[Federal Register: February 20, 2008 (Volume 73, Number 34)]
[Proposed Rules]
[Page 9243-9254]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe08-28]
=======================================================================
-----------------------------------------------------------------------
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4010
RIN 1212-AB01
Annual Financial and Actuarial Information Reporting; Pension
Protection Act of 2006
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would amend PBGC's regulation on Annual
Financial and Actuarial Information Reporting to implement the
provisions of the Pension Protection Act of 2006, Public Law 109-280
(``PPA 2006''), which changed the standards for determining which
persons are required to report under ERISA section 4010 (Authority to
Require Certain Information) and made other changes to the reporting
requirements. In addition to providing proposed guidance on
implementing the PPA 2006 changes, PBGC is proposing to waive reporting
in certain cases for controlled groups with aggregate plan underfunding
of $15 million or less, to modify the standards for determining which
plans are exempted from the actuarial information requirements, to
revise the actuarial information requirements to conform with other PPA
2006 changes, and to provide other clarifications.
DATES: Comments must be submitted on or before April 21, 2008.
ADDRESSES: Comments may be submitted by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the Web site instructions for submitting comments.
E-mail: reg.comments@pbgc.gov.
Fax: 202-326-4224.
Mail or Hand Delivery: Legislative and Regulatory
Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,
Washington, DC 20005-4026.
All submissions must include the Regulatory Identification Number for
this rulemaking (RIN 1212-AB01). Comments received, including personal
information provided, will be posted to http://www.pbgc.gov. Copies of
comments may also be obtained by writing to Disclosure Division, Office
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K
Street, NW., Washington, DC 20005-4026, or calling 202-326-4040 during
normal business hours. (TTY and TDD users may call the Federal relay
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)
FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, Legislative
and Regulatory Department; or Catherine B. Klion, Manager, Regulatory
and Policy Division, Legislative and Regulatory Department, Pension
Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-
4026; 202-326-4024. (TTY/TDD users may call the Federal relay service
toll-free at 1-800-877-8339 and ask to be connected to 202-326-4024.)
SUPPLEMENTARY INFORMATION:
Background
Pension Benefit Guaranty Corporation (PBGC) administers the pension
insurance programs under Title IV of the Employee Retirement Income
Security Act of 1974 (ERISA). In order to give PBGC an opportunity to
anticipate and attempt to minimize potential liabilities that may arise
from the termination of significantly underfunded plans, ERISA section
4010 requires the reporting of actuarial and financial information by
controlled groups with pension plans that have significant funding
problems. That information is exempt from disclosure under section 552
of title 5, United States Code and may not be made public, except as
may be relevant to any administrative or judicial action or proceeding.
Pursuant to ERISA section 4010, PBGC issued its regulation on
Annual Financial and Actuarial Information Reporting in 1995 (29 CFR
part 4010). The regulation specifies the items of identifying,
financial, and actuarial information that filers must submit under
section 4010. PBGC reviews the
[[Page 9244]]
information that is filed and enters it into an electronic database for
more detailed analysis. Computer-assisted analysis of this information
helps PBGC to anticipate possible major demands on the pension
insurance system and to focus PBGC resources on situations that pose
the greatest risks to that system. Because other sources of information
are usually not as current as the section 4010 information, the section
4010 filing plays a major role in PBGC's ability to protect participant
and premium-payer interests.
In March of 2005, PBGC amended part 4010 to require electronic
reporting and to make other less significant changes. Reporting is now
accomplished through PBGC's secure e-4010 Web-based application.
PPA 2006 Changes
On August 17, 2006, the President signed into law the Pension
Protection Act of 2006, Public Law 109-280 (``PPA 2006''), which made
numerous changes in the area of pension law, including changes to ERISA
section 4010. Prior to its amendment by PPA 2006, ERISA section 4010(b)
required reporting, in general, if: (1) The aggregate unfunded vested
benefits of all plans maintained by members of the controlled group
exceeded $50 million, disregarding plans with no unfunded vested
benefits (the ``$50 Million Gateway Test''); (2) the conditions
specified in ERISA section 302(f) and section 412(n) of the Internal
Revenue Code (``Code'') for imposing a lien for missed contributions
exceeding $1 million had been met with respect to any plan maintained
by any member of the controlled group; or (3) the Internal Revenue
Service had granted minimum funding waivers in excess of $1 million to
any plan maintained by any member of the controlled group, and any
portion of the waiver(s) was still outstanding.
Section 505 of PPA 2006 amended ERISA section 4010(b)(1), replacing
the $50 Million Gateway Test with a test based on the funding target
attainment percentage of each plan in the controlled group. As amended
by PPA 2006, ERISA section 4010(b)(1) requires reporting if:
the funding target attainment percentage (as defined in
subsection (d) \1\) at the end of the preceding plan year of a plan
maintained by the contributing sponsor or any member of its
controlled group is less than 80 percent.
---------------------------------------------------------------------------
\1\ ERISA section 4010(d)(2)(B) was added by section 505 of PPA
2006 and provides that ``the term `funding target attainment
percentage' has the meaning provided in section 302(d)(2) [sic].''
