3742 / What is the minimum funding standard that applied in plan years before 2008?

The Pension Protection Act of 2006 (PPA 2006) replaced the minimum funding standard with a single minimum required contribution ( Q 3743). The PPA 2006 funding provisions generally took effect for plan years beginning after 2007. For plan years beginning before 2008, the IRC provided for a minimum funding standard requiring at least a minimum level of funding for qualified defined benefit plans. A second “deficit reduction contribution” applied in the case of certain plans with over 100 participants.

The minimum amount that an employer is required to contribute to fund a money purchase pension plan (both before and after PPA 2006) is the contribution amount required under the terms of the plan for each year, as stated in the plan formula.¹

Profit sharing and stock bonus plans ( Q 3749 to Q 3816), certain government and church plans, certain employee-pay-all plans, and fully insured plans (known as 412(i) plans) ( Q 3813) are exempt from the minimum funding requirements, both before and after PPAPPA 2006.²