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These regulations set forth the definitions that were modified by PPA '06 that apply for purposes of applying the rules of section 4971. The waiver amortization installments established with respect to a waiver amortization base are determined using the interest rates that apply for the plan year for which the waiver is granted (even though the first installment with respect to the waiver amortization base is not due until the subsequent plan year) and are not redetermined in subsequent plan years to reflect changes in interest rates under section 430(h)(2) for those subsequent plan years. (i) The facts are the same as in Example 2. (C) The contribution paid August 15, 2017 is discounted for 71/2 months at the effective interest rate ($19,444 1.0590(7.5/12) = $18,760). The required annual payment for 2017 is equal to the lesser of (a) 100% of the 2017 minimum required contribution ($120,000) or (b) 90% of the 2017 minimum required contribution (90% of $100,000, or $90,000). Under section 430(e)(2), the waiver amortization installments with respect to a waiver amortization base established for a plan year (the amount of the waived funding deficiency for the plan year) are the amounts necessary to amortize the waiver amortization base in level annual installments over the 5-plan-year period beginning with the succeeding plan year. (iii) Election by commercial passenger airline under section 402(a)(2) of PPA '06. The plan sponsor makes one contribution for 2009 on July 1, 2009 in the amount of $200,000, and the sponsor does not make an election to use the prefunding balance or funding standard carryover balance to offset the minimum required contribution for 2009. Paragraph (c) of this section describes the accelerated required installment schedule for plans with a funding shortfall in the preceding plan year. One case in which this occurs is for a plan with no funding standard carryover balance and actuarial gains that would have caused the shortfall amortization base (and related shortfall amortization installments) to be negative. The portion of the contribution paid December 31, 2010 that is required to eliminate the unpaid minimum required contribution for 2009 (taking into account the 2009 effective interest rate for the 24 months between January 1, 2009 and the payment date of December 31, 2010), is $55,651 multiplied by 1.059(24/12) or $62,412. Under 1.430(f)-1(f)(1)(iii)(B), the amount of the prefunding balance used as of April 15, 2017 pursuant to the standing election is 25% of the $120,000 required annual payment for the 2016 plan year ($30,000). (iii) Ordering rule. Under the regulations, in general, the first segment rate is used to determine the present value of benefits expected to be payable during the 5-year period beginning on the valuation date for the plan year. Except as provided in paragraph (f)(5)(ii)(D) of this section, distribution of plan assets which is not completed within one year following the applicable date described in paragraph (f)(5)(ii)(A) of this section is presumed not to have been made as soon as administratively feasible. This portion of the payment is therefore adjusted to $36,268 as of the valuation date (that is, $40,000 1.0590(20.5/12)). In the case of benefits expected to be payable during the 5-year period beginning on the valuation date for the plan year, the interest rate used in determining the present value of the benefits that are included in the target normal cost and the funding target for the plan is the first segment rate with respect to the applicable month, as described in paragraph (c)(2)(i) of this section. Thus, taxpayers must follow the statute as amended for this technical correction for plan years beginning on or after January 1, 2014, and are permitted to apply this technical correction for earlier years as well. Accordingly, $20,000 of the July 15, 2017 contribution is adjusted to April 15, 2017, using an interest rate of 10.90% for the 3-month period between July 15, 2017 and the April 15, 2017 due date, and further adjusted using the effective interest rate of 5.90% for 31/2 months between April 15, 2017 and the January 1, 2017 valuation date. Instead, the determination of target normal cost must reflect benefits that accrue or are expected to accrue during the short plan year. 4010) and paragraph (h)(4) of this section. (ii) Making an election to use some or all of the plan's prefunding balance or funding standard carryover balance in accordance with the rules of paragraph (c)(4) of this section. Fact Sheet: Cash Balance Pension Plans | U.S. Department of Labor Is my 401(k) Top-Heavy? | Internal Revenue Service For this purpose, the prefunding balance is subtracted from the value of plan assets, but only if an election to use that prefunding balance to offset the minimum required contribution is in effect for the plan year. In the second step, this discounted amount is treated as if it were contributed on the installment due date for purposes of the interest adjustment under paragraph (b)(4)(i) of this section. Therefore, $30,000 of the payment is allocated to the April 15, 2017 required installment and the remaining $10,000 is allocated to the installment due on July 15, 2017. Under paragraph (d)(3)(iv)(A) of this section, to the extent that the amount due April 15, 2017 solely because of the liquidity requirement under paragraph (d)(1) of this section is not satisfied with a contribution of liquid assets during the quarter, this amount is no longer considered unpaid. (ii) CSEC plans. Under the regulations, a payment of the minimum required contribution under section 430 for a plan year can be made no earlier than the first day of the plan year. However, a plan is not treated as terminated on that date if the plan assets are not distributed as soon as administratively feasible after that date. (2) Funding shortfall. See paragraph (b)(4) of this section for special rules for a plan maintained by a commercial passenger airline (or other eligible employer) for which an election under section 402 of the Pension Protection Act of 2006, Public Law 109-280 (120 Stat. (iii) Special rule for first effective plan year. (B) The waiver amortization installments that have been determined for the plan year and any succeeding plan year with respect to the waiver amortization bases for any plan year preceding the plan year. (vi) The liquidity shortfall is recalculated as of June 30, 2017 as $100,000 (that is, the base amount of $1,500,000 minus the value of liquid assets of $1,400,000). If a plan's termination date occurs during a plan year but before the last day of a plan year, then, for purposes of section 430, the plan is treated as having a short plan year that ends on the termination date. The authority citation for part 54 continues to read in part as follows: Authority: Par. (a) In general - (1) Overview. