Final Regs For Defined Benefit Funding And Benefit Restrictions Require Plan Action

In October, the government published final regulations under IRS Code Sections 430 and 436 in the Federal Register relating to single employer defined benefit funding rules and benefit restrictions on underfunded plans. These regulations revise the rules proposed (i) in August 2007 regarding funding balances and benefit restrictions for underfunded plans, and (ii) in December 2007 regarding the measurement of assets and liabilities for pension funding purposes.

Both Code Sections 430 and 436 were added to the Code by the Pension Protection Act of 2006. Section 430 specifies the minimum funding requirements that apply to single employer defined benefit pension plans. Code Section 436 imposes a variety of limits on the benefits payable, and the manner in which those benefits may be paid, under a single employer defined benefit plan if a plan's funding status drops below certain prescribed levels. The final regulations expand and clarify these requirements and make