However, ERISA section 302(d)(2) contains no reference to ``funding
target attainment percentage'' but applies to certain retroactive
plan amendments. On the other hand, ERISA section 303(d)(2) is
entitled ``Funding Target Attainment Percentage'' and provides a
definition for that term. Therefore, this proposed rule presumes the
reference should have been to ERISA section 303(d)(2).
(Current filers are reminded that PBGC regulations provide that if a
filer for the immediately preceding information year is not required to
file for the current information year, the filer must submit
information, in accordance with the instructions on PBGC's Web site,
demonstrating why a filing is not required for the current information
year. This requirement would apply, for example, to a filer who was
required to file for the information year ending on December 31, 2007,
based on the $50 million Gateway Test, but who is not required to file
for the information year ending on December 31, 2008, based on the new
funding target attainment percentage gateway test.)
Although PPA 2006 did not alter the substance of the other two
triggers (found in paragraphs (b)(2) and (b)(3) of ERISA section 4010),
it made other changes that affect these provisions. For instance,
because PPA 2006 made changes to references in paragraph (b)(2),
references in Sec. 4010.4(a) (which describes who must file under part
4010) need to be amended. Similarly, PPA 2006 made changes to the
minimum funding waiver provisions, which are referred to in part 4010.
Finally, PPA 2006 added ERISA sections 4010(d)(1) and 4010(e).
ERISA section 4010(d)(1) lists three items that must be included in the
information filers submit to PBGC.\2\ ERISA section 4010(e) requires
PBGC to submit to Congress an annual summary report of the information
submitted to PBGC pursuant to ERISA section 4010.
---------------------------------------------------------------------------
\2\ ERISA section 4010(a), which was unaltered by PPA 2006,
provides that filers must provide the information specified by PBGC
in regulations.
---------------------------------------------------------------------------
Summary of Proposed Rule
This proposed rule would amend part 4010 of PBGC's regulations to
implement the change to ERISA section 4010(b)(1). In particular, this
proposed rule provides guidance on how to determine whether reporting
is required with respect to a plan based on the plan's funding target
attainment percentage. The proposed rule would also make conforming
changes to address the PPA 2006 changes affecting the section 4010
reporting triggers based on the imposition of certain liens or on the
granting of certain minimum funding waivers.
In conjunction with these changes, PBGC also is proposing: (1) To
waive reporting in certain cases for controlled groups with aggregate
underfunding of $15 million or less; (2) to modify the standards for
determining which plans are exempted from reporting actuarial
information; (3) to modify the reporting requirements in light of the
PPA 2006 changes; and (4) to make other clarifications (for instance,
the proposed rule would provide guidance for reporting for multiple
employer plans and for dealing with certain unusual timing issues with
respect to plan years and information years).
The proposed rule would be applicable to information years
beginning after December 31, 2007. (In the rare case of a short
information year beginning in 2008, such as an information year
beginning on January 1, 2008, and ending on March 31, 2008, the
employer should contact PBGC to request a reporting extension.)
However, the changes made to paragraphs (a) and (b) of Sec. 4010.8
(Plan actuarial information) are effective only for plan years
beginning after December 31, 2007.
Discussion of Proposed Rule
Information Year
In the original proposed rule under ERISA section 4010 (60 CFR
35308, July 6, 1995), PBGC introduced the concept of ``information
year'' The information year is the fiscal year, except that in the case
of controlled group members with different fiscal years, the
information year is the calendar year (Sec. 4011.5). In the preamble
to that original proposed rule, PBGC explained that ``information
year'' serves four purposes:
First, it will help persons determine which plan years and
fiscal years to use to identify Filers. Second, it will help Filers
determine whether a pension plan qualifies for a filing exemption.
Third, it is used to identify the information to be submitted by a
Filer. Fourth, it establishes the due date for submission of
required information by a Filer. The regulation does not require a
Filer to change its fiscal year or the plan year of any pension
plan. Further, the regulation does not require a Filer to report
financial information on any accounting period other than an
existing fiscal year or to report actuarial information for any
period other than the existing plan year of a pension plan.
Generally, the Information Year is the fiscal year of the Filer. If
all members of a controlled group do not report financial
information on the same fiscal year, the Information Year is the
calendar year.
``Information year'' has been integral to the process of reporting
under ERISA section 4010 and PBGC finds no indication that PPA 2006
alters this. Therefore, under the proposed rule, reporting will
continue to be based on the concept of ``information year.'' Under the
proposed rule, reporting
[[Page 9245]]
would be required (unless otherwise waived) if any plan within the
controlled group has a funding target attainment percentage of less
than 80 percent for the plan year ending within the information year
(the ``80% Funded Gateway Test'').
The proposed rule also would clarify how the 4010 requirements
apply to certain unusual situations, such as when a plan has two plan
years that end in the information year or has no plan year that ends in
the information year. Under the proposed rule, the last plan year
ending on or before the end of the information year would be treated as
the plan year that ends within the information year. In addition, in
order to prevent circularity, the proposed rule would provide that when
a controlled group reports on the basis of two different fiscal years,
the determination of whether an entity is exempt is made on the basis
of a calendar year information year.
