DESCRIPTION OF H.R. 6377,

THE “SAVE COMMUNITY NEWSPAPER ACT OF 2018’

Scheduled for Markup

by the

HOUSE COMMITTEE ON WAYS AND MEANS

on July 18, 2018

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

July 17, 2018

JCX-63-18
i

CONTENTS

Page

INTRODUCTION .......................................................................................................................... 1

A. Election to Apply Alternative Minimum Funding Standards to Certain

Single-Employer Community Newspaper Plans ................................................................ 2

B. Estimated Revenue Effect of the Proposal.......................................................................... 6
1

INTRODUCTION

The House Committee on Ways and Means has scheduled a committee markup on

July 18, 2018 of H.R. 6377, the “Save Community Newspaper Act of 2018,” which permits a 

plan sponsor to elect to apply alternative minimum funding standards to a single-employer 

community newspaper plan meeting certain requirements. This document,1 prepared by the staff 

of the Joint Committee on Taxation, provides a description of the bill. 

 1

 This document may be cited as follows: Joint Committee on Taxation, Description of H.R.6377, the 

“Save Community Newspaper Act of 2018” (JCX-63-18), July 17, 2018. This document can also be found on the 

Joint Committee on Taxation website at www.jct.gov. All section references herein are to the Internal Revenue 

Code of 1986, as amended, unless otherwise stated.
2

A. Election to Apply Alternative Minimum Funding Standards

to Certain Single-Employer Community Newspaper Plans

Present Law

The Internal Revenue Code of 1986 (“Code”) and the Employee Retirement Income 

Security Act of 1974 (“ERISA”) apply minimum funding requirements2 to defined benefit 

retirement plans maintained by private-sector employers for their employees (referred to as 

“single-employer” plans), for purposes of which employers that are members of a controlled 

group are considered a single employer.

Under these rules, a minimum contribution is required for a plan year if the value of the 

plan’s assets is less than the plan’s “funding target,” that is, the present value, determined 

actuarially, of all benefits earned as of the beginning of the year. If the value of plan assets is 

less than the plan’s funding target, such that the plan has a funding shortfall, the shortfall is 

generally required to be funded by contributions, with interest, over seven years, taking into 

account the remaining installments attributable to shortfalls from preceding years. In addition, if 

participants earn additional benefits for the year,3 the required contribution must include the 

amount of the plan’s “target normal cost,” that is, the present value, determined actuarially, of 

benefits expected to be earned for the year. In the case of a plan funded below a certain level, 

referred to as an “at-risk” plan, specified assumptions must be used in determining the plan’s 

funding target and target normal cost.

4

 2 Special funding rules may apply to certain categories of single-employer plans. For example, special 

rules apply to certain plans maintained by commercial airlines, under section 402 of the Pension Protection Act of 

2006, as amended. 

3

 In some cases, a plan may be “frozen” either as to service and/or compensation. When a plan is frozen 

with respect to both service and compensation, participants are entitled to previously earned benefits but do not 

accrue or earn additional benefits.

4

 For an at-risk plan, the specified assumptions generally are as follows: All employees who are not 

otherwise assumed to retire as of the valuation date but who will be eligible to elect benefits during the plan year and 

the next 10 plan years must be assumed to retire at the earliest retirement date under the plan but not before the end 

of the plan year for which the “at-risk funding target” and “at-risk normal cost” are being determined. Also, all 

employees must be assumed to elect the retirement benefit available under the plan at the assumed retirement age 

