BENEFITS DIGEST

Pension funding calculations need to account for the cost of running the plan as well as paying benefits. Mercer explains an IRS proposal that would include administrative expenses and PBGC premiums in the annual cost used for minimum funding, while excluding investment expenses. Bundled provider fees above $5,000 would need to be allocated, making the service breakdown relevant to the actuary’s calculation. The proposal also addresses retroactive amendments and changes awaiting IRS approval. Comments closed October 19, and the proposed rules would apply six months after finalization.

The monthly rate notice supplies the segment rates, yield-curve figures, and 30-year Treasury weighted averages that defined benefit plans use for funding and minimum-present-value calculations. Which table applies depends on the plan year and the elections in place, so administrators should pull the figure for their own plan rather than quote a headline rate.

On October 19 the Supreme Court requested responses in three petitions asking when outdated actuarial assumptions in pension benefit calculations violate ERISA, Southern Co. v. Drummond from the Eleventh Circuit and the consolidated Sixth Circuit cases [FedEx v. Watt](https://www.supremecourt.gov/docket/docketfiles/html/public/26-360.html) and [Bakery Workers Pension Committee v. Reichert](https://www.supremecourt.gov/docket/docketfiles/html/public/26-387.html). Each respondent had waived a response, and all three petitions were distributed for the November 6 conference before the requests issued, with responses now due November 18. The ERISA Industry Committee filed amicus briefs on the Sixth Circuit dockets on October 16, arguing per [PLANSPONSOR’s report](https://www.plansponsor.com/eric-files-amicus-briefs-in-forfeiture-pension-calculation-cases/) that the ruling below would expose thousands of defined benefit plans to litigation over competing actuarial opinions. A response request signals interest, not a grant, but three in one day on one question is worth watching.

October Three reviews three bills House Democrats introduced on October 1. The Employee and Retiree Access to Justice Act would replace deferential review of benefit denials with fresh judicial review and restrict arbitration. The Protecting Workers’ Benefits Act would let defined benefit participants sue on a plan’s behalf and receive a litigation incentive of 0.5% to 1.0% of the amount recovered. The Workers’ Retirement Savings Protection Act would broaden fiduciary investment advice, including rollover advice. October Three sees little near-term prospect of enactment, and the bills create no current duties.

Specialists from J.P. Morgan, NISA and NEPC tell PLANSPONSOR that the private-assets question for pension plans is one of sizing rather than suitability. A fully funded frozen plan needing 4% to 5% returns and a terminating plan heading toward a risk transfer have very different room for investments that cannot readily be sold, since an annuity purchase consumes liquid assets and can leave the illiquid holdings stranded. The interviews frame allocation size and timing against each plan’s liabilities and liquidity rather than treating private assets as categorically good or bad.

A frozen pension plan with a surplus may offer an employer another way to provide retirement benefits. Milliman examines reopening a defined benefit plan and using accumulated assets or a prefunding balance, which reflects certain prior contributions, to help support new benefits. The appeal depends on cash-flow projections, contribution rules, workforce needs and the cost of future promises. A surplus measured now doesn’t guarantee that a reopened plan will remain inexpensive as interest rates, investment returns and employee demographics change.

Year-end review needs to reach beyond the amendment signature page. Milliman’s checklist for single-employer retirement plans covers participant notices, benefit-statement delivery, annual filings, pension premiums and funding certifications, alongside required and discretionary amendments. The administrative work differs between defined benefit and defined contribution plans, and some obligations depend on the plan’s design and calendar. The bulletin also urges sponsors to look backward for amendments that should already have been adopted and consider the available correction procedures if something was missed. Its useful organizing point is to put document changes, operational compliance and participant communications on the same review list. A document deadline doesn’t by itself tell the sponsor when a provision must operate or when employees must receive a notice.

Corporate pension surpluses grew again in September, and this time rates did the work. A jump of nearly half a percentage point in corporate bond rates pushed discount rates to their highest level since May 2009, helped by the Federal Reserve’s September 16 rate increase, its first in more than three years, and the drop in liabilities more than offset one of the year’s worst market months. PLANSPONSOR’s roundup shows the consulting firms’ estimates clustering tightly. Marsh McLennan puts S&P 1500 plans at 113 percent funded, Wilshire at 113.6 percent, Legal & General at 112.3 percent and Aon at 109.8 percent, with Milliman’s index of the 100 largest corporate plans at 114.5 percent. The practical point for sponsors is the one October Three makes. Rate-driven gains lift every plan, including poorly funded ones, where equity rallies mostly help plans that are already healthy.

