American Benefits Council
Benefits Byte

2014-032

April 15, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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Council Urges Treasury to Address 'Liquidity Shortfall' Issue for Defined Benefit Plans

In an April 15 letter to the U.S. Treasury Department, the Council described a potentially serious problem with the “liquidity shortfall contribution” requirements of the 2008 proposed regulations on minimum required contributions for defined benefit plan funding under the Pension Protection Act of 2006 (PPA).

Section 430(j) of the Internal Revenue Code requires a defined benefit plan sponsor to make a contribution to cover any shortfall in the plan’s liquidity – measured at the end of every quarter by looking at the 12 months of prior payments and multiplying by three to get three years’ worth of payments – within 15 days after the liquidity calculation. The provision is designed to ensure that the plan has sufficient liquid assets to ensure that benefits can be paid to beneficiaries.

As fully explained in the letter, the problem relates to the question of whether the liquidity shortfall contribution continues to be required after there is no longer a liquidity shortfall. Under a long-standing interpretation of the statutory rule, a contribution is no longer required if the shortfall disappears, regardless of the reason. This is consistent with the statutory provision that the shortfall is “treated as unpaid until the close of the quarter in which the due date for such installment occurs.” However, the proposed regulations state that in these cases, the contribution continues to be required even though the shortfall no longer exists.

Application of such a rule would lead to plan sponsors having to make disproportionate contributions, in many cases contributing for the exact same shortfall multiple times. The Council is therefore urging Treasury to correct this inconsistency in the final regulations.

The Council will continue to engage with senior Treasury officials on this matter and report when final regulations are issued. For more information, contact Lynn Dudley, Senior Vice President, Global Retirement and Compensation Policy, at (202) 289-6700.



PBGC Premium Filing Instructions Finalized

On April 15, the Pension Benefit Guaranty Corporation (PBGC) announced that the U.S. Office of Management and Budget has approved the instructions for filing 2014 premiums for defined benefit plans.

To comport with the new instructions, PBGC has also updated its web pages showing premium due dates and the interest rates used to determine the variable-rate premium. The “My PAA” online filing system will also be updated soon to reflect the changes. For more information, contact Lynn Dudley, Senior Vice President, Global Retirement and Compensation Policy, at (202) 289-6700.



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.

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