Last week saw the President signed an infrastructure bill into law. Within that law was additional smoothing relief for defined benefit pension plans.
Earlier this year, ARPA changed the stabilization corridor used in establishing interest rates for minimum funding requirements. The new law would further modify the corridors used, as shown in the tables below. The corridor will expand now starting in 2031 (previously 2026), reaching the ultimate in 2035 (2030).
| Plan Year | Corridor (Old) |
| 2020 – 2025 | 5% (95% – 105%) |
| 2026 | 10% (90% – 110%) |
| 2027 | 15% (85% – 115%) |
| 2028 | 20% (80% – 120%) |
| 2029 | 25% (75% – 125%) |
| 2030 | 30% (70% – 130%) |
| Plan Year | Corridor (New) |
| 2020 – 2030 | 5% (95% – 105%) |
| 2031 | 10% (90% – 110%) |
| 2032 | 15% (85% – 115%) |
| 2033 | 20% (80% – 120%) |
| 2034 | 25% (75% – 125%) |
| 2035 | 30% (70% – 130%) |
Since these changes occur well into the future, they will have no immediate impact on plan valuations and compliance. The new law will certainly result in continuing lower minimum funding requirements for a longer period. However, since the interest rate relief does not impact the rates used for PBGC variable rate premium purposes, the lower contributions could lead to higher PBGC premiums. Feel free to reach out to your Foster & Foster consultant with any questions you may have.