The Internal Revenue Service has announced that defined-benefit plans
will be able to use a spot-rate yield curve from as early as four months before
their plan year begins to calculate their pension plan funding requirements for
2009.
“Thus, for a calendar year plan with a January 1, 2009, valuation date, the
IRS will not challenge the use of the monthly yield curve for January 2009, or
any one of the four months immediately preceding January 2009,” the IRS said in
a statement.
The IRS had previously proposed—but never made into a rule—that plans be
required to use the spot rate based on the interest rate in effect for the month
preceding the beginning of the plan year.
That meant calendar-year plans would have had to use the lower rates in
effect in December 2008, rather than the higher interest rates in effect in
October or November of that year, to calculate their funding obligations. Using
the lower December rates would have meant higher liabilities for the plans and
the need for funding increases.
“Today’s announcement is welcome news for many employer defined-benefit plan
sponsors that are facing unprecedented funding obligations as a result of the
economic downturn,” James Klein, president of the American Benefits Council,
said in a statement.
Filed by Doug Halonen of Pensions
& Investments, a sister publication of Workforce Management To comment,
e-mail editors@workforce.com.
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