(determined as above) that would result in the highest present value of benefits. The at-risk funding target is the 

present value of all benefits accrued or earned under the plan as of the beginning of the plan year using the actuarial 

assumptions set forth in the Code and regulations for single-employer plans, with the addition of a loading factor 

which arises when the plan has been in at-risk status for at least two of the four preceding plan years. This loading 

factor is equal to the sum of (1) $700 multiplied by the number of participants in the plan and (2) four percent of the 

funding target (determined without regard to the definition of at-risk funding target). The at-risk normal cost for a 

plan year generally represents the excess of the sum of (1) the present value of all benefits which are expected to 

accrue or to be earned under the plan during the plan year using the at-risk assumptions described above plus (2) the 

amount of plan related expenses expected to be paid from plan assets during the plan year, over (3) the amount of 

mandatory employee contributions expected to be made during the plan year. In addition, where the plan has been 

in at-risk status for at least two of the four preceding plan years, a loading factor is added, which is equal to four 

percent of the target normal cost (the excess of the sum of (1) the present value of all benefits which are expected to 

accrue or to be earned under the plan during the plan year plus (2) the amount of plan-related expenses expected to 
3

The minimum funding rules enacted in the Pension Protection Act of 2006 (“PPA”)

specify the interest rates used to determine a plan’s funding target and target normal cost for a 

year, consisting of three “segment” rates, each of which applies to benefit payments expected to 

be made from the plan during a certain period.

5

 The first segment rate applies to benefits 

reasonably determined to be payable during the five-year period beginning on the first day of the 

year; the second segment rate applies to benefits reasonably determined to be payable during the 

15-year period following the initial five-year period; and the third segment rate applies to 

benefits reasonably determined to be payable at the end of the 15-year period. The first, second,

and third segment rates are based on the corresponding portion of a corporate bond yield curve 

with certain adjustments. For June 2018, the first, second, and third segment rates after 

adjustment are 3.12 percent, 4.20 percent, and 4.60 percent, respectively. 

Under the Moving Ahead for Progress in the 21st Century Act and the Highway and 

Transportation Funding Act of 2014, for plan years beginning after December 31, 2011, a 

segment rate determined under the PPA rules is adjusted if it falls outside a specified percentage 

range of the average segment rates for a preceding period. In particular, if a segment rate 

determined under the PPA rules is less than the applicable minimum percentage in the specified 

range, the segment rate is adjusted upward to match the minimum percentage. If a segment rate 

determined under the PPA rules is more than the applicable maximum percentage in the 

specified range, the segment rate is adjusted downward to match the maximum percentage. 

The specified percentage range (that is, the range from the applicable minimum 

percentage to the applicable maximum percentage of average segment rates), as most recently 

modified in the Bipartisan Budget Act of 2015,

6 for determining whether a segment rate must be 

adjusted upward or downward for a plan year is determined by reference to the calendar year in 

which the plan year begins as follows:

• 90 percent to 110 percent for 2012 through 2020,

• 85 percent to 115 percent for 2021,

• 80 percent to 120 percent for 2022,

• 75 percent to 125 percent for 2023, and

 

be aid from plan assets during the plan year, over (3) the amount of mandatory employee contributions expected to 

be made during the plan year) with respect to the plan for the plan year.

5

 Each segment rate is a single interest rate determined monthly by the Secretary of the Treasury, on the 

basis of a corporate bond yield curve, taking into account only the portion of the yield curve based on corporate 

bonds maturing during the particular segment rate period. The corporate bond yield curve used for this purpose 

reflects the average, for the 24-month period ending with the preceding month, of yields on investment grade 

corporate bonds with varying maturities and that are in the top three quality levels available. Solely for purposes of 

determining minimum required contributions, in lieu of the segment rates, an employer may elect to use interest 

rates on a yield curve based on the yields on investment grade corporate bonds for the month preceding the month in 

which the plan year begins (that is, without regard to the 24-month averaging described above) (“monthly yield 

curve”). If an election to use a monthly yield curve is made, it cannot be revoked without IRS approval. 

6 Pub. L. No. 114-74. 
4

• 70 percent to 130 percent for 2024 or later.

The period over which a funding shortfall must be funded affects the amount of the 

required contribution for a year in that a shorter period results in a higher required contribution

for the year and a longer period results in a lower required contribution. Similarly, the interest 

rates used to determine a plan’s funding target and target normal cost affect the amount of 

required contributions in that lower interest rates result in a higher funding target and target 

normal cost and, therefore, higher required contributions. Alternatively, higher interest rates 

result in a lower funding target and target normal cost and, therefore, lower required 

contributions.

