News & Policy
Reportable Events Proposal: FAQs
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Q: What's this about?
A: The law requires that pension plans and the companies that sponsor them give PBGC notice of various events affecting either the company or the plan. PBGC in 2009 proposed to require reporting more often than it had in the past. The business community objected, saying that PBGC's proposal would have required unnecessary reports, reports when there was no real risk to the plan. After the President directed agencies to review their regulations, PBGC did so. We thought the business objections were right, so now we're changing the proposal to reduce unnecessary reports and to require reporting only where we think it's really needed. This will exempt more than 90 percent of companies and plans from most reporting requirements (and in the case of bankruptcies, eliminate reporting entirely), and permit PBGC to focus on companies and plans that are really at risk.
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Q: Why do companies have to report to PBGC?
A: Under ERISA, corporate or plan events that signal financial problems and could potentially put a pension plan at risk must be reported to PBGC. Those "reportable events" include company sponsor events such as bankruptcies, mergers, spinoffs, liquidations, insolvency, and loan defaults and plan events such as missed contributions, insufficient funds, and large pay-outs.
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Q: What does PBGC do with a report?
A: Event reports enable PBGC to take protective action, such as negotiation with the plan sponsor to improve plan funding. This leads to better protection for plans, participants, the pension insurance system, and retirement security generally. For example, in the case of missed required contributions, PBGC typically will contact the company to find out why the contributions were missed, assess the likelihood that those and future contributions will be made, and take action as appropriate.
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Q: Why is PBGC issuing this proposal now?
A: Because the President in 2011 directed agencies to review and revise existing regulations to make them less burdensome and more effective. In 2009, PBGC proposed to expand reporting requirements and eliminate most reporting waivers. Plan sponsors and pension practitioners objected to the changes, saying that they were an unnecessary burden and would require reporting to PBGC even in circumstances where the risk to plans and PBGC is minimal. PBGC concluded that many of the industry concerns were valid, so we're proposing to eliminate many reporting requirements for financially sound companies and plans and to eliminate reporting for bankruptcies entirely (since we can get the information other ways without burdening the company).
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Q: What are the highlights of the proposal?
A: The proposal would reduce the burden of filing for financially sound plans and sponsors, where risk to the pension insurance system is lower, and focus reporting requirements more on situations where risk is higher. It would do this primarily by establishing "safe harbors" for companies and plans that meet financial soundness standards described in the proposal.
There would also be more reporting waivers for small plans.
Overall, PBGC expects the new proposal to exempt more than 90 percent of plans and sponsors from many reporting requirements. Furthermore, by eliminating reporting when risk is low, PBGC estimates that unnecessary reporting – reports PBGC does not follow up – could be reduced by some 90 percent.
The new proposal, Reportable Events and Certain Other Notification Requirements, is available on the Federal Register website.
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Q: What about small businesses and small plans?
A: This is a major change from the prior proposal. PBGC is now proposing to expand the small plan waivers under the current regulation and extend them to more events. Since two-thirds of all plans are sponsored by small businesses, this effort will dramatically expand relief from reporting requirements.
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Q: What do you mean by "financially sound"?
A: We mean unlikely to become bankrupt and default on their pension and other obligations. Companies would be exempted if they meet a set of standards based on widely available measures already used in business. These are: a credit report score indicating a low probability of default, positive net income, no secured debt (with some exceptions), no defaults on major loans, and no missed pension contributions.
Companies that do not meet the above tests are still exempt if their plans are financially sound (i.e., either 120 percent funded on an ongoing basis or 100 percent funded on a termination basis).
PBGC analyzed the pension plan terminations of the past and found that when companies and plans met these tests, plans were rarely terminated.
PBGC is proposing to use measures of financial soundness that are already widely available and widely applied, and not to create any new measures.
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Q: What is a credit report score?
A: A credit report score is a score issued by a commercial credit reporting company, such as Dun & Bradstreet, that measures a company's ability to meet its financial obligations. More than 90 percent of pension plan sponsors already have a Dun & Bradstreet credit report score.
Those few companies that do not can get one without cost simply by providing relevant data to the commercial credit reporting company (not to PBGC).
(Credit report scores are different from credit ratings, which are generally available only for larger companies and require the rated company to pay a fee.)
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Q: Is PBGC creating its own financial standard?
A: No. Businesses have, for centuries, worked with other businesses on the basis of whether they can live up to their commitments. Credit reports have been available in the US, produced and used by private businesses, for over 150 years. PBGC will use the standards already used by businesses throughout the world: common financial measures of financial soundness such as credit scores, indebtedness, liquidity, and profitability.
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Q: Will PBGC publicize a company's reportable event notice?
A: No. These notices are confidential.
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Q: Would the proposal change the events that are subject to reporting?
A: Yes. The proposal would make several changes to reduce reporting burden. For example, to make it easier for plans to monitor for reportable decreases in the number of covered employees, the proposal would only require annual checking for slow attrition at the end of each year, using readily available participant count information. Reporting during the year would be required only in limited cases, for losses in covered employees that happened quickly or because of a single event.
Another example would be the elimination of separate reporting of a bankruptcy filing. The proposal would eliminate reporting of proceedings under the US Bankruptcy Code, which PBGC can and does monitor by other means. (Reporting would still be required for other types of insolvency proceedings in which there are not public Federal bankruptcy filings, such as receivership, and for out-of-court settlements with creditors. Liquidations would still be reportable in most cases.)
The proposal would expand the definition of loan defaults. -
Q: Is PBGC looking for suggestions to improve the proposal?
A: Absolutely. We've specifically asked for comments on how to make the safe harbors easier to determine and qualify for. We're also particularly interested in comments on our treatment of loan defaults and on all aspects of our electronic filing proposals.
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Q: How can the public comment & suggest changes?
A: PBGC is expanding the ways in which plans, sponsors, and others can comment on our proposal.
PBGC will hold a public hearing on the proposal on June 18, 2013, in Washington, DC., at which persons who provided written comments on the rule may speak.
You can send written comments any time up to June 3, 2013. Submit by any of the following methods:
- Federal eRulemaking Portal: http://www.regulations.gov.
- E-mail: reg.comments@pbgc.gov.
- Fax: 202-326-4224.
- Mail or Hand Delivery: Regulatory Affairs Group, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026.
The proposed forms and instructions will be posted on www.pbgc.gov. Comments on the forms and instructions should be sent to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Pension Benefit Guaranty Corporation, at OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974.
See the proposal for details.
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Q: What happens after the hearing?
A: PBGC will consider all written and oral comments and then prepare a final rule (and final forms and instructions).
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Q: How long will all this take?
A: We're hoping that we can consider all comments and issue the final regulation by the end of this year.