Funding Target Attainment Percentage
As discussed above, ERISA section 4010(b)(1), as amended by PPA
2006, requires reporting if the funding target attainment percentage at
the end of the preceding plan year of a plan maintained by the
contributing sponsor or any member of its controlled group is less than
80 percent. ERISA section 303(d)(2) provides that the ``funding target
attainment percentage'' of a plan for a plan year is the ratio
(expressed as a percentage) which--
(A) the value of plan assets for the plan year (as reduced under
subsection (f)(4)(B)), bears to
(B) the funding target of the plan for the plan year (determined
without regard to subsection (i)(1)).
In accordance with ERISA section 303(g)(1), for a plan year, the
value of plan assets and the funding target of a plan are determined as
of the valuation date of the plan for such plan year. Under ERISA
section 303(g)(2), the valuation date for nearly all plans subject to
4010 reporting will be the beginning of the plan year.\3\ Thus, while
section 4010(b)(1) refers to the funding target attainment percentage
at the end of the preceding plan year, in nearly all cases both
elements of the funding target attainment percentage must be calculated
as of the beginning of the plan year. This creates an ambiguity with
regard to the date as of which the funding target attainment percentage
is to be calculated for purposes of section 4010(b)(1).
---------------------------------------------------------------------------
\3\ ERISA section 303(g)(2) provides that the valuation date of
a plan for any plan year is the first day of the plan year, except
that certain small plans may designate any date in the plan year to
be the valuation date for the plan year and succeeding plan years.
For this purpose, small plans are plans with 100 or fewer
participants on each day of the plan year, when aggregated with all
plans in the controlled group. Because PBGC proposes to exclude
controlled groups with under $15 million in underfunding, plans that
would be considered small plans for purposes of determining
valuation dates would rarely be subject to reporting under part
4010. Therefore, the valuation date for nearly all plans subject to
4010 reporting would be the beginning of the plan year.
---------------------------------------------------------------------------
The proposed rule would resolve this ambiguity by providing that
the funding target attainment percentage (for purposes of the 80%
Funded Gateway Test) would be determined as of the valuation date for
the plan year ending within the information year--generally, the first
day of the plan year that ends within the information year. Because
plans will need to determine the funding target attainment percentage
as of the valuation date for other purposes, measuring the funding
target attainment percentage as of the valuation date for the 80%
Funded Gateway Test should be less burdensome on prospective filers
than requiring a separate determination as of the end of the preceding
plan year. In addition, using this measurement date will give
controlled groups ample time to determine whether reporting is required
pursuant to the 80% Funded Gateway Test and to prepare the section 4010
filing (if required) by the due date.
Reduction of Assets Based on Carryover and Prefunding Balances
ERISA section 303(d)(2) provides that in determining the funding
target attainment percentage of a plan for a plan year, plan assets are
reduced by the amount of the prefunding balance and the funding
standard carryover balance. Plan sponsors are permitted under ERISA
section 303(f) to make certain elections to use, increase, or reduce a
prefunding balance or a funding standard carryover balance effective at
the beginning of the plan year. Under PPA 2006, the Department of the
Treasury (``Treasury'') is to provide guidance on the timing and manner
of these elections. On August 31, 2007, Treasury published a proposed
rule (Benefit Restrictions for Underfunded Pension Plans) in the
Federal Register at 72 FR 50544, which would provide guidance on such
elections. That rule would require any such election to satisfy certain
timing rules. As proposed, those Treasury rules would require an
election that affects the funding target attainment percentage for a
plan year to be made well before the due date for the section 4010
filing. Therefore, PBGC's proposed rule assumes that filers will have
no difficulty including these elections in determinations made for
purposes of section 4010. However, if under final Treasury regulations
it is possible for a plan sponsor to make such an election after the
due date for the section 4010 filing, the PBGC would expect controlled
groups to anticipate any such election when determining the funding
target attainment percentage, regardless of when the election is made.
Certain Plans to Which Special Funding Rules Apply
Sections 104, 105, and 106 of PPA 2006 defer the effective date of
the funding amendments for certain plans described in those sections,
which in general deal with plans of cooperatives, plans affected by
settlement agreements with PBGC, and plans of government contractors.
Section 402 of PPA 2006 applies special funding rules to certain plans
of commercial passenger airlines and airline caterers. Section 402 of
PPA was amended by the U.S. Troop Readiness, Veterans' Care, Katrina
Recovery, and Iraq Accountability Appropriations Act, 2007, Public Law
110-28. None of these provisions affects the applicability of the
amendments to ERISA section 4010. The proposed rule provides explicitly
that plans in this small group must apply part 4010 in the same manner
as all other plans (i.e., without regard to these sections of PPA).
However, for purposes of Sec. 4010.8(a)(9) (which specifies what
information must be contained in the actuarial valuation report), the
filer must provide details of any such funding rules that are
applicable to the plan. Where the different funding rules for this
small group affect an item described in Sec. 4010.8(a)(9), PBGC would
expect that filers could, in consultation with PBGC, provide
appropriately modified information.
