As Goldman Sachs noted in their recent paper, “US Corporate Pension Review and Preview: Running in Place,” and PEI would advise, plan sponsors need to consider the fact that funding relief (MAP21, HATFA, BBA) will begin to expire in 2021. Many plan sponsors could start to see the effect of higher actuarial projections past that date. This is because liability valuation based on utilizing higher discount rates allowed under the 25‐year average interest rate “corridor” will begin to be phased out.
Unless there is additional legislation this year to extend the relief, in many cases lower interest rates will be used to calculate contribution requirements. This would result in a lower funded status and higher levels of projected mandatory contributions for those plan sponsors.
Scheduled Widening of Funding Relief Corridor and Possible Higher Contribution Requirements*
Plan sponsors should consult with their actuary to discuss the implication of this change to funding calculations and the specific impact on their plan.
*Source: Goldman Sachs Asset Management (GSAM), Internal Revenue Services; as of December 2019. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Please see additional disclosures as provided by GSAM at the end of the sourced report (here).