IRS ponders pension math tweaks for defined benefit plans.
Published Date: 8/20/2026
Proposed Rule
Summary
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.
Analyzed Economic Effects
5 provisions identified: 4 benefits, 1 costs, 0 mixed.
Post-Year Benefit Amendments Count
If an employer adopts a pension plan or a benefit-increasing amendment after the end of a plan year but before the employer's tax return due date (including extensions), the amendment can be treated as adopted as of the last day of the taxable or plan year under sections 401(b)(2) or 401(b)(3). That means the amendment can be taken into account in the plan year's actuarial results and can increase the plan sponsor's deductible contribution limit for the employer's taxable year.
Anti‑Abuse Rule for Mid‑Year Boosts
A mid‑year plan amendment that increases liabilities may be required to be taken into account for the plan year if it would increase the target normal cost disproportionately. An amendment is treated as increasing target normal cost disproportionately if the percentage increase in target normal cost from the amendment is more than twice the percentage increase in the funding target (measured taking into account only benefits of participants currently employed).
Investment Fees Excluded from Target Cost
Investment-related expenses (like investment manager fees and other expenses directly related to investing plan assets) are treated as investment-related and are not included in the plan's target normal cost. If total payments from plan assets to a service provider are expected to be $5,000 or more in a plan year and include both investment-related items and other services, only the amounts the service provider itemizes as investment management fees or other investment-related expenses are treated as investment-related.
Pending Actuarial Changes Can Apply
If a plan sponsor has submitted an application to the IRS to change actuarial assumptions or a funding method but the IRS has not yet approved it, the sponsor may change the assumptions or funding method for that plan year in accordance with the Secretary's later approval. The proposed rule updates how such pending applications are treated for the plan year.
Remedial Operations Treated as Adoption
If a plan changes its operations during a remedial amendment period to reflect a planned remedial amendment, those operative changes are treated as if the provisions of the remedial amendment were adopted on the date operations changed. This rule applies when plan operations are changed in anticipation of a required remedial amendment under the remedial amendment period rules in Sec. 1.401(b)-1(d).
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Key Dates
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