In our prior alerts, we introduced the SECURE 2.0 Act of 2022 (SECURE 2.0 or the Act), a portion of the Consolidated Appropriations Act. We discussed key provisions applicable to all qualified retirement plans, as well as provisions applicable to only defined contribution plans. This alert, the final alert in our series covering the retirement plan changes included in SECURE 2.0, summarizes provisions applicable only to defined benefit plan sponsors.

Reasonable Interest Credit Under Cash Balance Plans. The Internal Revenue Code provides that interest credit in a hybrid-defined benefit plan must not exceed the actual market rate of return unless the plan uses a reasonable, fixed-interest credit. The Act clarifies that an interest credit rate that does not exceed 6 percent is deemed to be reasonable for this purpose. This provision is effective for plan years beginning after December 29, 2022.

Enhancing Retiree Health Benefits in Pension Plans. Under current law, a plan sponsor may use assets from an overfunded pension plan to pay retiree health and life insurance benefits. The Act extends the sunset date of this feature to the close of 2032, and permits asset transfers to pay retiree health and life insurance benefits, provided the transfer is no more than 1.75 percent of plan assets and the plan is at least 110 percent funded. This provision is effective for transfers made on or after December 29, 2022.

Defined Benefit Annual Funding Notices. The Act requires plan sponsors...

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