Milliman’s Vanessa Vaag works through whether a cash balance plan should let participants who reach age 59½ move their money out while still working, an option the Bipartisan American Miners Act opened in 2019. Despite the name, that law’s distribution provision is not limited to miners. It lowered the minimum in-service distribution age from 62 to 59½ for every employer’s pension plan, cash balance plans included, and a sponsor adopts the feature by amending its plan. The appeal is control. A participant who cannot direct the pooled plan’s investments can roll a vested benefit to an IRA or the employer’s 401(k) without leaving the job. Employers may reduce future pension obligations and federal pension-insurance premiums, but they need enough cash to pay departing balances and must weigh the accounting effects, especially if many participants move money out at once. Employees give up the plan’s federal pension protection and lifetime payment option for the money they withdraw. The decision facing a sponsor is whether the added flexibility solves a real workforce problem, and Vaag recommends starting with an estimate of how many employees would actually use the option.

MetLife’s 2026 pension risk transfer poll surveyed 250 defined benefit plan sponsors with at least $100 million in assets and goals to reduce pension risk. Among those sponsors, 88 percent are considering transferring obligations to an insurer and 80 percent plan to shed their pension liabilities entirely within five years, and among the sponsors open to an insurer deal, 32 percent expect to complete one within two years. Half name interest rates as the top catalyst, and the share ranking an insurer’s financial strength as the leading selection factor jumped to 65 percent from 33 percent a year ago. October Three’s companion survey of insurers reports that full plan terminations made up 66 percent of these transactions in the first half of 2026, and that deals covering only retirees already receiving benefits made up another 28 percent. Milliman puts the competitive cost of buying annuities for retirees at 99.9 percent of the liabilities recorded for accounting purposes, the fourth straight month below 100 percent. The insurers’ chief complaint lands on sponsors. Incomplete participant data was the top obstacle to onboarding for 72 percent of carriers.

The SECURE Acts raised the statutory required minimum distribution ages to 72 and then 73, but Code section 401(a)(9) sets the latest permissible commencement date, not the plan’s own. A defined benefit plan whose document independently defines its required beginning date as April 1 following age 70 1/2 may keep starting benefits at 70 1/2, a result the preamble to Treasury’s 2024 final RMD regulations confirms directly. The answer lives in the plan document rather than the statute, so check whether yours states its own age or merely incorporates the Code by reference. The amendment clock runs either way; required SECURE amendments, including the technical RMD updates, are generally due by December 31 of this year.

The funded ratio of the Milliman 100 companies’ pension plans jumped to 114.5 percent as of September 30, from 112.2 percent a month earlier, putting the aggregate surplus at $160 billion. Higher interest rates drove the improvement. The rate used to value future pension payments rose from 6 percent to 6.47 percent, a level last seen in May 2009, reducing the estimated obligations by $54 billion. That more than offset a 2.21 percent investment loss. Milliman’s baseline projection now has the ratio at 114.7 percent by year end and 115.5 percent by the end of 2027. The improvement depends heavily on interest rates. Falling rates could increase the value of those obligations again.

Milliman’s midyear study puts aggregate multiemployer pension funding at 106 percent as of June 30, up from 100 percent a year earlier, with 69 percent of plans fully funded and the system holding roughly $55 billion in surplus. The Special Financial Assistance program is a large part of the story: 161 plans have received nearly $78 billion in grants since 2021, which Milliman credits with 9 percentage points of the aggregate funded level. Co-author Tim Connor points to strong markets and contributions that keep outpacing plan costs.

Consultants at October Three, J.P. Morgan Asset Management and Russell Investments describe the same change in client conversations. With average corporate pension funding at 99 percent this year, up from 77 percent in 2008 by Russell’s tally of public filings, employers with fully funded pension plans are asking how to use them rather than how to wind them down. The options include reopening frozen plans, improving benefits, and applying surplus to shore up an acquired company’s pension, and some employers are watching for legislation that would let surplus move into the 401(k) plan. For a decade the standard endgames were keeping a frozen plan quietly invested in bonds or terminating it by buying annuities. Neither is the automatic answer anymore.