Minimum Funding Waivers
ERISA section 4010(b) requires 4010 reporting if the Internal
Revenue Service has granted minimum funding waivers in excess of $1
million to any plan maintained by any member of the controlled group
and as of the end of the plan year ending within the information year
there is an outstanding balance on the waiver.
In general, the waiver will continue to be included for all five
years of the amortization period, unless the waiver amortization bases
are reduced to zero pursuant to ERISA section 303(e)(5) or Code section
430(e)(5). PBGC notes that there is some uncertainty as to the effect
of PPA 2006 on the carryover balances for funding waivers granted
before 2008. The proposed rule makes clear that the statutory
amortization period will not be deemed to have ended merely because
[[Page 9246]]
the funding waivers granted with respect to plan years beginning before
2008 are not carried over as a separate amortization base for the post-
2007 plan years.
To simplify the regulation, the proposed rule would eliminate the
provision in the current regulation that provides that a minimum
funding waiver is not outstanding under certain circumstances where an
agreement requires the maintenance of a specific credit balance. PBGC
found that this occurred infrequently. In those cases where it does
occur, PBGC will consider waiving the 4010 reporting requirement on a
case-by-case basis under Sec. 4010.11.
Reporting Requirements
In addition to the requirements described in ERISA section 4010(a),
which provides that filers must submit certain financial and actuarial
information as prescribed by PBGC in regulations, ERISA section
4010(d), as amended by PPA 2006, specifies three items that are
required to be filed with PBGC. That section provides that information
filed under section 4010 must include:
(1) The amount of benefit liabilities under the plan determined
using the assumptions used by the corporation [PBGC] in determining
liabilities;
(2) The funding target of the plan determined as if the plan has
been in at-risk status for at least 5 plan years; and
(3) The funding target attainment percentage of the plan.
The proposed rule provides detailed guidance on how to determine
benefit liabilities as described in item (1), i.e., how to determine
benefit liabilities for ongoing plans using the assumptions used by
PBGC in determining liabilities. This determination would be similar to
that set forth in the current regulation under Sec. 4010.8(d)(2). As
with the current regulation, the proposed rule would require filers to
use the assumptions prescribed by Sec. Sec. 4044.51 through 4044.57.
However, as explained below, in two respects the proposed regulation
would modify or expand upon previous guidance (including informal
guidance) given by PBGC or PBGC staff relating to certain assumptions
not specified in Sec. Sec. 4044.51 through 4044.57.
First, the proposed rule provides that solely for purposes of
determining the earliest retirement age (ERA) at valuation date and the
unreduced retirement age (URA) to be used when determining expected
retirement age (XRA), an active participant would be treated as
continuing in service after the end of the plan year. This provision
would modify informal guidance provided by PBGC that future expected
service should be disregarded when determining XRAs for 4010 liability
calculations.\4\ This modification would eliminate an inconsistency
between how filers compute benefit liabilities for 4010 purposes and
how PBGC calculates benefit liabilities as part of its plan monitoring
functions. The main impact of this change on 4010 filers would be that
they would need to make a one-time modification of their computer
programs. The proposed rule includes examples demonstrating how XRA
would be calculated and applied in determining benefit liabilities.
---------------------------------------------------------------------------
\4\ Q&A 17 in the 2001 Blue Book and Q&A 19 in the 2002 Blue
Book, available at http://www.pbgc.gov. Blue Books are summaries of the
questions and answers discussed at meetings between PBGC staff and
representatives of the Enrolled Actuaries Program Committee in
preparation for the annual Enrolled Actuaries Meetings. The
summaries reflect the views of individual staff members and do not
represent the official position of PBGC.
---------------------------------------------------------------------------
Second, the proposed rule provides that a 4010 filer would be
permitted to use pre-retirement assumptions other than mortality (such
as turnover and disability assumptions) as long as the filer uses the
same pre-retirement assumptions used to determine minimum required
contributions. This provision would expand informal guidance provided
by PBGC that it is permissible for 4010 purposes to use pre-retirement
assumptions other than mortality.\5\ The informal guidance was silent
on which pre-retirement assumptions could be used. In PBGC's
experience, most actuaries who choose to use pre-retirement assumptions
for 4010 purposes use those same pre-retirement assumptions to
determine minimum required contributions. Because the actuary certifies
that the funding assumptions represent his best estimate of future
experience, this practice is entirely reasonable, and the proposed rule
would codify it for consistency.
---------------------------------------------------------------------------
\5\ Q&A 25 in the 2000 Blue Book.
---------------------------------------------------------------------------
The proposed rule also would clarify that, with the exception of
pre-retirement assumptions, any other assumptions used to determine the
minimum required contribution that are not overridden by Sec. Sec.
4044.51 through 4044.57 must be used when determining benefit
liabilities.
In addition to providing detailed guidance on how to determine
benefit liabilities, the proposed rule reflects new requirements (under
PPA 2006) to provide the funding target of the plan determined as if
the plan has been in at-risk status for at least 5 plan years, and the
funding target attainment percentage of the plan. Finally, for each
plan (other than an exempt plan), the proposed rule would require
filers to report whether the plan, at any time during the plan year,
was subject to any of the limitations described in ERISA section 206(g)
and, if so, which limitations applied, when such limitations applied,
and when they were lifted (if applicable).
