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Practitioners

VCP FAQs for Plan Administrators

The Basics

1. What is a Participant Notice?

If your plan is underfunded, you may be required to provide your participants with a Participant Notice that tells them the plan's funding status and the limits of the PBGC's guarantee. In general, you must provide a Participant Notice for a plan year if a variable rate premium is payable for your plan for that plan year, unless your plan meets a funding related test for that plan year or for the prior plan year. If you don't provide a Participant Notice timely and in accordance with all other requirements, the PBGC may assess a penalty under section 4071 of the Employee Retirement Income Security Act of 1974 (ERISA).

2. Where can I find the Participant Notice rules?

The Participant Notice rules are contained in section 4011 of ERISA and 29 CFR part 4011. You can find these rules, along with additional guidance, on the PBGC's Web site.

3. What is the Participant Notice Voluntary Correction Program (VCP)?

The Participant Notice Voluntary Correction Program is a program we announced in the Federal Register on May 7, 2004. The VCP generally covers Participant Notices for the 2002 or 2003 plan year that were not issued timely and in accordance with all other requirements. We will not assess a penalty for a 2002 or 2003 Participant Notice failure if you correct the failure in accordance with the VCP guidelines. We also will not pursue any failure to provide a pre 2002 Participant Notice unless you have a 2002 or 2003 Participant Notice failure that is covered by the VCP but that does not meet the requirements for penalty relief under the VCP.

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Participant Notices Covered by the VCP

4. What Participant Notices are covered by the VCP?

The VCP covers any Participant Notice for your plan's 2002 or 2003 plan year: (1) that is due before May 7, 2004 (see Note below); and (2) that is not, as of May 7, 2004, the subject of a PBGC compliance evaluation proceeding.

Note: For purposes of determining whether the VCP covers your plan's Participant Notice, we will determine the date the Participant Notice is due without regard to any deadline extension resulting from a disaster relief notice. For example, if your plan's 2003 Participant Notice was originally due on December 15, 2003, but as a result of a disaster relief notice the due date was extended to May 14, 2004, the VCP would cover your plan's 2003 Participant Notice because we would disregard the extension to May 14, 2004.

5. Does the VCP cover my plan's 2002 or 2003 Participant Notice that I issued late, but before May 7, 2004, and otherwise as required?

Yes. If the only failure with respect to your plan's 2002 or 2003 Participant Notice was issuing it late and you issued it before May 7, 2004, we will treat the failure as meeting the requirements for VCP penalty relief without requiring that you issue a VCP corrective notice or notify us of your participation in the VCP.

6. Can I participate in the VCP if -

  1. I didn't issue a 2002 or 2003 Participant Notice for my plan, and I'm not sure whether I was required to? OR
  2. I issued a 2002 or 2003 Participant Notice for my plan, and I'm not sure whether I issued it timely and in accordance with all other requirements?

Yes. You can participate in the VCP if you're not sure whether you were required to issue a 2002 or 2003 Participant Notice or if you issued a 2002 or 2003 Participant Notice but you're not sure whether you issued it timely and in accordance with all other requirements.

For information on Participant Notice requirements for 2002 and 2003, see PBGC Technical Update 02-2, and Technical Update 03-17.

7. I didn't issue a Participant Notice timely and in accordance with all other requirements for my plan for a pre-2002 plan year. Does the VCP cover that pre-2002 Participant Notice?

No. However, we will not pursue any failure to provide a pre 2002 Participant Notice unless there was a Participant Notice failure for the 2002 or 2003 plan year that was covered by the VCP but that does not meet the requirements for penalty relief under the VCP.

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VCP Corrective Notice

8. To whom do I have to issue a VCP corrective notice?

You must issue a VCP corrective notice to those persons entitled to receive your plan's 2004 Participant Notice (or, if your plan is not required to issue a 2004 Participant Notice, those persons who would be entitled to receive it if you were required to issue it). See § 4011.7.

You do not need to issue a VCP corrective notice to those persons who were entitled to receive your plan's missed 2002 or 2003 Participant Notice but who are not entitled to receive your plan's 2004 Participant Notice, for example, a participant whose entire benefit has been annuitized or paid out in a lump sum.

9. When do I have to issue a VCP corrective notice?

You must issue a VCP corrective notice by the due date for your plan's 2004 Participant Notice, or, if your plan is not required to issue a 2004 Participant Notice, the due date that would apply if you were required to issue it (for calendar year plans, generally October 4, 2004, November 15, 2004, or December 15, 2004). See § 4011.8.

10. What methods may I use to issue a VCP corrective notice?

You must issue a VCP corrective notice under the issuance rules that apply to your plan's 2004 Participant Notice (or, if your plan is not required to issue a 2004 Participant Notice, the rules that would apply if you were required to issue it). See § 4011.9. You must use measures reasonably calculated to ensure actual receipt by the persons entitled to receive it.

You may use e-mail as long you comply with certain rules. In certain circumstances, e mail issuance to employees may be reasonably calculated to ensure actual receipt. But e-mail issuance to recipients such as retirees who may not have access to or familiarity with e-mail or the ability to print out the notice would not be acceptable.

We published new rules in this area on October 28, 2003 (68 Fed. Reg. 61,344). The section on permitted issuance methods, including electronic issuances, can be found at page 61,348 and at § 4000.13.