Description of Proposal

Under the proposal, an employer maintaining a “community newspaper plan” (as defined

below) under which no participant has had the participant’s accrued benefit increased (whether 

because of service or compensation) after December 31, 2017, may elect to apply certain 

alternative funding rules to the plan and any other plan sponsored by any member of the 

employer’s controlled group. Therefore, the election is only available to a plan under which all 

participant benefits are “frozen” after December 31, 2017. An election under the proposal to 

apply the alternative funding rules is to be made at such time and in such manner as prescribed 

by the Secretary of the Treasury, and once made with respect to a plan year, applies to all 

subsequent years unless revoked with the consent of the Secretary of the Treasury.

Under the alternative funding rules, an interest rate of eight percent is used to determine a 

plan’s funding target and target normal cost, rather than the first, second, and third segment rates. 

However, if new benefits are accrued or earned under a plan for a plan year in which the election 

is in effect, the present value of such benefits must be determined on the basis of the U.S. 

Treasury obligation yield curve for the day that is the valuation date of such plan for such plan 

year. In addition, if the value of plan assets is less than the plan’s funding target, such that the 

plan has a funding shortfall, the shortfall is required to be funded by contributions, with interest, 

over 30 years, rather than over seven years. The shortfall amortization bases determined7 for all 

plan years preceding the first plan year to which the election applies (and all related shortfall 

amortization installments) are reduced to zero. Further, the assumptions applicable to an “atrisk” plan do not apply.

Under the proposal, a “community newspaper plan” is a plan to which the new provision 

applies, which is maintained by an employer that, as of December 31, 2017,

• publishes and distributes daily, either electronically or in printed form, one or more 

community newspapers (as defined below) in a single State,

• is not a company the stock of which is publicly traded on a stock exchange or in an 

over-the-counter market, and is not controlled, directly or indirectly, by such a 

company, 

 7 Under section 430(c)(3).
5

• is controlled, directly or indirectly (a) by one or more persons residing primarily in 

the State in which the community newspaper is published; (b) for at least 30 years by 

individuals who are members of the same family; (c) by a trust created or organized 

in the State in which the community newspaper is published, the sole trustees of 

which are persons described in (a) or (b); (d) by an entity described in section 

501(c)(3) and exempt from tax under code section 501(a) that is organized and 

operated in the State in which the community newspaper is published, and the 

primary purpose of which is to benefit communities in the State; or (e) by a 

combination of persons described in (a), (c), or (d), and

• does not control, directly or indirectly, any newspaper in any other State.

A “community newspaper” means a newspaper that primarily serves a metropolitan 

statistical area, as determined by the Office of Management and Budget, with a population of not 

less than 100,000. For purposes of the proposal, a person (the “first” person) is treated as 

controlled by another person if the other person possesses, directly or indirectly, the power to 

direct or cause the direction and management of the first person (including the power to elect a 

majority of the members of the board of directors of the first person) through the ownership of 

voting securities.

The proposal makes the above-described amendments to both the Code and ERISA.

8

 

Effective Date

The proposal applies the amendments to plan years in effect on or beginning after the 

date of enactment.

 8 By adding a new subsection (m) to section 430, and a new subsection (m) to section 303 of ERISA. The 

basis for calculating underfunding in a plan for purposes of Pension Benefit Guaranty Corporation variable rate 

premiums is not changed by the proposal.
6

B. Estimated Revenue Effect of the Proposal

The following presents the estimated Federal fiscal year budget receipts of the proposal:

Fiscal Years

[Millions of Dollars]

Item 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-23 2019-28

Permit election to 

apply alternative 

minimum funding 

standards to certain 

single-employer 

community 

newspaper plans 

[1][2].................. 1 1 1 1 1 1 2 2 2 1 5 13

[1] Estimate does not include effects on PBGC premiums, which are estimated by the Congressional Budget Office.

[2] Estimate contains negligible off-budget revenue effects.