Defined benefit plan

The Department of Labor’s (DOL’s) Employee Benefits Security Administration, the IRS, and the Pension Benefit Guaranty Corporation (PBGC) have released a third and final phase that implements a September 2021 regulatory proposal.

The IRS has released final regulations amending rules intended to increase the filing of electronic returns in accordance with the Taxpayer First Act of 2019.

The IRS has released Announcement 2023-6, stating that it expects to issue opinion letters for pre-approved defined benefit plans that were filed with the IRS during the third remedial amendment cycle “on February 28, 2023, or, in some cases, as soon as possible thereafter.”

The IRS has issued Notice 2023-12, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for January used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe winter storms, flooding, and mudslides in California. The tax relief postpones various tax filing deadlines that began on January 8, 2023. Affected individuals and households who reside or have a business in Colusa, El Dorado, Glenn, Humboldt, Los Angeles, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Bernardino, San Diego, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Ventura, Yolo, and Yuba counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after January 8, 2023, and before May 15, 2023, will have until May 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after January 8, 2023, and before May 15, 2023.

"Affected taxpayer" automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

Retirement plan assets should be invested prudently to obtain the best possible financial returns, of course. But what if your plan invests in a company that conducts business in a way that violates your ethical values? For example, is it okay for a plan administrator to buy stock in a company with a record of environmental violations and polluting with impunity? Should that behavior affect whether a company qualifies as a suitable retirement plan investment? Is it possible, or even likely, that a company that responsibly produces a similar product may actually be a better choice, measured both by investment returns and by other factors?

The IRS has issued Notice 2023-5, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for December used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The Pension Benefit Guarantee Corporation (PBGC) has issued a final rule updating interest assumptions under the asset allocation regulation for plans with valuation dates in the first quarter of 2023. These interest assumptions are used for valuing benefits under terminating single-employer plans. The rule is scheduled to be published in the Federal Register on December 15, 2022, and is effective January 1, 2023.

Earlier this year, the IRS released proposed regulations to update the mortality tables that are used to calculate minimum required contributions for single-employer defined benefit (DB) pension plans, as we previously announced. These regulations were proposed to be effective for plan years beginning in 2023 and provided guidance on the use of updated generational and static mortality tables. The IRS also issued Notice 2022-22, which provided mortality tables applicable for valuation dates occurring in 2023 under existing regulations.

The Pension Benefit Guarantee Corporation has issued a final rule updating the table used to determine the expected retirement age for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2023. This table is needed to compute the value of early retirement benefits and the total value of benefits under a plan. The new table is effective January 1, 2023.