SECTION 2. BACKGROUND

.01 Sections 412 (minimum funding standards), 430 (minimum funding standards for single-employer defined benefit pension plans other than CSEC plans), 431 (minimum funding standards for multiemployer plans), and 433 (minimum funding standards for CSEC plans) of the Code set forth funding rules for defined benefit plans. ¹⁷⁵ Under § 412(d)(1), a change of funding method for a plan may take effect only if the change is approved by the IRS. A funding method is a recognized actuarial technique utilized for establishing the amount and incidence of the annual actuarial cost of pension plan benefits and expenses.

.02 Section 430(h)(2) provides the requirements for the interest rates that are used under § 430. Unless the plan sponsor elects to use interest rates under the corporate bond yield curve, the interest rates that must be used are based on the three segment rates for the applicable month. Under § 430(h)(2)(E), the applicable month is the month that includes the valuation date, unless the plan sponsor elects to use a different permitted applicable month. As provided under §§ 430(h)(2) (D)(ii) and 430(h)(2)(E), an election to use the corporate bond yield curve, as well as an election of a permitted applicable month other than the month that contains the valuation date (if use of the corporate bond yield curve is not elected), may be revoked only with the consent of the IRS.

.03 Rev. Proc. 2000–41 provides procedures for obtaining the IRS’s approval for a change in funding method, but it does not take into account the changes to the minimum funding requirements enacted in legislation after it was issued, including the Pension Protection Act of 2006, Pub. L. 109–280, the Cooperative and Small Employer Charity Pension Flexibility Act, Pub. L. 113–97, and the Multiemployer Pension Reform Act of 2014, which was enacted as part of the Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. 113–235.

.04 Rev. Proc. 2017–4, 2017–01 I.R.B. 146, sets forth the current general procedures of the IRS relating to the issuance of rulings, determination letters, and opinion

175Sections 302, 303, 304 and 306 of ERISA contain parallel funding rules for defined benefit plans.

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letters on employee plans and exempt organization matters (including user fees). These general procedures are updated annually. Sections 6.02(11) and (12) of Rev. Proc. 2017–4 set forth the requirements for designating an authorized representative.

.05 Rev. Proc. 2017–56, 2017–44 I.R.B. xx, provides automatic approval for certain changes in funding method for single-employer defined benefit plans for calculations described under § 430, and Rev. Proc. 2000–40, 2000–2 C.B. 357, provides automatic approval for certain changes in funding method for defined benefit plans that are not subject to the required minimum funding rules of § 430.