IRS Proposes New Funding Rules for Traditional Employer Pension Plans

The Internal Revenue Service has issued a notice of proposed rulemaking that would update the regulations governing how single-employer defined benefit pension plans calculate their minimum funding requirements, according to an official announcement published in the Federal Register on August 20, 2026.

What the Proposed Pension Rules Would Change

The proposed regulations, identified as REG-107855-25, would modify existing rules related to two key calculations: a plan’s “target normal cost” and its “funding target.” These figures help determine whether a traditional pension plan is adequately funded to meet its future obligations to retirees and other beneficiaries.

According to the IRS, the proposed changes are intended to implement certain statutory amendments that have not yet been reflected in current regulations. Those amendments stem from three pieces of legislation: the Worker, Retiree, and Employer Recovery Act of 2008; the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act); and the SECURE 2.0 Act of 2022.

What a Pension “Funding Target” Actually Means

The terminology sounds complicated, but the basic idea is straightforward: employers sponsoring traditional pension plans generally must fund those plans sufficiently to account for benefits promised to workers and retirees. Under federal tax law, a plan’s funding target generally represents the present value of benefits already accrued under the plan, while target normal cost generally reflects benefits and certain related amounts associated with the current plan year. Interest-rate assumptions are part of those calculations because pension plans may not have to pay some promised benefits for many years. The proposed regulations update rules used in making these calculations rather than announcing a new benefit formula for individual retirees.

The Proposal Incorporates Changes From Three Federal Laws

Among the changes addressed in the proposal are updated rules related to plan qualification timing. Under amendments made by the SECURE Act and SECURE 2.0 Act, employers have added flexibility around when a plan or plan amendment is considered adopted for tax purposes. For example, an employer who adopts a plan after the close of a taxable year but before the tax-filing deadline may elect to treat the plan as having been adopted on the last day of that prior taxable year. The proposed regulations also address rules allowing employers to amend plans to increase benefits accrued during a preceding plan year under certain conditions.

What This Means for Workers and Retirees With Pensions

The IRS stated that these proposed regulations would affect participants in, beneficiaries of, employers maintaining, and administrators of single-employer defined benefit plans. For workers and retirees covered by a traditional defined-benefit pension, the proposal concerns rules their employers and plan administrators use to determine required plan funding. It does not mean an individual’s pension payment is being reduced or increased. Instead, the regulations address calculations used to determine how much must be contributed to pension plans to satisfy federal minimum-funding requirements. Participants concerned about the financial condition of a particular pension should review information provided by their plan administrator rather than assuming this proposed IRS rule changes their promised benefit.

The public comment period runs through October 19, 2026. Individuals or organizations wishing to submit comments may do so electronically through the Federal eRulemaking Portal at regulations.gov, using the identifier IRS and REG-107855-25. Written comments may also be mailed to the IRS at the address listed in the Federal Register notice. Requests for a public hearing must also be submitted by that date.

For questions about the proposed regulations, the IRS listed Tom Morgan at (202) 317-6700 as a contact. Questions about submitting comments or hearing requests can be directed to the Publications and Regulations Section at (202) 317-6901.

Because pension funding rules can affect individual retirement benefits in different ways depending on a plan’s specific terms and an employer’s situation, readers are encouraged to verify how these proposed changes may apply to their own circumstances directly with the IRS or a qualified benefits professional.

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Amanda Blankenship

Amanda Blankenship is Chief Editor at District Media, Inc., leading content strategy, quality assurance, and editorial operations across high-traffic personal finance sites like SavingAdvice.com and CleverDude.com. A Wingate University graduate with a BA in Communications (Journalism focus), she brings over a decade of experience in digital publishing, writing, and team leadership in the personal finance space.