

I would think that those of us who went with market this year have a lot of incentive to examine using asset smoothing going into next year. A LOT if the market doesn't improve before the end of the calendar year. Anyone with 7/1 or 8/1 plan years already has plenty of incentive.

You would probably have to request for approval to change back to a smoothing method.

[colby2152]

Originally Posted by Mark Cavazos

You would probably have to request for approval to change back to a smoothing method.

That was my next question; is a change in the actuarial value of assets method a change in the funding methods. My initial guess was, yes, it would require a request from the IRS to change the funding methodology.