# Prop. Treas. Reg. § 1.430(d)-1: Determination of target normal cost and funding target. Proposed regulation, not in force. REG-107855-25, 91 FR 53803, published 2026-08-20 . Interprets 26 U.S.C. § 430. Par. 2. Section 1.430(d)-1 is amended by: 1. Revising paragraph (b)(1)(iii)(B). 2. Adding paragraph (b)(1)(iii)(C). 3. Revising and republishing paragraphs (d)(1) and (2). 4. Revising paragraphs (f)(1)(ii) and (f)(4)(iii)(C),(f)(5)(i),(f)(5)(ii)(A) and (C) and (g). The revisions and additions read as follows: * * * * * (b) * * * (1) * * * (iii) * * * (B) Plan-related expenses. For purposes of this paragraph (b)(1)(iii), plan-related expenses consist of all amounts that are expected to be paid from plan assets that are neither benefits paid to participants or beneficiaries (treating the purchase of an annuity contract as the payment of benefits) nor investment-related expenses described in paragraph (b)(1)(iii)(C) of this section. Plan-related expenses include fees paid for professional services (such as legal, actuarial, and audit services), plan administration, and premiums paid to the Pension Benefit Guaranty Corporation, among other items. (C) Investment-related expenses. Investment-related expenses consist of investment management fees and other expenses directly related to the investment of the plan's assets. However, if the total payments from plan assets to a service provider are expected to be $5,000 or more for a plan year and consist of investment-related expenses and expenses for other services (such as recordkeeping services), only those amounts that the service provider itemizes as investment management fees or other expenses directly related to the investment of the plan's assets are treated as investment-related expenses. Amounts itemized as expenses for other services are not treated as investment-related expenses. * * * * * (d) Plan provisions taken into account —(1) General rule— (i) Plan provisions adopted by valuation date. Except as otherwise provided in paragraphs (d)(1)(ii) and (iii), and (d)(2) of this section, a plan's funding target and target normal cost for a plan year are determined based on plan provisions that are adopted no later than the valuation date for the plan year and that take effect on or before the last day of the plan year. For example, in the case of a plan amendment adopted on or before the valuation date for the current plan year that has an effective date occurring in the current plan year, the plan amendment is taken into account in determining the funding target and the target normal cost for the current plan year if it is permitted to take effect under the rules of section 436(c) for the current plan year, but the amendment is not taken into account for the current plan year if it does not take effect until a future plan year. (ii) Plan provisions adopted after valuation date —(A) Impact of section 412(d)(2) election. If the plan administrator makes an election under section 412(d)(2) with respect to a plan amendment that is adopted no later than 2 1/2 months after the end of a plan year, then the amendment will be taken into account in determining the plan's funding target and target normal cost for that plan year, provided that the amendment takes effect no later than the date the amendment is adopted. The preceding sentence applies even if the plan amendment is adopted during the plan year. (B) Impact of section 401(b)(2) election. If an employer adopts a plan after the last day of the employer's taxable year and before the due date for the employer's income tax return for that taxable year (including extensions) and makes an election under the first sentence of section 401(b)(2), then the plan is treated as adopted on the last day of that taxable year. In such a case, the target normal cost and funding target for the plan's first plan year are determined based on the adopted plan provisions, provided that— ( 1 ) The plan takes effect no later than the date the plan is adopted; and ( 2 ) If the plan's valuation date is before the date the plan is treated as being adopted, a section 412(d)(2) election is made. (C) Impact of section 401(b)(3) election. If, before the due date (including extensions) for an employer's income tax return for a taxable year, the employer adopts an amendment increasing benefits accrued under a plan effective as of any date during the plan year that immediately precedes the date of adoption, and makes an election under section 401(b)(3) with respect to the plan amendment, then the plan amendment is treated as having been adopted as of the last day of that preceding plan year. In such a case, the target normal cost and funding target for that preceding plan year are determined taking the plan amendment into account, provided that— ( 1 ) The amendment takes effect no later than the date it is adopted; and ( 2 ) If the plan's valuation date is before the date the amendment is treated as being adopted, a section 412(d)(2) election is made. (iii) Special rule to reflect plan operations during a remedial amendment period —(A) Requirement to reflect future remedial amendment. For purposes of this paragraph (d), if plan operations are changed during a remedial amendment period (within the meaning of § 1.401(b)-1(d)) to make effective a future remedial amendment, then the provisions of the future remedial amendment are treated as adopted on the date that the plan operations are changed. To the extent the language of the plan's remedial amendment differs from the way the plan was operated at any point during the remedial amendment period, the remedial amendment is treated as adopted only when plan operations were changed to reflect the language ultimately adopted in that amendment. (B) Future remedial amendment. A plan makes effective a future remedial amendment when— ( 1 ) The plan is required to be amended to address a disqualifying provision that has been designated as such by the Commissioner pursuant to § 1.401(b)-1(b)(3), ( 2 ) The remedial amendment period with respect to that required amendment has not ended, and ( 3 ) Plan operations are changed in anticipation of a proposed amendment to the plan relating to the disqualifying provision. (iv) Determination of when an amendment takes effect. For purposes of this paragraph (d)(1)— (A) The determination of whether an