11. What information do I have to include in a VCP corrective notice?

You must include in a VCP corrective notice all of the information required in your plan's 2004 Participant Notice, see 4011.10(b) (for example, current information on funding waivers, missed contributions, and limitations on our guarantee) - or, if your plan is not required to issue a 2004 Participant Notice, all of the information that would be required in your plan's 2004 Participant Notice if you were required to issue it - with the following modification. Normally your plan's 2004 Participant Notice would have to include your plan's "funded current liability percentage" for the 2003 plan year or for the 2004 plan year. Under the VCP, whether you are correcting only a 2002 failure, both a 2002 and a 2003 failure, or only a 2003 failure, your plan's VCP corrective notice:

  1. must include your plan's "funded current liability percentage" for the 2002 plan year and for the 2003 plan year, and
  2. may include as well your plan's "funded current liability percentage" for the 2004 plan year.

12. Is there a model VCP corrective notice I can use?

Yes. You can use the Model VCP Corrective Notice to meet VCP requirements.

13. If I participate in the VCP, do I have to tell participants that I didn't issue a Participant Notice timely and in accordance with all other requirements or that I am participating in a "voluntary correction program"?

No. You are not required to inform participants that your plan had a Participant Notice failure for the 2002 or 2003 plan year (or for both), or that you are participating in a "voluntary correction program." However, you may choose to include that information in a VCP corrective notice.

14. I am required to issue a 2004 Participant Notice for my plan. If I issue a VCP corrective notice, do I have to issue a separate 2004 Participant Notice?

No. We will treat a VCP corrective notice that you issued in accordance with the guidelines in the VCP Federal Register Notice as meeting the requirements for your plan's 2004 Participant Notice.

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Notification to the PBGC

15. Do I have to notify the PBGC that I participated in the VCP in order to qualify for penalty relief?

With one exception, you must notify us that you are participating in the VCP to qualify for penalty relief. The notice is due no later than the 30th day after the due date for issuing a VCP corrective notice. You must include a copy of your plan's VCP corrective notice and the name and telephone number of a person for us to contact with any questions. You can notify us electronically through our Web site, by fax at 202-326-4197, or by mail, commercial delivery service, or hand-delivery to ATTN: Participant Notice VCP, Contracts and Controls Review Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW, Suite 580, Washington, DC 20005-4026. We will promptly issue a written acknowledgment of your notification. You should keep the acknowledgment as proof of meeting the VCP requirement of notifying us.

The exception is that if your only failure with respect to a 2002 or 2003 Participant Notice was issuing it late and you issued it before May 7, 2004, we will treat the failure as meeting the requirements for VCP penalty relief without requiring that you issue a VCP corrective notice or notify us of your participation in the VCP.

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Participant Notice Certification Requirement

16. I certified on my 2003 Form 1 that a Participant Notice was not required for my plan for the 2002 plan year. I later found out that a Participant Notice in fact was required for my plan for the 2002 plan year. In accordance with the VCP guidelines, I issued a VCP corrective notice and notified the PBGC that I was participating in the VCP. Do I have to file an amended 2003 Form 1 certification?

No. If you notified us that you were participating in the VCP, we will treat the notification as effectively amending any erroneous certification that you filed on or before May 7, 2004, with respect to a 2002 or 2003 Participant Notice. (Note: All plan administrators that participated in the VCP will have to check a box on their 2005 PBGC premium filing indicating that they participated in the VCP.)

17. I certified on my 2003 Form 1 that a Participant Notice was not required for my plan for the 2002 plan year. I later found out that a Participant Notice in fact was required for my plan for the 2002 plan year. I issued the 2002 Participant Notice late - but before May 7, 2004 - and in accordance with all other applicable requirements. Do I have to file an amended 2003 Form 1 certification?

No. If you issued the 2002 Participant Notice late - but before May 7, 2004 - and in accordance with all other applicable requirements, you do not have to file an amended 2003 Form 1 certification, as long as you check the box on your 2005 PBGC premium filing indicating that you participated in the VCP. (You also do not have to notify us that you were participating in the VCP in order to get VCP penalty relief. See Q&A 5 and Q&A 15.)

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Compliance Assistance

18. What should I do if I have more questions about the VCP?

You can submit questions about the VCP electronically through our Web site or call the Practitioner Customer Service Center toll-free at 1 800 736 2444. For TTY/ASCII users, call the Federal Relay Service toll free at 1-800-877-8339 and ask to be connected to 1-800-736-2444.

19. What should I do if I didn't provide my plan's 2002 or 2003 Participant Notice to some of the participants in the plan or didn't include some of the required information?

You can follow the guidelines in the VCP Federal Register Notice. Under those guidelines, you may contact us to request appropriate modifications to the VCP requirements. We will work with you to determine what type of correction, if any, would be needed to address the partial failure in order for it to qualify for penalty relief under the VCP.

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Future Participant Notice Enforcement and Penalties

20. How would my participation in the VCP affect the likelihood that my plan will be selected for audit?

We anticipate that many plan administrators will want to participate in the VCP as a precaution, even in the absence of a known Participant Notice failure. Your participation in the VCP will not affect the likelihood that your plan will be selected for audit of compliance with the Participant Notice requirement for a post VCP plan year, the PBGC premium requirement for any plan year, or any other PBGC requirement.

21. What happens if I don't participate in the VCP?

We proposed a new Participant Notice penalty policy that would apply to 2002 and 2003 Participant Notice failures that do not meet the requirements for penalty relief under the VCP (as well as to 2004 and later Participant Notice failures). The new policy also would apply to pre-2002 Participant Notice failures, where there is a 2002 or 2003 Participant Notice failure that is covered by the VCP but that does not meet the requirements for penalty relief under the VCP.

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