Determination of Target Normal Cost and Funding Target for Single-Employer Defined Benefit Plans
Key claim: The IRS is proposing to change how employers calculate the yearly contribution they must make to a traditional single-employer pension plan, updating the rules for target normal cost and funding target to match later statutory amendments.
Abstract
(Proposed Rule · Treasury Department, Internal Revenue Service) This document contains proposed regulations that would modify rules in the existing regulations relating to the minimum funding requirement applicable to single-employer defined benefit pension plans. The modifications include changes to the rules relating to the determination of a plan’s target normal cost and funding target and would implement certain statutory amendments that have not yet been reflected in the regulations. These proposed regulations would affect participants in, beneficiaries of, employers maintaining, and administrators of single-employer defined benefit plans.
Why this matters
Minimum funding rules determine how much employers must contribute annually to single-employer defined benefit pension plans, directly shaping corporate cash outlays and deductible pension expense. Aligning the target normal cost and funding target regulations with later statutory amendments closes a gap between the tax code and the rules actuaries actually apply. The change is technical and narrowly scoped to plan sponsors and their advisors rather than a broad taxpayer population.