On August 8, 2014, President Obama signed into law the Highway and Transportation Funding Act (HAFTA) of 2014, which allows for single-employer defined pension plan sponsors to use higher interest rate assumptions for the determination of minimum funding requirements. HAFTA also extends the funding relief provided in the 2012 Moving Ahead for Progress in the 21st Century Act (MAP 21), generally resulting in lowering 2013 funding requirements. Additionally, HAFTA can be applied retroactively to 2013 plan years.
Because plan sponsors had to make their required minimum contributions (for calendar year plans) by September 15, 2014, they were not given much notice to have changes made to their valuations. If plan sponsors made the decision to revise their 2013 funding under HAFTA, the plans’ Schedule SB will reflect the revised minimum funding. The Internal Revenue Service has issued Notice 2014-53, Guidance on Pension Funding Stabilization under the Highway and Transportation Funding Act of 2014, which provides guidance to plan sponsors for using the pension relief provided by HAFTA. This Notice provides guidance in allowing many plan sponsors to file as planned and follow up with a revised filing at a later date.
It should be noted that HAFTA does not impact interest rates used in calculating the present value of accumulated plan benefits in accordance with FASB ASC 960, Plan Accounting – Defined Benefit Pension Plans, or FASB ASC 715, Compensation – Retirement Benefits. In addition, HAFTA does not impact the amounts a participant may receive from a pension plan.
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