Pension Plan Funding Stabilization Finally Here Under MAP-21 Law

After many months of discussion, the Moving Ahead for Progress in the 21st Century Act (MAP-21) became law on July 6, 2012. The provisions in MAP-21 on pension plan interest rates will provide much-needed relief on pension plan funding and liabilities. However, the good news is offset by provisions in the new law for higher termination-insurance premiums payable to the Pension Benefit Guaranty Corporation (PBGC) in the future.

Summary of Pension Provisions of MAP-21

MAP-21 is primarily a transportation bill that also includes student-loan interest-rate relief. However, as a revenue-raiser, it includes pension plan provisions that:

• Reduce the adverse impact of historically low interest rates on the three "segment rates" (corporate-bond interest rates) used by many pension plans to calculate funding liabilities. The primary change is to smooth segment rate changes by calculating each rate based on the average of that segment rate over 25 years — a much longer