For several years now, the low interest rate environment has wreaked havoc on employers sponsoring defined benefit (DB) plans. Many face serious funding shortages and struggle year after year to fulfill their minimum contribution requirements. The government has once again thrown plan sponsors a life vest. Anticipated for many months, the President finally signed the Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21) into law July 6, 2012 enacting pension relief for DB plans. Noticeable declines in funding requirements are expected for the near future and plans may even be able to forestall benefit restrictions. Other aspects of the law will not be as welcome since they lead to higher cash outlays.
With this latest round of relief, plan sponsors may again be asking “lower my pension plan contributions, why not?” While it sounds like a great deal, delaying plan funding may further impair the plan’s prospects for full recovery. The next step for sponsors is to dig below surface level of the new rules to determine the full impact of reducing contributions and the long-term effects of such a funding strategy before making any critical decisions.
Full article here >> 07 24 12 Pension Relief Guidance