Many companies do not know about or take advantage of the pension funding provisions of the Moving Ahead for Progress in the 21st Century (MAP-21) Act that was signed into law on July 6, 2012.
- Although the Act is primarily known for authorizing funding for the nation’s highways and for extending low interest rates for federal student loans, it also included a series of pension provisions related to the Pension Benefit Guaranty Corporation.
Pre-MAP-21 Act:
Traditional defined benefit (“DB”) pension plans are generally subject to minimum funding rules designed to make sure that plans have enough money in them to fund promised benefits.
- Pre-MAP-21, employers were required to use a 2-year average of interest rates.
- As a result, today’s historically low interest rates would have meant that employers would have had to put in significantly more money than expected into their pension plans in order to meet their benefit liabilities.
Post-MAP-21 Act:
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The MAP-21 Act changed the mechanism for determining interest rates to be used for funding pension plans.
- Instead of a 2-year average, employers can use an average of interest rates going back 25 years in order to calculate their minimum required funding contribution.
- Consequently, employers are able to contribute significantly less money into their pension plans today while fully meeting their federally mandated funding liability.
- It turn, taking advantage of this provision is a boost to your cash flow.
If your organization needs help with its pension plan [401(k), 403(b), defined benefit or defined contribution plan}, Trinity’s Team of Consultants can provide assistance expertly and economically.
- For more information, e mail Trinity at info@TrinityHR.netor visit our website at www.TrinityHR.net.