{ "id": "R46366", "type": "CRS Report", "typeId": "R", "number": "R46366", "active": true, "source": "CRSReports.Congress.gov, EveryCRSReport.com", "versions": [ { "summary": null, "sourceLink": "https://crsreports.congress.gov/product/details?prodcode=R46366", "source_dir": "crsreports.congress.gov", "type": "CRS Report", "formats": [ { "sha1": "948745f76df328517e0e3fb4c1c2ad754e482cad", "format": "PDF", "url": "https://crsreports.congress.gov/product/pdf/R/R46366/5", "filename": "files/2023-05-18_R46366_948745f76df328517e0e3fb4c1c2ad754e482cad.pdf" }, { "format": "HTML", "filename": "files/2023-05-18_R46366_948745f76df328517e0e3fb4c1c2ad754e482cad.html" } ], "title": "Single-Employer Defined Benefit Pension Plans: Funding Relief and Modifications to Funding Rules", "source": "CRSReports.Congress.gov", "retrieved": "2023-06-19T04:03:18.352670", "date": "2023-05-18", "typeId": "R", "id": "R46366_5_2023-05-18", "active": true }, { "source": "EveryCRSReport.com", "id": 625234, "date": "2020-05-20", "retrieved": "2020-05-20T22:15:36.206570", "title": "Single-Employer Defined Benefit Pension Plans: Funding Relief and Modifications to Funding Rules", "summary": "To protect the interests of participants and beneficiaries in pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406). ERISA specified funding rules for single-employer defined benefit (DB) pension plans, among other provisions. Single-employer DB pension plans are sponsored by one employer for the benefit of its employees. In DB pension plans, participants typically receive regular monthly benefit payments in retirement (which some refer to as a \u201ctraditional\u201d pension). ERISA also authorized the creation of the Pension Benefit Guaranty Corporation (PBGC), which is a government corporation that insures private-sector pension benefits up to a specified maximum in the case of plan termination.\nSingle-employer DB funding rules generally require several steps: calculating the value of benefits that a plan will pay in the future; determining how much a plan has set aside to pay those benefits; and determining how much, and the time period over which, an employer must contribute to the plan each year.\nSince ERISA, Congress has periodically modified funding rules for pension plans. The Pension Protection Act of 2006 (PPA; P.L. 109-280) outlined new pension funding standards for single-employer DB plans, among other requirements. PPA required that plans become 100% funded over time and outlined assumptions that pension plans must use to become fully funded. PPA also provided special rules for DB plans sponsored by certain employers, such as some airlines and defense contractors.\nSince PPA was enacted, legislation has further modified funding rules for single-employer DB plans for various reasons. At times, legislation has applied broadly to most private-sector DB plans; at other times, changes to funding rules have targeted plans sponsored by specific industries or types of employers.\nAt times, legislation has provided funding relief, which are measures that lower employer contributions. In general, funding relief measures allow plans more time to make required payments by (1) modifying assumptions that affect the calculated value of pension benefits or (2) extending the time period to make up for plan losses. \nThe adoption of a funding corridor for interest rates in the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141) marked a significant change to single-employer DB funding rules. DB plans calculate the present value of future benefits that will be owed using certain specified interest rates for discounting. In response to a period of low interest rates, MAP-21 established a process for determining minimum and maximum interest rates for discounting based on 25-year averages of historical corporate bond yields. As originally established, the funding corridor was scheduled to widen eventually, which, when applied to the specified interest rates, would have resulted in the use of lower interest rates to calculate DB pension obligations. Subsequent legislation delayed the date when the funding corridor is to begin widening. Under current law, the widening is scheduled to begin in 2021. \nFunding relief measures do not directly affect participants\u2019 benefits. However, they can result in pension plans having lower funding levels than they otherwise would at a point in time. Thus, funding relief can negatively affect PBGC\u2019s finances because it could take over a plan that has fewer assets than the plan otherwise would in the absence of funding relief. Funding relief can also affect PBGC\u2019s ability to pay non-guaranteed benefits, such as benefit increases implemented within five years prior to plan termination. On the other hand, funding relief can positively affect PBGC finances because greater DB plan underfunding results in higher variable-rate premiums (premiums based on the amount of plan underfunding) paid to PBGC by employers. \nThis report provides (1) background on single-employer DB pension funding, (2) a discussion of funding rules under PPA, and (3) provisions since PPA that have provided funding relief or otherwise modified single-employer DB pension funding rules.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R46366", "sha1": "664c994a30ac9661f3391b134f7574e8b3e1d8ad", "filename": "files/20200520_R46366_664c994a30ac9661f3391b134f7574e8b3e1d8ad.html", "images": { "/products/Getimages/?directory=R/html/R46366_files&id=/2.png": "files/20200520_R46366_images_c88779c7f2031f39d84cc2ada47433bb80900b5c.png", "/products/Getimages/?directory=R/html/R46366_files&id=/3.png": "files/20200520_R46366_images_ed79c411a30497c7f4ddaeb4ae6394619a265e4c.png", "/products/Getimages/?directory=R/html/R46366_files&id=/5.png": "files/20200520_R46366_images_42a4769eb5b286a0a00ffa8ec3751d6ac6b0a6c8.png", "/products/Getimages/?directory=R/html/R46366_files&id=/1.png": "files/20200520_R46366_images_3aa9e86972c7fccb154cfba771eb929e49700bf3.png", "/products/Getimages/?directory=R/html/R46366_files&id=/4.png": "files/20200520_R46366_images_376e90b4de22ab096aa0fcf5f8cfaae4aed6062c.png", "/products/Getimages/?directory=R/html/R46366_files&id=/0.png": "files/20200520_R46366_images_8f02185c401538bbf2989ab48679416258844df7.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R46366", "sha1": "fe59deba4693595ad4189e42162f620650de90b9", "filename": "files/20200520_R46366_fe59deba4693595ad4189e42162f620650de90b9.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4869, "name": "Pensions & IRAs" } ] } ], "topics": [ "Domestic Social Policy", "Health Policy" ] }