As with the current rule, the proposed rule would require
submission of the actuarial valuation report for the plan year ending
within the filer's information year and would specify what information
must be included in or attached to the report. PBGC is proposing to
modify the required items of information to better suit the new funding
structure instituted by PPA 2006. The required information is
information that PBGC expects most actuaries would include in valuation
reports once PPA 2006 takes effect (e.g., target normal cost,
information on shortfall amortization bases, information on funding
assumptions, an age/service scatter). However, because the funding
rules have changed so dramatically as a result of PPA 2006, and because
Treasury regulations implementing the new funding rules are not yet
final, the list of required items may exclude some relevant actuarial
information. To allow PBGC to expand the list of required items as it
gains more experience with the new funding requirements under PPA 2006,
the proposed rule would provide that the online instructions to PBGC's
secure e-4010 web-based application may require that additional items
be included in (or attached to) the valuation report. PBGC expects that
any additional items would be items typically required to be reported
on the Form 5500 schedule for defined benefit plan actuarial
information (Schedule SB).
Because the new actuarial reporting requirements are geared to the
new funding rules, which generally are applicable to plan years
beginning after December 31, 2007, the changes made to the actuarial
information requirements under Sec. 4010.8(a) and (b) would not apply
to plan years beginning before 2008. Information for such plan years
would be based upon the prior regulation. (Note that the other
paragraphs of Sec. 4010.8 (as proposed), such as the new rules for
determining which plans would be exempt from actuarial reporting
requirements (Sec. 4010.8(c)) and the determination of liabilities
(Sec. 4010.8(d)) would apply to all plan years ending within an
information year that begins on or after January 1, 2008.)
[[Page 9247]]
Waiver for Controlled Groups With Plan Underfunding Not Exceeding $15
Million
The Technical Explanation of PPA 2006 prepared by the Staff of the
Joint Committee on Taxation states: ``It is intended that the PBGC may
waive the requirement [for reporting under ERISA section 4010 based
upon the 80% Funded Gateway Test] in appropriate circumstances, such as
in the case of small plans.'' Moreover, PBGC seeks to balance the
benefit it derives from annual reporting of financial and actuarial
information with the burden reporting imposes on filers. As the total
underfunding in a filer's controlled group becomes smaller, the benefit
PBGC derives from reporting lessens, while the burden on the filer
tends to increase relative to the filer's resources. Based on its
experience, PBGC has determined that controlled groups with aggregate
plan underfunding of $15 million or less present a level of risk and
exposure to PBGC that is sufficiently low to warrant the waiver of
reporting based on the 80% Funded Gateway Test.
Therefore, PBGC is proposing to waive reporting for a controlled
group if the aggregate plan underfunding does not exceed $15 million
(disregarding those plans with no underfunding); however, the waiver
would not apply if reporting is required for any reason other than
having a funding target attainment percentage below 80 percent. For
this purpose, plan underfunding would equal the ``4010 funding
shortfall.'' The proposed rule would define the 4010 funding shortfall
as the funding shortfall defined in ERISA section 303(c)(4), but
determined without regard to the credit balance reduction under ERISA
section 303(f)(4)(B).
Exempt Plans
Section 4010.8(c) of PBGC's current regulation provides that
reporting actuarial information is not required for plans with fewer
than 500 participants. (It also provides an exemption for overfunded
plans.) Through means other than reporting under part 4010, such as
through PBGC's early warning program (see Technical Update 00-3,
available at http://www.pbgc.gov) and reportable events notices, PBGC has
discovered that a number of plans with fewer than 500 participants have
significant underfunding and thereby represent significant financial
exposure for PBGC. In such cases, PBGC needs actuarial information on
these plans to properly evaluate its risk and exposure for the entire
controlled group. Therefore, PBGC is proposing to modify the exemption
from reporting actuarial information. Under the proposed rule,
actuarial information would not be required if (1) the plan has fewer
than 500 participants, and (2) the plan's 4010 funding shortfall does
not exceed $15 million. For this purpose, the 4010 funding shortfall
would be determined as of the valuation date for the plan year ending
within the information year and would be based upon the same
methodology prescribed for purposes of determining whether the $15
million controlled-group waiver would apply.
The proposed rule retains the exemption from providing actuarial
information for plans that have no unfunded benefits. For this purpose,
unfunded benefits would be determined in the same manner as they would
be determined for purposes of ERISA section 4010(d)(1), which requires
the reporting of benefit liabilities using the assumptions used by
PBGC. The only difference is that the filer would be allowed to use the
retirement age assumptions used by the plan for that plan year for
purposes of section 303 of ERISA (without regard to the at-risk
assumptions of section 303(i) of ERISA) instead of the retirement age
assumptions in Sec. 4044.8(d)(2).
Note that, as under the current regulation, these exemptions from
reporting actuarial information do not apply if the plan has a funding
waiver or has been more than 10 days late with minimum funding
contributions.
