By Gail Steward, EA.
The segment rates required to be used for 2018 funding valuations were released on September 14, 2017. For Minimum Funding Requirement purposes, the rates are 3.92%, 5.52% and 6.29%. These compare to 4.16%, 5.72% and 6.48% for 2017 funding valuations. These lower rates are expected to increase Funding Target Liabilities by 2.00% – 3.00% depending on the average age of the population being valued.
For calendar-year plans that use September rates, the 2018 segment rates without relief are 1.75%, 3.76% and4.66% compared to 1.52%, 3.80% and 4.79% for 2017. These rates are used for calculating the maximum deductible contribution. They are also used for the PBGC variable premium liabilities for plans that have elected the Alternative Calculation option. These rates are expected to increase the applicable liabilities by less than 1%.
Note that the IRS is also updating the mortality used for funding calculations as detailed here so the combination of new mortality and interest rates will increase the Funding Target Liabilities by 5% – 10% overall. Plan Sponsors should prepare now for increased 2018 funding requirements.Retirement Plans, Findley Post