A new Field Assistance Bulletin (FAB) from the Department of Labor (DOL) provides guidance about compliance by plan administrators of single-employer defined benefit (DB) plans with the annual funding notice requirements of section 101(f) of the Employee Retirement Income Security Act of 1974 (ERISA), as amended by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).
HATFA extends relief provided in the Moving Ahead for Progress in the 21st Century Act (MAP-21)—passed in 2012—which allowed defined benefit plans to discount future benefit payments to a present value using a 25-year average of bond rates rather than a two-year average. MAP-21 created a “corridor” of rates on either side of a 25-year average that were permissible for discounting purposes. If the two-year average falls outside this corridor, a company can use the 25-year average that is closest to the two-year average in the corridor. HATFA resets the corridor’s boundaries.
FAB 2015-01 describes the adjustment of the segment rates under HATFA. It also includes a model annual funding notice and a Q&A about the new rules.
Pending further guidance, the agency said it will treat a plan administrator of a single-employer DB plan as satisfying HATFA if the plan administrator complies with the guidance in FAB 2013-01 and the current FAB and has acted in accordance with a good faith, reasonable interpretation of rules not specifically addressed in those pieces of guidance. The DOL also said it will treat a funding notice for a plan year beginning after December 31, 2012, that was issued before the issuance FAB 2015-01 as satisfying the HATFA rules if it reflects a good faith, reasonable interpretation.