The IRS Has Reopened the Math Behind Corporate Pension Funding. Comments Close October 19.

The Internal Revenue Service published proposed regulations on August 20 that change how employers calculate what they must contribute to traditional pension plans. The document — REG-107855-25, RIN 1545-BR50 — updates the rules under section 430 of the Internal Revenue Code, which sets minimum funding requirements for single-employer defined benefit plans. Comments are due October 19, 2026.

This is technical, and it is not about anyone's benefit amount. It is about the annual arithmetic that determines how much cash a sponsoring employer has to put into the plan, and therefore how much it can deduct.

How the calculation works

Section 430 requires a plan to compute two quantities each year. The funding target is the present value of benefits already earned. The target normal cost is the present value of benefits expected to be earned during the coming plan year, plus the plan's expenses for that year. Together they determine the minimum required contribution.

The phrase "plus the plan's expenses" is where the proposed rule does most of its work.

Plan expenses versus investment expenses

The proposal states that plan-related expenses consist of amounts expected to be paid from plan assets that are neither benefits nor investment-related expenses. Fees for professional services — legal, actuarial, audit — and administration costs are plan-related, and they go into target normal cost. Investment management fees and asset-related costs are excluded.

The practical rule is the itemization threshold. A provider billing the plan $5,000 or more in a year must itemize which portion of its charges is investment expense and which is not; only the itemized investment portion is excluded from target normal cost. Payments below $5,000 are treated as investment-related without itemization. The proposal also treats custodial and trustee fees as plan-related rather than investment costs.

Because plan-related expenses raise target normal cost and investment expenses do not, where a fee lands changes the minimum contribution.

Late amendments

The second substantive change concerns timing. A plan amendment adopted after the valuation date but within two and a half months after the end of the plan year can be reflected in that year's calculation, if the plan administrator makes an election under section 412(d)(2). Employers may also treat a plan adopted after year-end but before the tax filing deadline as adopted at year-end, through a section 401(b) election.

That gives sponsors a window after the books close to increase benefits and have the increase count toward the year just ended — which, for an employer deciding late in the process how much to contribute and deduct, is a meaningful piece of flexibility.

The anti-abuse provision

Flexibility of that kind invites structuring, and the proposal carries a limit. It targets amendments that disproportionately increase target normal cost — specifically, where the percentage increase in target normal cost exceeds twice the percentage increase in the funding target for current employees. The analysis we reviewed reads this as narrowing the prior anti-abuse rule rather than tightening it.

• Docket: REG-107855-25; RIN 1545-BR50; published in the Federal Register August 20, 2026.
• Comment deadline: October 19, 2026.
• Applicability: plan years beginning six months after publication of a final rule.
• Reliance: taxpayers may rely on the proposed regulations for current and prior open years before finalization.
• Scope: single-employer defined benefit plans only — not multiemployer plans, and not defined contribution plans such as 401(k)s.

What to watch

The comment file through October 19, particularly from actuarial firms on the itemization threshold, which shifts administrative burden onto service providers. And whether the reliance provision draws employers into making retroactive amendments for the 2026 plan year before the rule is final — the proposal explicitly permits it, and the two-and-a-half-month window makes early 2027 the moment that choice gets made.