On August 20, 2026, the Internal Revenue Service (IRS) and the Department of the Treasury (Treasury) published proposed regulations that would modify the rules affecting how single-employer defined benefit (DB) plans determine their minimum funding requirements. The proposed regulations generally provide greater flexibility for reflecting certain plan amendments and clarify the treatment of plan expenses in determining minimum funding requirements. The changes reflect statutory changes made by the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and the SECURE 2.0 Act of 2022 (SECURE 2.0 Act).

Comments on the proposal are due by October 19, 2026.

The key provisions of the proposed regulations are below:

• Plan expenses. Plan-related expenses reflected in the plan’s minimum funding calculations generally include all expenses expected to be paid from plan assets except participant benefits (including annuity purchases) and investment-related expenses. This means expenses such as actuarial, legal and audit fees, plan-administration expenses, and PBGC premiums are included in minimum funding calculations, while fees related to the investment of the plan’s assets are excluded.

  If a service provider’s fees are expected to be $5,000 or more and consist of both investment-related expenses and expenses for other services, only fees itemized by the service provider as being related to the investment of the plan’s assets are treated as investment-related expenses. Amounts itemized for other services, such as recordkeeping or custodial/trustee services, are not treated as investment-related expenses.

  If total payments to a service provider are expected to be less than $5,000, the proposed regulation treats all payments as investment-related expenses and the provider does not need to itemize them.

• Timing of plan amendments. The proposed regulations would provide additional flexibility in determining when certain plan amendments are reflected in a plan's minimum funding calculations. In particular, certain amendments adopted after the valuation date or even after the end of the plan year could be reflected in the prior year's funding calculations, subject to specified requirements.
  • Amendments adopted by the valuation date. Plan amendments adopted by the plan’s valuation date and effective by the end of that plan year are generally reflected in the minimum funding calculations for that year, provided any applicable Internal Revenue Code (IRC) section 436 benefit restriction rules are satisfied. Amendments that do not take effect until a future year are not reflected in the current year’s calculations.

  • Amendments adopted after the valuation date. Plan amendments adopted after the valuation date may be reflected for that plan year if the amendment is adopted no later than 2½ months after the end of the plan year, takes effect no later than the date the amendment is adopted, and an IRC section 412(d)(2) election is made. Certain amendments adopted after the valuation date may also be required to be reflected under a special anti-abuse rule.

• Special anti-abuse rule for certain liability-increasing amendments. The proposed regulations would retain and modify an anti-abuse rule that could require certain benefit-increasing amendments adopted after the valuation date to be reflected in the current year’s funding calculations if they take effect by the last day of the plan year. The rule generally applies where the amendment increases liabilities, would not be permitted under a modified application of the IRC section 436 benefit restrictions rules, and would disproportionately increase the plan's annual cost of benefits (i.e., target normal cost).

• New plans adopted after year-end. A new plan adopted after the close of the employer’s taxable year but before the deadline for filing that year’s income tax return, including extensions, may be treated as adopted on the last day of that taxable year if the employer makes an election under IRC section 401(b)(2). In that case, the plan’s minimum funding requirements are determined based on the adopted plan provisions, provided the plan takes effect no later than its adoption date. If the plan’s valuation date is before the deemed adoption date, a section 412(d)(2) election must also be made.

• Retroactive benefit increases. If, before the deadline for filing the employer’s income tax return, including extensions, the employer adopts an amendment increasing accrued benefits effective during the immediately preceding plan year and makes an election under IRC section 401(b)(3), the amendment is treated as adopted on the last day of that preceding plan year. The prior-year minimum funding calculations will reflect the amendment if the amendment takes effect no later than its adoption date and if the plan’s valuation date is before the deemed adoption date, a section 412(d)(2) election must also be made.

• Remedial amendments.¹ The proposed regulations would allow certain future remedial amendments to be reflected based on related operational changes. If plan operations are changed during a remedial amendment period to implement a future remedial amendment, the amendment is generally treated as adopted when the operational change occurs.

• Actuarial assumptions and funding method changes. If a request to change actuarial assumptions or funding method is submitted before the plan files the Form 5500, Schedule SB for the plan year, the assumptions or method may be changed after a Form 5500 filing for that year once the IRS approves the request. Currently, a later change is permitted only if the IRS determines that the assumptions originally used were unreasonable or that the funding method was impermissible.

The proposed regulations generally provide additional flexibility in the timing of certain plan amendments and clarify the treatment of plan expenses and other funding-related items. Plan sponsors considering benefit improvements near the end of a plan year may have greater flexibility to reflect those changes in the prior year's funding calculations, which could also affect the sponsor's deductible contribution limit. The proposed rules remain subject to change as part of the regulatory process.

The proposed regulations would apply to plan years beginning on or after six months after publication of final regulations. For earlier plan years, plan sponsors may apply either the proposed rules or the existing regulations.

For more detailed information or assistance in evaluating the impact on your specific plan, consult your Milliman consultant.

¹ Remedial amendments are corrective amendments that update a plan document to comply with legal requirements, often after the plan has already begun operating under the required change. The law may require the plan to operate under the new rule first, and the formal document can then be updated within the allowed remedial amendment period.