Legislative update - Ways and Means approves highway funding bill with “pension smoothing” provision 

July 10:  The House Ways and Means Committee today passed by voice vote a bill that would provide approximately $11 billion for highway funding, through May 31, 2015.

Legislation that is scheduled to be considered by the Senate Finance Committee this afternoon would provide a nearly identical amount of funding, according to a Ways and Means release (although with a different mix of revenue offset provisions and a modified pension provision).


The full House is expected to take up the bill next week.

Pension smoothing

The Ways and Means bill includes three revenue provisions—“pension smoothing,” extension of customs user fees, and a transfer from the Leaking Underground Storage Tank Trust Fund.


“Pension smoothing” refers to changes to the actuarial calculations for determining pension funding targets.


Currently, the minimum funding rules for single-employer plans specify the interest rates and actuarial assumptions used to determine the present value of benefits for purposes of a plan’s target normal cost and funding target. Present value is generally determined using three interest rates (“segment” rates)—each of which applies to benefit payments expected to be made from the plan during a certain period.


The proposal would revise the specified percentage ranges for determining whether a segment rate must be adjusted upward or downward. The adjusted segment rates would not apply to determine whether prohibited payments may be made from a plan when the plan sponsor is in bankruptcy. The plan’s adjusted funding target attainment percentage, determined without regard to the adjusted segment rates, would have to be at least 100% in order for prohibited payments to be made during bankruptcy.


Further, the proposal would revise the period of benefit payments to which the segment rates apply.


The adjustment, in general, would reduce tax deductible payments to fund pension plans, increasing the taxable income of employers and employees in the near-term; hence, the change increases federal tax revenue during the 10-year budget window.


Read a Joint Committee on Taxation description of the provisions—JCX-79-14 [PDF 70 KB]




©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this