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. (B) The contribution paid July 15, 2017 is increased for 51/2 months at the effective interest rate ($30,000 1.0590(5.5/12) = $30,799). With respect to a multiemployer plan defined in section 414(f), the term accumulated funding deficiency has the meaning given to that term by section 431. As provided in 1.430(h)(2)-1(f)(2), these installments are determined assuming that the installments are paid on the valuation date for each plan year and using the interest rates applicable under section 430(h)(2). (ii) The amount of the adjusted disbursements from Plan D for the 12-month period ending March 31, 2017 is calculated as the sum of the annuity benefits, single sum payments, and administrative expenses paid during the 12-month period, reduced by the product of the plan's FTAP and the sum of the single sum payments and any payments for annuities purchased during the plan year. The proposed regulations under section 4971 generally were proposed to apply at the same time the statutory changes to section 4971 under PPA '06 become effective, but would not apply to any taxable years ending before the date the proposed regulations were published (April 15, 2008). However, with respect to a plan year beginning before January 1, 2014, for a plan with a valuation date other than the first day of the plan year, the 5-year period beginning on the first day of the plan year is permitted to be used in lieu of the 5-year period beginning on the valuation date. (4) Funding shortfall(i) In general. Assistant Secretary of the Treasury (Tax Policy). IRS Clarification on Defined Benefit Pension Plan Contributions Because a portion of the prefunding balance is used to offset the minimum required contribution, the test under section 430(c)(5) is applied by subtracting the prefunding balance from the actuarial value of assets as illustrated in paragraph (ii) of this Example 10, and no further adjustments are required to the minimum required contribution. 9. A CSEC plan (that is, a plan that fits within the definition of a CSEC plan in section 414(y) for plan years beginning on or after January 1, 2014 and for which the election under section 414(y)(3)(A) has not been made) is not subject to the rules of section 430. In response to comments, the regulations provide special rules for applying the liquidity requirements to a multiple employer plan to which section 413(c)(4)(A) applies. Because section 430(f)(3)(B) and 1.430(f)-1(d)(2) require that the funding standard carryover balance be used before using the prefunding balance, this means that the full minimum required contribution will be offset without using the prefunding balance. The proposed regulations would have credited interest on an early election to use a funding balance for purposes of satisfying the quarterly contribution requirement, but would not have credited interest on an early contribution for this purpose. For purposes of paragraph (c)(5)(ii) of this section, the minimum required contribution for a plan year is determined without regard to the installment acceleration amount for the plan year determined under section 430(c)(7) or any increase to the minimum required contribution under paragraph (d)(3)(iv)(B) of this section (relating to an unpaid liquidity amount). The contribution is allocated in the order in which those installments occur, and the amount allocated to each required installment is limited to the amount necessary to satisfy the required installment (including satisfaction of the liquidity requirement under paragraph (d)(1) of this section, taking into account the special rule with respect to the unpaid liquidity amounts in paragraph (d)(3)(iv)(A) of this section) taking into account any interest as described in the next sentence. (2) The portion of the required installment that is no longer treated as unpaid by reason of paragraph (d)(3)(iv)(A) of this section, discounted for interest for the period from the last day of the quarter that includes the due date of the required installment to the due date of the installment, using the plan's effective interest rate for the plan year plus 5 percentage points, and further discounted for interest for the period from the due date of the required installment to the valuation date using Start Printed Page 54394the plan's effective interest rate for the plan year. (ii) The 2017 Schedule SB shows an unpaid minimum required contribution of $42,868 as of January 1, 2017. Register (ACFR) issues a regulation granting it official legal status. If the value of plan assets that was used for the pre-effective plan year was more than 110 percent of the value of plan assets computed pursuant to 1.430(g)-1(c), then 110 percent of the value of plan assets computed pursuant to 1.430(g)-1(c) is permitted to be used as the value of plan assets for the pre-effective plan year. In accordance with section 430(h)(2)(C)(i) prior to its amendment by HATFA, 1.430(h)(2)-1(b)(2)(i) provided that, for a plan with a valuation date that is the first day of the plan year, the first segment rate was used to determine present value of benefits expected to be payable during the 5-year period beginning on the first day of the plan year. With respect to an unpaid minimum required contribution for a plan year, the term correct means to contribute, to or under the plan, an amount that, when discounted to the valuation date for the plan year for which the unpaid minimum required contribution is due at the appropriate rate of interest, equals or exceeds the unpaid minimum required contribution. The shortfall amortization installment for this base is calculated as $23,139. In addition, this document contains final regulations regarding the excise tax for failure to satisfy the minimum funding requirements for defined benefit pension plans. (ii) Special rules for plans for which election was made pursuant to section 402(a)(1) of PPA '06. Required installments of $25,000 each are due April 15, 2008, July 15, 2008, October 15, 2008, and January 15, 2009. There are no other shortfall or waiver amortization bases for Plan B as of January 1, 2016. Age 62 or age 65 is typical. Plan G's required installments are $25,000 each for the 2017 plan year, and the final installment of the minimum required contribution for the 2016 plan year is due on September 15, 2017, in the amount of $40,000. The funding shortfall as of January 1, 2016 is the difference between the funding target and the actuarial value of assets, where the actuarial value of assets is reduced by both the remaining funding standard carryover balance and the prefunding balance. Therefore, a regulatory impact assessment is not required. . See 1.430(h)(2)-1(e) and (f) for rules regarding interest rates used for determining shortfall amortization installments and the date within each plan year on which the installments are assumed to be paid. (e) Early deemed amortization upon attainment of funding target. RMDs for Beneficiaries in Qualified Retirement Plans Furthermore, two provisions of these regulations lessen the collection of information imposed on small entitles. What is a defined benefit plan?