The recently enacted Highway and Transportation Funding Act of 2014 (HATFA-14) provides opportunities for plan sponsors to reduce cash contributions and Pension Benefit Guaranty Corporation (PBGC) premiums. For the approaches that involve contributions for the 2013 plan year, prompt action is needed to ensure the applicable funding requirements are satisfied. For calendar year plans, the final date to designate cash contributions and/or add excess contributions to the prefunding balance for the 2013 plan year is September 15, 2014.

HATFA-14 opportunities
1. Reduce cash contributions required for the 2013 plan year.
Plan sponsors may optionally revise the 2013 actuarial valuation (absent an election to opt out of the HATFA-14 relief for 2013).
With the use of the higher interest rates for the cash funding valuation, the minimum required contribution may be lower.

2. Reduce cash contributions required for the 2013 and 2014 plan years.
Plan sponsors may optionally revise the 2013 actuarial valuation (absent an election to opt out of the HATFA-14 relief for 2013).
Plan sponsors are required to revise the 2014 actuarial valuation.
With the use of the higher interest rates for the cash funding valuations, the total minimum required contributions (combined 2013 and 2014 plan years) may be lower.

3. Reduce 2014 PBGC variable rate premiums.
Revise the 2013 actuarial valuation to reduce the minimum funding requirements for the 2013 plan year.
Revise the 2014 actuarial valuation to reduce the minimum funding requirements for the 2014 plan year.
Confirm that contributions are sufficient to satisfy both 2013 and 2014 minimum funding requirements.
Designate some or all of the cash contributions previously used for the 2014 plan year as receivable contributions for the 2013 plan year.
This reduces the unfunded liability for PBGC variable rate premium.

4. Manage credit balances for 2013 and 2014 plan years.
Revise the 2013 actuarial valuation to reduce the minimum funding requirements for the 2013 plan year.
Revise the 2014 actuarial valuation to reduce the minimum funding requirements for the 2014 plan year.
Confirm that contributions are sufficient to satisfy both 2013 and 2014 minimum funding requirements.
Create and use credit balances to optimize the plan sponsor's use of cash.

Some plan sponsors may decide forgo the opportunities provided by HATFA-14. One example is a plan sponsor with planned cash contributions to reach a specified funding threshold. These plan sponsors will still need to revise the 2014 actuarial valuation to reduce the minimum funding requirements for the 2014 plan year (required). However, they may elect to opt out of the HATFA-14 relief for 2013 and satisfy 2013 plan year minimum funding requirements by making contributions based on the 2013 actuarial valuation results prepared under the Moving Ahead for Progress in the 21st Century Act (MAP-21) rates.

Cash savings opportunities under HATFA-14 will vary by a plan's funded status, amount of credit balances available, etc. Also, different plan sponsors will have different goals and objectives regarding cash funding to the pension plan. Your Milliman consultant can help you review the opportunities that are available and decide on a course of action that is appropriate for your situation.