Multiple Employer Plans
Over the last decade, PBGC has received a number of inquiries on
the application of ERISA section 4010 to contributing sponsors of
multiple employer plans. The proposed rule would provide for reduced
reporting for certain multiple employer plans. In general, only
information on employers that are among the 10 largest employers in
terms of participants (for hourly plans) or contributions (for salaried
plans) would need to be provided. Of course, PBGC could request
additional information pursuant to Sec. 4010.6(b). In addition, the
proposed rule would allow a filer to provide the actuarial information
on a multiple employer plan by reference if that information (for the
same plan year) has been provided by another filer. The proposed rule
would clarify that the entire underfunding (i.e., funding shortfall) of
a multiple employer plan is counted when determining whether the $15
million controlled-group waiver applies to an employer that is a
contributing sponsor of the multiple employer plan. It also would
clarify that filers are not required to provide identifying or
financial information for another contributing sponsor of the multiple
employer plan if that other contributing sponsor is not a member of the
filer's controlled group.
Applicability
Section 505(e) of PPA 2006 provides that the amendments made by
section 505 apply with respect to ``years beginning after 2007.'' We
note that this applicability provision of PPA 2006 uses the term
``year'' rather than ``plan year,'' although the term ``plan year''
appears in other applicability provisions in PPA 2006. PBGC interprets
this section of PPA to mean the amendments apply to any information
year beginning after 2007. Therefore, these rules, if adopted, would
apply to information years beginning after 2007. In the rare case of a
short information year beginning in 2008 (for example, an information
year beginning on January 1, 2008, and ending on March 31, 2008), the
employer should contact PBGC to obtain a reporting extension. However,
the changes made to paragraphs (a) and (b) of Sec. 4010.8 (Plan
actuarial information) are effective only for plan years beginning
after December 31, 2007.
Transition Rules
Under the proposed rule, a number of valuation determinations (for
instance, the 80% Funded Gateway Test, the $15 million controlled-group
waiver, and the $15 million small-plan exemption from reporting
actuarial information) would be made as of the valuation date for the
plan year ending within the information year. For these purposes, the
valuation determination is based on either the funding target
attainment percentage or the 4010 funding shortfall as of the valuation
date. The provisions of PPA 2006 defining funding target attainment
percentage and funding shortfall apply only to plan years beginning
after 2007. Therefore, for plan years beginning in 2007 but ending in
information years that begin after 2007 (and thus covered by these
proposed rules), the funding target attainment percentage and funding
shortfall are not prescribed by statute. As a result, this proposed
rule would require employers to use a surrogate for determining the
funding target attainment percentage and funding shortfall for plan
years beginning before January 1, 2008. PBGC's proposed surrogate would
be similar to a rule proposed by Treasury in its proposed benefit
restrictions rule. Section 1.436-1(j)(2)(iii) of Treasury's proposed
rule provides that, for benefit restriction purposes, the funding
target
[[Page 9248]]
attainment percentage for a pre-effective plan year is determined as a
fraction (expressed as a percentage), the numerator of which is the
value of net plan assets, and the denominator of which is the plan's
current liability on the valuation date for the last plan year that
begins before 2008 (the 2007 plan year). For this purpose, the value of
plan assets is determined under Code section 412(c)(2) as in effect for
the 2007 plan year, except that the value of plan assets prior to
subtraction of the plan's funding standard account credit balance
described below can neither be less than 90 percent of the fair market
value of plan assets nor greater than 110 percent of the fair market
value of plan assets on the valuation date for that plan year. In
addition, if a plan has a funding standard account credit balance as of
the valuation date for the 2007 plan year, that balance must be
subtracted from the asset value described above as of that date unless
the value of plan assets is greater than or equal to 90 percent of the
plan's current liability determined under Code section 412(l)(7) on the
valuation date for the 2007 plan year. Finally, if the employer makes
an election to reduce some or all of the funding standard carryover
balance as of the first day of the first plan year beginning in 2008 in
accordance with Sec. 1.430(f)-1(e) of Treasury's proposed rule, then
the present value (determined as of the valuation date for the prior
year using the valuation interest rate for that prior year) of the
amount so reduced is not treated as part of the funding standard
account credit balance when that balance is subtracted from the value
of net plan assets.
PBGC's proposed rule would provide that the funding target
attainment percentage for section 4010 purposes for plan years
beginning before 2008 would equal the funding target attainment
percentage as determined under Treasury's proposed special rule (Sec.
1.436-1(j)(2)(iii) of the regulation as proposed), except that: (1)
Current liability would be determined by using the highest allowable
interest rate for the plan year; and (2) there would be no special rule
providing that if the value of plan assets is greater than or equal to
90 percent of the plan's current liability determined under Code
section 412(l)(7) on the valuation date for the 2007 plan year, the
value of assets is not reduced by the credit balance.
The surrogate for 4010 funding shortfall would equal the excess, if
any, of the plan's current liability over the value of plan assets. For
this purpose, both current liability and plan assets would be
determined in the same manner as determined for purposes of PBGC's
transition rule for determining funding target attainment percentage,
except that assets would not be reduced by the credit balance in the
funding standard account (i.e., there would be no reduction as
described in 26 CFR 1.436-1(j)(2)(iii)(B)(2) and (3) (as proposed)).
The following example demonstrates how the transition rules would
work.
