The IRS has issued guidance regarding the election of alternative minimum funding standards for certain defined benefit pension plans added by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). The guidance sets out election rules and procedures, including making the election for prior years. It also provides a model election certification, specifies the applicable U.S. Treasury obligation yield curve, provides relief related to triggering single-employer defined benefit plan limits, and provides reporting requirements.

Community Newspaper Plans and the SECURE Act

The SECURE Act permits the plan sponsor of a community newspaper plan. No participant has had an increase in accrued benefit after December 31, 2017, to elect to have alternative minimum funding standards apply to the plan instead of the minimum funding requirements that would otherwise apply. A community newspaper plan is a defined benefit plan maintained by an employer that, as of December 31, 2017, publishes and distributes a daily newspaper that primarily serves a metropolitan area with a population of at least 100,000 in a single state, but only if the employer satisfies certain ownership and control requirements. If the plan sponsor makes the election for its community newspaper plan, the election also applies to all other defined benefit plans sponsored by any member of the same controlled group.

Election

The guidance provides a model election certification. Once an election is made for a plan year, it applies to all subsequent plan years unless revoked. A plan sponsor may request permission to revoke an election using the procedures for obtaining a private letter ruling.

For the first plan year for which the election applies, different actuarial assumptions will be used for the plan than were used for prior plan years. The actuarial assumptions that apply to the plan for a plan year are established by filing Schedule SB for Form 5500 for the plan year that reflects those assumptions. Once the actuarial assumptions have been established for a plan year, generally, they may not be changed. These rules generally would preclude the making of an election for a plan year after the Schedule SB has been filed for the plan year. However, a change of the interest rate assumption under an election is permitted to be made for a plan year after the actuarial assumptions for that plan year have been established if (1) the election is made on or before December 31, 2020, and (2) for each affected plan year, an amended Schedule SB reflecting the retroactive election is filed no later than the date the next Schedule SB is filed after the election is made.

An election to use the alternative minimum funding standards for a plan year applies to any other defined benefit plan sponsored by a member of the plan sponsor’s controlled group, provided that (1) the plan year of that other defined benefit plan begins during a plan year of the community newspaper plan for which the election applies to the community newspaper plan, and (2) the plan sponsor of that other defined benefit plan is a member of the controlled group on the first day of that plan’s plan year.

Please call our office we can help you implement the required changes and help you understand the guidance as it applies to your plan.