3743 / What is the funding requirement for defined benefit plans beginning after PPA 2006, MAP-21 and HATFA 2014?
Editor’s Note: The SECURE Act 2.0 clarifies that plan fiduciaries are not always required to collect overpayments from participants or make corrective contributions for overpayments not collected from plan participants. Sometimes, collection efforts for overpayments will now be prohibited in cases where the overpayment was the result of an inadvertent error, and the overpayment began more than three years before a participant or beneficiary receives notice of the overpayment. The legislation also requires plan sponsors to give participants and beneficiaries access to a dispute process to dispute overpayment recoveries. These changes are effective immediately. Plan sponsors should remember that the rules governing minimum funding discussed below have not been changed, meaning that the plan sponsor may need to repay the amounts if the overpayment has a significant impact on plan funding levels.
The Pension Protection Act of 2006 (PPA 2006) replaced the minimum funding standard account and the deficit reduction contribution for single-employer defined benefit plans ( Q 3742) with a single basic “minimum required contribution.”1
The minimum required contribution for a defined benefit plan (other than multiemployer plans) is determined in the following manner:
(1) If the value of a plan’s assets (reduced as described below) equals or exceeds the funding target of the plan for the plan year, the minimum required contribution is the target normal cost reduced (but not below zero) by such excess.2