Traditionally forced to use the 85% yield figure, defined benefit sponsors complained they had to cope with burdensome and artificially high funding requirements.
The pension plans are required to file funding reports with the Pension Benefit Guaranty Corporation (PBGC) – the agency which steps in to make pension payments for a defunct company or chronically underfunded defined benefit plans.
According to the PBGC, plans can use the new benchmark for:
- annual employer financial and actuarial reporting for information years ending in 2002 or 2003,
- post-event reporting for reportable events in 2002 or 2003, and
- advance reporting for reportable events with 2002 or 2003 effective dates
The PBGC said the 100% benchmark is also to be used when calculating vested benefits for the purposes of the variable rate premium for plan years beginning 2002 or 2003. For 2002 or 2003 plan years, the PBGC said the new figure is to be used to determine a plan’s Deficit Reduction Contribution liability – an extra charge paid by single-employer underfunded plans.
Read the full text of the Technical Update .