- 45 -
the medical benefit or life insurance (including death
benefit) payable to a retired employee during retirement
is fully funded upon retirement. These amounts may be
accumulated no more rapidly than on a level basis over
the working life of the employee, with the employer of
each employee. * * * The conferees intend that the
Treasury Department prescribe rules requiring that the
funding of retiree benefits be based on reasonable and
consistently applied actuarial cost methods, which take
into account experience gains and losses, changes in
assumptions, and other similar items, and be no more
rapid than on a level basis over the remaining working
lifetimes of the current participants. * * * [H. Conf.
Rept. 98-861, at 1157 (1984), 1984-3 C.B. (Vol. 2) 1,
411.]
The legislative history makes clear that the funding of the
reserve can be completed no more rapidly than over the working life
of the employee. Therefore, we conclude that fully funding the
reserve at or after retirement is permissible because, in that
case, the assets are accumulated less rapidly than over the working
life of the employee.
To conclude this aspect of our deliberation, we hold that for
purposes of section 419A(c)(2), the phrase “reserve funded over the
working lives of the covered employees” means that assets necessary
to satisfy the employer’s liability may be accumulated no more
rapidly than over the working lives of the covered employees, such
that the reserve with respect to an employee can be fully funded no
earlier than upon retirement of the employee.
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011