What does an employer do when its pension no longer needs contributions? Advisers from Gallagher, Cerulli, Alight and Milliman walk through two different pools of money. Company cash freed up by a contribution holiday can go to debt, buybacks or deals. Assets already inside the plan are plan assets, and the choices there run from maintaining a funding cushion to help absorb market losses (the advisers quoted suggest 105 to 110 percent) to applying surplus to retiree cost-of-living increases or a qualified replacement plan, or continuing to de-risk through liability transfers and cash balance conversions. The thread running through the interviews is that the right answer turns on company-specific risk tolerance, not an industry default.

In the only benefits entry in the IRS’s Friday, October 2 batch of private letter rulings, the agency approved a single-employer pension sponsor’s request to use substitute mortality tables, tables built from the plan’s own participant experience rather than the standard government tables, in its minimum funding calculations under Code section 430. The approval runs up to 10 years starting with the plan year beginning November 1, 2026, and follows a new experience study. The same sponsor received a similar ruling in 2021. These approvals are routine, but they’re a reminder that a large plan whose population differs from the standard tables can ask to fund based on its own data. The approval carries annual reporting conditions, and the standard tables snap back if the sponsor stops supplying the data. A private letter ruling binds the IRS only as to the taxpayer who requested it.

The initial 2026-2027 Priority Guidance Plan lists 121 projects the agencies intend to prioritize, and the benefits entries sketch the year ahead. From the One Big Beautiful Bill Act, the plan includes Trump Account guidance, regulations on the expanded employer child care credit, and guidance on the paid family and medical leave credit. The retirement entries run from an update to the Employee Plans correction program and a new program for correcting IRA mistakes, through SECURE 2.0 guidance including the saver’s match and student-loan matching contributions, to electronic-delivery modernization and defined benefit funding guidance. Other projects address fringe benefits and VEBAs, the tax-exempt trusts some employers use to fund benefits. For executive pay, the plan lists regulations on the deduction limit for high pay at public companies and the parallel excise tax at tax-exempt organizations. The list sets the agencies’ priorities for the coming year. It doesn’t change existing requirements or promise when any project will be finished.

Five retired Major League Baseball umpires, including Joe West, say their pension plan has been shortchanging them for years. They challenge a benefit table that allegedly reduces annual pensions between ages 62 and 65 and charges them for a death benefit they never selected. They also allege errors in the ages used to calculate payments and missing increases for working beyond retirement age. West says the plan acknowledged an underpayment of about $144,000 but left roughly $133,000 unpaid. The umpires want the table corrected and their missing benefits paid with interest. The plan has not yet responded to the allegations.

The IRS is clearing out old guidance. Notice 2026-58 declares 71 revenue rulings, revenue procedures, notices, and announcements obsolete under the administration's deregulatory executive orders, the third round in the effort after earlier notices covering 9 and 83 documents. Nothing here repeals a current benefit protection. The listed items are expired or superseded, including Notice 96-8, the 1996 guidance on calculating lump sum distributions from cash balance plans, which Congress superseded in the Pension Protection Act of 2006, and financial-crisis-era funding relief for multiemployer pension plans whose election windows closed years ago. Sponsors with plan documents or procedures that still cite any listed item should confirm what replaced it.

Kellanova and FedEx are asking the Supreme Court to hear disputes over how pension plans calculate benefits that continue paying a surviving spouse. The question is whether plans must use reasonable, up-to-date assumptions about life expectancy or can rely on the assumptions written into their plan documents. [Kellanova's petition](https://digest.theinnerfirm.com/docs/kellanova-cert-petition-2026-09-14.pdf) and [FedEx's companion petition](https://digest.theinnerfirm.com/docs/fedex-v-watt-cert-petition-2026-09-14.pdf), both filed September 14, come from a single divided Sixth Circuit decision holding that these spousal annuities must be calculated with reasonably accurate, modern mortality data even where the plan document specifies older tables. The Eleventh Circuit reads the statute the same way, while the D.C. Circuit treats the calculation as pure math under whatever assumptions the plan states. The petitions lean hard on the stakes. Defined benefit plans hold nearly $3 trillion and pay out over $250 billion a year, older mortality tables remain common in plan documents, and settlements in these suits have run from $10 million at CITGO to $59.2 million at Raytheon. Both sets of respondents have waived their right to respond unless the Court requests a response.

