The president has signed into law a transportation funding bill
(H.R. 4348) that extends current fuel taxes and raises new revenue
with several pension and retirement plan provisions.
The bill sets new highway spending levels and extends the taxes
that currently fund transportation spending, including fuel excise
taxes, the excise tax on heavy vehicle tires, the retail sales tax
on heavy highway vehicles and the annual use tax on heavy vehicles.
In addition, it raises revenue with several retirement plan and
The most significant provision will allow defined benefit plan
sponsors to revalue their pension funding liabilities by using
higher interest rates. Funding obligations were previously
calculated using a two-year average of interest rates. Lower
interest rates mean higher funding obligations. The bill will allow
plans to use an interest rate within a specified range (increasing
from 2012 through 2016) of the 25-year average of interest rates.
The Joint Committee on Taxation estimates this change will raise
$9.4 billion because businesses will put less money in their
pension plans, which are tax-favored.
The bill will also raise an estimated $10.2 billion by
increasing Pension Benefit Guaranty Corporation (PBGC) premiums on
pension plans. The flat rate premium for single employer plans will
increase from $35 per participant to $42 in 2013 and to $49 in
2014, indexed in future years. The variable premium ($9 per $1,000
of unfunded vested benefits) will be increased $13 in 2014 and $18
in 2015, plus indexing beginning in 2014. However, the variable
rate premiums will be capped at $400 per participant.
The bill will also:
allow federal employees to receive retirement benefits while
working and without paying 10 percent early distribution tax for
distributions before age 59½;
extend the provision allowing transfers of excess pension
benefits to retiree health plans through Dec. 31, 2021, and expand
this provision to include transfers to group-term life insurance
extend tobacco excise taxes to businesses operating "roll
your own" machines.
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The following are select tax topics affecting individuals and businesses for tax year 2014. Several issues of significance to individuals and businesses for 2013 remain relevant for 2014 and are noted below.
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