ERISA Benefits Law Desk ReferenceERISA Benefits Tech, LLC

Part 7 · Chapter 1

Minimum Funding and §436 Benefit Restrictions

Law stated as of October 3, 2026 · Defined Benefit and Hybrid Plans

Scope and status

This chapter covers single-employer defined benefit plan minimum funding (Code §§412/430; ERISA §§302–303), the §436/ERISA §206(g) funding-based benefit restrictions and AFTAP certification mechanics, the §430(i) at-risk rules, funding waivers, the §4971 excise tax, and the DB-side deduction rules. The interest-rate, mortality, and premium inputs are indexed or reissued annually — confirm the current plan year's segment rates, mortality notice, and stabilization corridor before relying on them.

Citations are to primary authority (Code §§412, 430, 436, 404(o), 420, 4971; ERISA §§302–303, 206(g), 101(d), 101(j); the Treasury regulations under §§1.430 and 1.436-1; and annual IRS notices). Multiemployer funding (§§431–432) and CSEC plans (§433) are outside this chapter — route multiemployer matters to Part 10 (Multiemployer Plans and Withdrawal Liability); flag CSEC plans for separate research. For PBGC premiums and reportable events, see this Part's PBGC chapter; hybrid design and §417(e) lump-sum assumptions to the hybrid/lump-sum chapter; annuity purchases to the pension risk transfer chapter; DB plan terminations to Part 2 (Plan Documents, Amendments, Mergers, and Terminations); and Schedule SB/annual funding notice mechanics to Part 4 (Reporting, Disclosure, Recordkeeping, and Claims).

Threshold framing. A DB plan that is underfunded generates four separate compliance tracks that run on different numbers: (1) the minimum required contribution (§430, stabilized segment rates); (2) the §436 benefit restrictions (AFTAP, stabilized rates); (3) the PBGC variable-rate premium (unstabilized rates — a plan can owe no §430 shortfall contribution yet owe a large VRP); and (4) PBGC reporting (§4043/§4010). Always identify which track a "funded percentage" number belongs to before relying on them.

Sections

The opening sections of Part A are shown in full. The other sections are listed by title; their text is available to subscribers.

Part A — Minimum Funding (§412/§430; ERISA §§302–303)

A1.Scope and architecture

Part 7, ch. 1, § A1

Code §412 imposes the minimum funding standard on defined benefit plans and money purchase plans; for single-employer DB plans the amount is the §430 minimum required contribution (MRC). Statute: Code §412(a), §430(a); ERISA §§302–303. The MRC equals the target normal cost (TNC) (the present value of benefits accruing in the year, plus plan-paid expenses, less expected mandatory employee contributions) plus the shortfall and waiver amortization installments; if plan assets (reduced by credit balances) exceed the funding target, the excess reduces TNC. Statute: Code §430(a)–(d); Final reg: Treas. Reg. §1.430(a)-1, §1.430(d)-1. The funding target is the present value of all benefits accrued or earned as of the beginning of the plan year, valued as of the valuation date (generally the first day of the plan year; small plans ≤100 participants may use another date, but the accrual cutoff stays at the start of the year). Statute: Code §430(d), (g)(2). Proposed reg — no reliance: REG-107855-25, 91 Fed. Reg. 53803 (Aug. 20, 2026). Until finalized, keep applying the existing §1.430 regulations.

A2.Shortfall amortization — the ARPA 15-year rule

Part 7, ch. 1, § A2

A funding shortfall (funding target minus assets, net of credit balances) generates a new shortfall amortization base each year, amortized in level installments over 15 years. Statute: Code §430(c), as amended by ARPA §9705 — plan years beginning after December 31, 2021 (electable back to 2019). ARPA also mandated a fresh start: all pre-effective-date shortfall bases were reduced to zero and re-amortized. No new base is created for a year in which assets (with specified credit-balance adjustments) equal or exceed the funding target (the shortfall exemption). Statute: Code §430(c)(5), (c)(8).

A3.Interest — segment rates, the stabilization corridor, and where it does not apply

Part 7, ch. 1, § A3

The funding target and TNC are discounted using three segment rates (24-month averages of an investment-grade corporate bond yield curve, for benefits payable in years 0–5, 5–20, and 20+), or an elected full yield curve. Statute: Code §430(h)(2); Final reg: Treas. Reg. §1.430(h)(2)-1. Recent change the 24-month segment rates are constrained to a corridor around 25-year average rates (with a 5% floor on the 25-year averages): 95%–105% through 2030, then widening 5 points per year to 70%–130% in 2035 and after. Statute: Code §430(h)(2)(C)(iv), as amended by MAP-21, HATFA, BBA 2015, ARPA §9706, and IIJA §80602. Stabilized rates apply for §430 funding and §436 AFTAP purposes (except the §436(d)(2) bankruptcy test, whose 100% certification must be unstabilized), but not for §417(e) minimum lump sums, §415(b) conversions, the §404(o) deduction limit, or the PBGC variable-rate premium. Statute: Code §430(h)(2)(C)(iv)(I); Practitioner consensus as to the standard checklist. The full-yield-curve election is not stabilized.

A4.Mortality — the 2024 final regulations and annual tables

Part 7, ch. 1, § A4

The funding mortality assumption is prescribed: T.D. 9983 (Oct. 2023) adopted tables based on the Society of Actuaries Pri-2012 report projected with an adjusted MP-2021 improvement scale, effective for valuation dates in plan years beginning on or after January 1, 2024, and generally requires generational tables — static tables remain available only for plans with 500 or fewer participants (and multiemployer/CSEC plans), via annual IRS notices. Final reg: Treas. Reg. §1.430(h)(3)-1 (T.D. 9983); IRS Notice: Notice 2025-40 (2026 static tables and §417(e) table); Notice 2026-27 (2027 static tables and the 2027 §417(e) unisex table). Substitute (plan-specific) mortality tables may be used with IRS approval based on credible plan experience. Statute: Code §430(h)(3)(C); Final reg: Treas. Reg. §1.430(h)(3)-2; T.D. 10005 (July 31, 2024); Rev. Proc. 2024-32, as modified by Rev. Proc. 2025-21 (superseding Rev. Proc. 2017-55). Rev. Proc. 2025-21 narrowed which sponsors must obtain new table approvals for 2026 and later.

  1. A5Assets, and the carryover/prefunding balancesSubscribers
  2. A6Timing — the 8½-month deadline, quarterlies, and the liquidity ruleSubscribers
  3. A7Consequences of failure — §4971 excise, the >$1M lien, and noticesSubscribers
  4. A8Funding waiversSubscribers
  5. A9DB deductions — §404(o) and the combined limitSubscribers
  6. A10§420 retiree health/life transfersSubscribers

Part B — At-Risk Status (§430(i))

  1. B1The two-prong test and the small-plan exemptionSubscribers
  2. B2At-risk funding target, load, and phase-inSubscribers

Part C — §436 Benefit Restrictions and the AFTAP (ERISA §206(g))

  1. C1The AFTAPSubscribers
  2. C2The presumption timeline — April 1, October 1, and range certificationsSubscribers
  3. C3The four restrictionsSubscribers
  4. C4Employer cures — §436 contributions, security, and deemed burnsSubscribers
  5. C5Notices, plan terms, and restorationSubscribers

The first Part of each chapter is open to everyone. The remaining sections, with their authority and practice points, are available to subscribers and to clients of ERISA Benefits Law Group, PLLC whose engagement includes access.

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