The Pension Benefit Guaranty Corporation, which insures private-sector pensions, wants to move the penalty policies it has used since 1995 into formal regulations, and commenters are asking it to distinguish promptly corrected mistakes from serious failures. The [July proposal](https://www.federalregister.gov/documents/2026/07/21/2026-14627/penalties-for-failure-to-provide-certain-notices-or-other-material-information) keeps the familiar framework, in Marsh's summary more or less the old policy made official, including $25 a day for the first 90 days a required notice is late and $50 a day after that, now indexed for inflation. The Wagner Law Group's comment letter, from Harold Ashner and Israel Goldowitz, who helped write the 1995 policies, asks the agency to consider whether a sponsor exercised ordinary business care in hiring and overseeing the advisers who prepare most filings, to weigh whether a violation caused any actual harm, and to answer first-time, promptly corrected, harmless mistakes with written warnings rather than daily fines. Comments closed September 21. The number of covered single-employer plans has fallen about 25 percent since 2005, and penalty exposure is one more line in the cost of keeping a defined benefit plan open.

August was a quiet net positive for the 100 largest corporate pension plans: [Milliman's index](https://www.milliman.com/en/insight/pension-funding-index-august-2026) puts the aggregate funded ratio at 112.2 percent at month-end, up from 112.1 percent in July, with the funded surplus growing $3 billion as a 0.92 percent investment return outweighed a small decline in discount rates. For plans weighing termination or risk transfer, the arithmetic keeps cooperating.

Corporate pension surpluses keep compounding: the funded ratio for the Milliman 100 plans inched up to 112.2 percent as of August 31, a $141 billion surplus, as a 0.92 percent investment return outran a two-basis-point dip in the discount rate to 6.00 percent. The baseline projection now has the ratio at 112.5 percent by year end and 113.5 percent by the end of 2027. That is the backdrop for why pension risk transfer and surplus questions keep landing on sponsor agendas.

WTW's Thinking Ahead Institute counts $27.7 trillion in the world's 300 largest retirement funds after 13.4% growth in 2025, the fastest pace since 2017, with defined contribution assets growing 15.8% against 9.4% for defined benefit. The report's warning lands close to home for US sponsors. The weakness appears at retirement, when institutional support falls away and individuals face fragmented markets on their own.

Public-sector workers who cut back hours for caregiving likely do not know what it costs them at retirement, a new Pew study finds. A career worked at 20 hours a week produces roughly half the annual retirement income of a full-time career in a defined contribution plan, and the reductions run steeper still in defined benefit plans.

The proposal landed on August 20, and this new write-up explains why sponsors should welcome it. The current anti-abuse rule for mid-year amendments is so broad it can catch ordinary benefit improvements; the proposal narrows it to amendments that front-load costs out of proportion to the benefit. The package also lets sponsors adopt retroactive benefit increases up to the tax filing deadline, and plans may rely on the proposed rules immediately, so the planning opportunities start now.

Groom collects its August publications in one place, spanning DB plan funding rules, 45S credit and Saver's Match guidance, dependent care nondiscrimination, the wellness program enforcement relief, the e-delivery proposal, and the tobacco surcharge litigation.

On August 20, 2026, Treasury and the IRS published a Notice of Proposed Rulemaking that would significantly modify the minimum funding rules for single-employer defined benefit pension plans under Code section 430, including a new anti-abuse rule.

Milliman reviews key provisions of the proposed IRS regulations that would modify how single-employer DB plans determine their minimum funding requirements.

With the majority of large corporate DB plans now in surplus territory, Milliman lays out strategies for preserving that surplus and options for putting the excess funds to work.

Milliman explains why the PBGC’s new Coverage Assessment Program matters especially for professional service firms, whose defined benefit plans often sit under unique coverage rules.

As a reminder, the minimum funding rules under Section 430 establish how much an employer must contribute to a defined benefit pension plan each year to avoid excise tax penalties and satisfy related funding requirements.

Cash balance plans grew by 1,025% over two decades, according to an Ascensus report.

The IRS on Aug. 19 issued proposed regulations that would modify rules for the minimum funding requirement applicable to single-employer defined benefit plans.