Example. Assume Company X, which reports based on a calendar
year information year, maintains Plan A, which has a plan year
beginning on October 1 and ending on September 30 and an October 1
valuation date. The October 1, 2007 valuation results were as
follows: actuarial value of assets of $115 million, market value of
assets of $100 million and current liability of $135 million. In
addition, assume the funding standard account credit balance as of
September 30, 2007, was $20 million and that the employer does not
elect to reduce the October 1, 2008, carryover balance at all.
For the section 4010 report due on April 15, 2009, the proposed
rule prescribes that the 80% Funded Gateway Test is based on the
plan's funding target attainment percentage as of October 1, 2007.
However, because funding target attainment percentage for purposes
of ERISA section 303 applies to plan years beginning after 2007, the
funding target attainment percentage is determined using a surrogate
prescribed in Sec. 4010.4(b)(3) of the proposed rule.
The surrogate funding target attainment percentage is calculated
as follows: First, because the 2007 actuarial value of assets is
more than 10% above the market value of assets, assets are reduced
to $110 million. Next, assets are reduced by the credit balance
resulting in an asset value for the Funding Target Attainment
Percentage of $90 million ($110 million minus $20 million). The
surrogate Funding Target Attainment Percentage is the ratio of $90
million to the plan's current liability using the highest permitted
rate ($135 million). So, the surrogate Funding Target Attainment
Percentage is 67% ($90/$135). Since this is less than 80%, a section
4010 filing is required (unless the aggregate 4010 funding shortfall
is less than $15 million).
(Note that if the employer elects to reduce some, or all, of the
October 1, 2008, carryover balance in accordance with the election
procedures provided in 26 CFR 1.430(f)-1(e) (as proposed), the
discounted value of the waived amount would be subtracted from the
$20 million credit balance before the $20 million credit balance is
subtracted from the $110 million adjusted asset value.)
The surrogate 4010 funding shortfall is determined under Sec.
4010.11(c)(2) and equals the excess, if any, of liability using the
highest permitted rate ($135 million) over assets (after any
adjustments to bring the asset value within 10% of market value).
For this calculation, assets are not reduced by the credit balance.
Therefore, the 4010 funding shortfall is the excess of $135 million
over $110 million, or $25 million.
Compliance With Rulemaking Guidelines
PBGC has determined that this proposed rule is a ``significant
regulatory action'' under Executive Order 12866. The Office of
Management and Budget has therefore reviewed the proposed rule under
Executive Order 12866.
Pursuant to section 1(b)(1) of E.O. 12866 (as amended by Executive
Order 13422), PBGC has determined that regulatory action is required in
this area. Principally, this regulatory action is necessary to
implement the changes made to ERISA section 4010 by PPA 2006. The
proposed rule would provide guidance without which plan sponsors would
have significant difficulty determining whether reporting is required.
Moreover, ERISA section 4010 specifically provides that the actuarial
and financial information to be reported, as well as the deadline for
reporting, are as specified by PBGC in regulations. Finally, the
proposed rule would provide exemptions, waivers, and reporting
simplifications that reduce reporting burden for numerous plan
sponsors.
PBGC certifies under section 605(b) of the Regulatory Flexibility
Act that the amendments in this proposed rule would not have a
significant economic impact on a substantial number of small entities.
This proposed rule would implement statutory changes made by Congress.
It provides guidance on how to determine whether reporting under ERISA
section 4010 is required and what to report. Furthermore, PBGC is
providing an exemption for controlled groups that have total plan
underfunding of $15 million or less. Accordingly, as provided in
section 605 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),
sections 603 and 604 do not apply.
The information requirements relating to reporting under ERISA
section 4010 have been approved by the Office of Management and Budget
under the Paperwork Reduction Act (OMB control number 1212-0049,
expires February 29, 2008).
PBGC is submitting the information requirements relating to these
amendments to the Office of Management and Budget for review and
approval under the Paperwork Reduction Act. (This submission also
includes the information requirements relating to the current
collection of 4010 information.) Copies of PBGC's request may be
obtained free of charge by contacting the Disclosure Division of the
Office of the General Counsel of PBGC,
[[Page 9249]]
1200 K Street, NW., Washington, DC 20005, 202-326-4040.
PBGC expects that once the new rules take effect it will receive
section 4010 filings from about 300 contributing sponsors or controlled
group members annually and that the total annual burden of the
collection of information will be about 2,600 hours and $5,167,500.
(Detailed information on these burden estimates is included in PBGC's
request.)
Comments on the paperwork provisions under this proposed rule
should be mailed to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Attention: Desk Officer for Pension
Benefit Guaranty Corporation, via electronic mail at
OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974. Although comments may
be submitted through April 21, 2008, the Office of Management and
Budget requests that comments be received on or before March 21, 2008
to ensure their consideration. Comments may address (among other
things)--
Whether the proposed collection of information is needed
for the proper performance of PBGC's functions and will have practical
utility;
The accuracy of PBGC's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
Enhancement of the quality, utility, and clarity of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
List of Subjects in 29 CFR Part 4010
Pension insurance, Pensions, Reporting and recordkeeping
requirements.
