Durward Gehring and Cory Hirsch Published in Employee Benefit Plan Review
“Market Crisis Combined with New Pension Plan Funding Rules Creates Substantial New Liabilities and Benefit Restrictions”

Durward James (Jim) Gehring and Cory Hirsh’s article, “Market Crisis Combined with New Pension Plan Funding Rules Creates Substantial New Liabilities and Benefit Restrictions,” was published in the March 2009 issue of Employee Benefit Plan Review. In their article, the authors discuss how the stringent new pension plan funding rules enacted by the Pension Protection Act of 2006 (PPA), has raised the specter of increased funding obligations for single-employer plans, as well as restrictions on the operation of underfunded plans and the funding of nonqualified plans in 2009. The authors note that the legislation intended to reduce the impact of the PPA changes failed to pass Congress and although industry groups are pushing for relief, at this point there is no assurance that Congress will act.

According to Jim and Cory, “The PPA completely revised the minimum funding requirements for qualified plans, changing from a system that focused on long-term funding to a ‘pay as you go’ system that requires current funding of all pension liabilities.” The authors also note that the heart of the new PPA system is a plan’s “funding target attainment percentage” and its “adjusted funding percentage.” In conclusion, Jim and Cory suggest, “Plan fiduciaries should review the plan’s investment strategy and become informed about the funded status. In many cases, no action will be required, but volatility in the global market requires vigilance with the fiduciary process.”