TaxNewsFlash-Exempt Organizations

April 11, 2008
No. 2008-38

Proposed Regulations on Minimum Funding Requirements for Single-Employer Defined Benefit Plans

The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-108508-08) for determining the minimum required contributions for purposes of the funding rules that apply to single-employer defined benefit plans. Today’s release also contains proposed excise tax regulations under section 4971.

Today’s proposed regulations follow the release of three sets of earlier proposed regulations that concern changes made to the Code by the Pension Protection Act of 2006. Today’s rules address how to determine the minimum required contributions under the funding rules of section 430. According to a related Treasury Department release (HP 918, April 11, 2008), today’s proposed regulations enable plan sponsors to determine the contribution requirements that apply to their defined benefit plans under the new funding regime—including the application of the quarterly contribution requirements.

Although new funding rules are generally effective for plan years beginning on or after January 1, 2008, Treasury reports that today’s regulations are proposed to be effective for plan years beginning on or after January 1, 2009. Plan sponsors, however, can rely on the proposed regulations for purposes of satisfying the minimum funding requirements for plan years beginning in 2008.

Today’s release further notes that certain provisions are reserved to accommodate changes that are anticipated from pending technical corrections legislation.

For a computer-scanned version of the proposed regulations (70 pages): REG-108508-08

Background

The Pension Protection Act of 2006 made extensive changes to the minimum funding requirements that generally apply for pension plans—including both defined benefit and money purchase pension plans—for plan years beginning on or after January 1, 2008, including:

Section 430 specifies the minimum funding requirements that apply to single-employer defined benefit pension plans (including multiple employer plans).

Section 4971 provides an excise tax on a failure to meet applicable minimum funding requirements of 10% of the unpaid minimum required contribution for all plan years remaining unpaid in the case of a single-employer plan and 5% for multiemployer plans.

Comments Due Date, Hearing Date

Comments on the proposed regulations must be received by Treasury and the IRS within 90 days after the proposed regulations are published in the Federal Register—which is scheduled to be April 15, 2008. A hearing has been scheduled for August 4, 2008, and outlines of topics to be discussed at the hearing must be received by July 15, 2008.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

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