amendment that increases benefits takes effect and when it takes effect is made in accordance with the rules of section 436(c) and § 1.436-1(c)(5); and (B) In the case of an amendment that decreases benefits, the amendment takes effect under a plan on the first date on which the benefits of any individual who is or could be a participant or beneficiary under the plan would be less valuable than those benefits would be under the pre-amendment plan provisions if the individual were on that date to satisfy the applicable conditions for the benefits. (2) Special rule for certain amendments increasing liabilities —(i) In general. In the case of a plan amendment that takes effect by the last day of the plan year but is not required to be taken into account under the rules of paragraph (d)(1) of this section because it is adopted after the valuation date for the plan year, the plan amendment must nonetheless be taken into account in determining a plan's funding target and target normal cost for the plan year if the plan amendment— (A) Increases the liabilities of the plan by reason of increases in current benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable; (B) Would not be permitted under section 436, as described in paragraph (d)(2)(ii) of this section; and (C) Disproportionately increases target normal cost, as described in paragraph (d)(2)(iii) of this section. (ii) Plan amendment that would not be permitted under section 436. A plan amendment is described in this paragraph (d)(2)(ii) if the plan amendment would not be permitted to take effect under the rules of section 436(c) as applied under this paragraph (d)(2)(ii). The rules of section 436(c) are applied under this paragraph (d)(2)(ii) by— (A) Treating the increase in the target normal cost for the plan year attributable to the amendment (and all other amendments that must be taken into account solely because of the application of the rules in this paragraph (d)(2)) as if the increase were an increase in the funding target for the plan year; and (B) Taking into account all unpredictable contingent event benefits permitted to be paid for unpredictable contingent events that occurred during the current plan year and all plan amendments that took effect in the current plan year (including all amendments to which this paragraph (d)(2) applies for the plan year). (iii) Plan amendment resulting in disproportionate increase in target normal cost. A plan amendment is described in this paragraph (d)(2)(iii) if the percentage increase in target normal cost as the result of the amendment is more than twice the percentage increase in the funding target as a result of the amendment (taking into account only the benefits of participants currently employed in the service of the employer). * * * * * (f) * * * (1) * * * (ii) Changes in actuarial assumptions and funding method. Actuarial assumptions established for a plan year cannot subsequently be changed for that plan year unless the Secretary of the Treasury or the Secretary's delegate (Secretary) either approves a request for a change in actuarial assumptions that was submitted before the actuarial assumptions were established for the plan year or determines that the assumptions that were used are unreasonable. Similarly, a funding method established for a plan year cannot subsequently be changed for that plan year unless the Secretary either approves a request for a change in funding method that was submitted before the funding method was established for the plan year or determines that the use of that funding method for that plan year is impermissible. * * * * * (4) * * * (iii) * * * (C) Optional application of generational mortality. In determining the present value of a distribution under this paragraph (f)(4)(iii), if the generational mortality tables under § 1.430(h)(3)-1(b) or § 1.430(h)(3)-2 are used for a plan, then an equal-weighted blend of the annuitant mortality rates under the § 1.430(h)(3)-1(b) generational mortality tables for males and females may be used in lieu of the applicable mortality table under section 417(e)(3) that would apply to a distribution with an annuity starting date occurring on the valuation date. * * * * * (5) * * * (i) In general. In the case of a statutory hybrid plan described in § 1.411(a)(13)-1(d)(5), if the amount of a future distribution is based on an interest adjustment applied to the current accumulated benefit, then the amount of that distribution is determined by projecting the future interest credits or equivalent amount under the plan's interest crediting rules using actuarial assumptions that satisfy the requirements of paragraph (f)(3) of this section. Thus, if a plan provides for a single sum distribution equal to the balance of a participant's hypothetical account under a cash balance plan, then the amount of that future distribution is equal to the projected account balance at the expected date of payment determined using actuarial assumptions that satisfy the requirements of paragraph (f)(3) of this section. (ii) * * * (A) General rule. In the case of a statutory hybrid plan with a lump sum-based benefit formula as described in § 1.411(a)(13)-1(d)(3), if the amount of an annuity distribution is based on either the balance of the hypothetical account maintained for a participant or the accumulated percentage of a participant's final average compensation, then the amount of that annuity distribution is calculated by converting the projected account balance (or accumulated percentage of final average compensation), in accordance with paragraph (f)(5)(i) of this section, to an annuity by applying the plan's annuity conversion provisions using the rules of this paragraph (f)(5)(ii). * * * * * (C) Optional application of generational mortality. The option under paragraph (f)(4)(iii)(C) of this section to substitute the generational mortality table may be used for purposes of determining the amount of an annuity distribution under paragraph (f)(5)(ii)(B) of this section. * * * * * (g) Applicability date. This section applies to plan years beginning on or after [DATE SIX MONTHS AFTER DATE OF PUBLICATION OF FINAL RULE]. For earlier plan years, taxpayers may apply either the rules of this section or the rules described in 26 CFR 1.430(d)-1 (as it appeared in the April 1, [2026], edition of 26 CFR part 1).