April 12, 2004
In this issue:
- Treasury Department releases guidance following President Bush's signing of the pension reform bill
- Council continues push for delay in relative value regulations effective date
Treasury Department releases guidance following President Bush's signing of the pension reform bill
The Treasury Department released on April 12 guidance on pension interest rate reform following signature of the Pension Funding Equity Act (H.R. 3108) by President Bush on April 10. IRS Notice 2004-34 provides the interim guidance for determining the weighted average interest rate for calculating pension contributions and premiums paid to the Pension Benefit Guaranty Corporation (PBGC). The guidance is effective until the first plan year beginning after the publication of further guidance. The guidance designates the indices upon which the rate is calculated. The rate is based on an arithmetic average of the specified indices’ rates. For purposes of calculating the quarterly contributions for plan years beginning in 2004, the guidance requires use of the prior interim law (90-120 percent of the weighted average of the rate of interest on 30-year Treasury bonds) if 2003 calculations are being used. The guidance includes a table that sets forth the permissible range of corporate bond weighted average interest rates by the month in which the plan year begins. The permissible 90-100 percent range of rates in 2004 for calendar year plans is 5.89-6.55%. IRS Announcement 2004-38 details election of the alternative Deficit Reduction Contributions (DRC).
For more information on this issue, please contact Lynn Dudley, Council vice president & senior counsel, or Diann Howland, Council vice president, retirement policy. Both can be reached by phone at (202) 289-6700.
Council continues push for delay in relative value regulations effective date
The American Benefits Council continues to press the Internal Revenue Service and Treasury Department for a delay in the effective date of the final relative value regulations published in the Federal Register on December 17, 2003. The final regulations consolidate the content requirements applicable to explanations of qualified joint and survivor annuities and qualified preretirement survivor annuities and specify requirements for disclosing the relative value of optional forms of benefit that are payable in lieu of a qualified joint and survivor annuity.The regulations are scheduled to be effective for annuity starting dates beginning on or after October 1, 2004, which means that notices sent as early as July 1, 2004, will need to meet the new requirements.
The Council contacted the Treasury Department and IRS several times in early March trying to convince the IRS and Treasury that a delay was needed. Following a preliminary in-person meeting with an IRS representative on March 11, the Council sought additional input on the issue from the Council’s Retirement Income Task Force and provided that to the IRS. The Council has posted a summary to its web site for more information on some of the issues identified or discussed by the Task Force and discussed with the IRS.
The Council will continue to push for a delayed effective date, preferably tied to the effective date of the 411(d)(6) regulations, and clarification that the most valuable form of benefit may be the lump sum when calculated under the requirements of 417(e)(3) (see attached summary). If you have additional concerns with the current effective date and/or would like to provide your insights on the issue, please contact Jan Jacobson, director, retirement policy at (202) 298-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.