IRS/Treasury proposed rule would exclude investment management fees from the plan-related expenses counted in a plan's target normal cost. It would also let sponsors adopt benefit-increasing amendments after the plan year ends, up to the tax return deadline, and still have them reduce that prior year's required contribution, potentially lowering minimum funding obligations for single-employer defined benefit plans.

PBGC filed a comment letter supporting FASB's proposal to discount qualifying market return cash balance obligations at the plan's assumed interest crediting rate. An accounting change rather than a compliance obligation, but one that would move reported pension obligations for hybrid plans.

A pensions specialist on why stale actuarial assumptions and mortality tables are fiduciary exposure, after a recent ruling found outdated data can violate ERISA. Fiduciary responsibility extends past investment oversight and into plan math.

In an unpublished memorandum, the Ninth Circuit affirmed an arbitration award holding that a multiemployer plan actuary's use of PBGC-published interest rate assumptions to calculate withdrawal liability violated ERISA's requirement that assumptions represent the actuary's best estimate of anticipated experience. The plan's 7 percent minimum funding rate applied instead. See The Second Thing above.

A pilot becomes policy: employers considering a defined benefit plan can now ask PBGC for a coverage determination before establishing the plan, removing a source of uncertainty for church-affiliated, professional-service, and Puerto Rico plan sponsors.

Corporate pension funded percentage leaps ahead in July, per Milliman's monthly tracking of the 100 largest U.S. corporate defined benefit plans.

On July 20, 2026, the PBGC proposed a framework modernizing how it calculates and enforces penalties for late required notices and filings, with daily penalty schedules ranging from $25 to $1,000 by violation severity and reductions or waivers for reasonable cause and self-correction. Plan sponsors should revisit compliance procedures for reportable events and section 4010 filings, as PBGC has ended its informal nonenforcement posture in these areas.

As the December 31, 2026 deadline approaches for adopting SECURE and SECURE 2.0 amendments, Milliman examines a key decision for defined benefit plan sponsors: whether to retain a required start date for benefit distributions that is earlier than the new later statutory required beginning date for RMDs, which has been raised to age 72, 73, and 75 depending on the participant's birth year.

A Milliman case study on designing a cash balance pension plan for a law firm's partners, allowing deferral of significant taxable income until retirement with contribution flexibility by career stage. The design supported deferrals exceeding $250,000 annually per participant, with potential accumulations over $3.5 million by retirement.

Private letter ruling addressing the section 4980 transfer of surplus assets from a terminating defined benefit plan to a replacement defined contribution plan. A PLR binds only its recipient.

An NCPERS survey suggests lower-stakes experimentation with artificial intelligence is happening more quickly than strategic integration.

Groom's July roundup collects the firm's month in publications and press, including the Cycle 4 Cumulative List for pre-approved defined benefit plans and Kreps on fiduciary partnerships in PLANADVISER.

VAPPs can help funded pension plans balance risk, support retirement income and create a more sustainable path forward.

The Labor Department filed an amicus brief with a federal appellate court addressing the standards for offloading defined benefit plan liabilities through pension risk transfers. The filing gives sponsors a first official read on how DOL views the safest available annuity analysis in the current PRT litigation wave.

The IRS has released Notice 2026-34, establishing the 2026 Cumulative List of Changes in Plan Qualification Requirements for Defined Benefit Pre-approved Plans (the “2026 Cumulative List”).

Background Under ERISA section 4043, defined benefit plan administrators must notify PBGC when certain “reportable events” occur. One of those events is a reduction in the active participant headcount.

Today’s retirement plans (401(k), 403(b), defined benefit pension plans, etc.) are growing ever more sophisticated, offering plan participants more features and options for increased retirement savings.

Hobbs, Esq. Britney, a retired singer and superstar, owns and operates Lucky Records (the “Company”), a record company in Los Angeles with 44 employees. The Company sponsors the Lucky Records 401(k) Profit Sharing Plan (the “PS Plan”) to help its employees save for retirement.

“Plan document providers have a little over a year to get their pre-approved defined benefit plans updated for these changes and submitted to the IRS. Stay tuned for ‘LRM’ sample language to help

Analysis of nearly 58,000 retirement plans over 16 years concludes that defined contribution plans without alternative investments delivered higher returns than defined benefit plans with significant

This update would amend Topic 715 of the FASB Accounting Standards Codification, which governs the measurement of pension liabilities for a plan sponsor’s financial statements. Under the current