For the reasons given above, PBGC proposes to amend 29 CFR parts
4010 as follows.
PART 4010--ANNUAL FINANCIAL AND ACTUARIAL REPORTING
1. The authority citation for part 4010 continues to read as
follows:
Authority: 29 U.S.C. 1302(b)(3), 1310.
Sec. 4010.1 [Amended]
2. Section 4010.1 is amended by removing the words ``the PBGC under
section 4010 of ERISA'' and adding in their place the words ``PBGC
under ERISA section 4010''; and by removing the last sentence of the
section (beginning with the words ``This part applies * * *'').
3. In Sec. 4010.2:
a. The words ``of this part'' are removed from the definitions of
``exempt entity,'' ``exempt plan,'' ``filer,'' and ``information
year.''
b. The definition of ``exempt entity'' is amended by removing the
figures ``4010.4(d)'' and adding in their place the figures
``4010.4(c)''.
c. The definition of ``information year'' is amended by removing
the words ``the year'' and adding in their place the words ``the
information year''.
d. The definition of ``fair market value of the plan's assets'' is
revised, and five new definitions are added, to read as follows:
Sec. 4010.2 Definitions.
* * * * *
4010 funding shortfall means, with respect to a plan for a plan
year, the 4010 funding shortfall as determined under Sec. 4010.11(c).
At-risk status means, with respect to a plan for a plan year, at-
risk status as defined in ERISA section 303(i)(4).
* * * * *
Fair market value of the plan's assets means the fair market value
of the plan's assets determined without regard to any contributions
receivable (i.e., contributions made after the date as of which the
fair market value of the plan's assets is determined are not included).
* * * * *
Funding target means, with respect to a plan for a plan year, the
funding target as provided under ERISA section 303(d)(1) determined as
of the valuation date for the plan year.
Funding target attainment percentage means, with respect to a plan
for a plan year, the funding target attainment percentage as determined
under Sec. 4010.4(b) for the plan year.
* * * * *
Valuation date means, with respect to a plan for a plan year, the
valuation date as determined under ERISA section 303(g)(2).
Sec. 4010.3 [Amended]
4. In Sec. 4010.3, paragraph (a) is amended by revising the
paragraph heading to read ``General.''; by removing the words ``exempt
plans) and except'' and adding in their place the words ``exempt
plans), and except'' (with a comma after the closing parenthesis); by
removing the words ``waivers have been granted under Sec. 4010.11''
and adding in their place the words ``one or more waivers under Sec.
4010.11 apply''; by removing the words ``plans maintained by members of
a controlled group'' and adding in their place the words ``plans
maintained by members of the controlled group''; by removing the words
``the PBGC'' (where they appear twice in the paragraph) and adding in
their place each time the word ``PBGC''; and by removing the words
``the PBGC's'' and adding in their place the word ``PBGC's''.
5. In Sec. 4010.4:
a. Paragraph (a) introductory text is amended by removing the words
``paragraph (d)'' and adding in their place the words ``paragraph
(c)''.
b. Paragraph (a)(1) is amended by removing the words ``The
aggregate unfunded vested benefits of all plans'' and adding in their
place the words ``For any plan''; by removing the words ``any exempt
plans'' and adding in their place the words ``an exempt plan''; and by
removing the words ``group exceed $50 million (disregarding those plans
with no unfunded vested benefits)'' and adding in their place the words
``group, the funding target attainment percentage for the plan year
ending within the information year is less than 80 percent''.
c. Paragraph (a)(2) is amended by removing the words ``a controlled
group'' and adding in their place the words ``the controlled group'';
and by removing the words ``section 302(f)(1)(A) and (B) of ERISA or
section 412(n)(1)(A) and (B) of the Code'' and adding in their place
the words ``ERISA section 303(k) or Code section 430(k)''.
d. Paragraph (a)(3) is amended by removing the words ``a controlled
group'' and adding in their place the words ``the controlled group'';
by removing the words ``section 303 of ERISA or section 412(d) of the
Code'' and adding in their place the words ``ERISA section 302(c) or
Code section 412(c)''; and by removing the words ``(determined in
according with paragraph (c) of this section)''.
e. Paragraph (c) is removed.
f. Paragraph (d) is redesignated as paragraph (c).
g. Paragraph (b) is revised, and new paragraphs (d), (e), and (f)
are added, to read as follows:
Sec. 4010.4 Filers.
* * * * *
(b) Funding target attainment percentage--(1) General. Except as
provided in paragraph (b)(3) of this section, the funding target
attainment percentage for a plan for a plan year equals the funding
target attainment percentage as provided under ERISA section 303(d)(2)
determined as of the valuation date for the plan year.
[[Page 9250]]
(2) Prefunding balance and funding standard carryover balance
elections. For purposes of determining the funding target attainment
percentage for a plan for a plan year, prefunding balances and funding
standard carryover balances must reflect any elections (or deemed
elections) under ERISA section 303(f) or Code section 430(f) for the
plan year, regardless of when the elections (or deemed elections) are
made.
(3) Transition rule for plan years beginning before 2008. For plan
years beginning before 2008, the funding target attainment percentage
for a plan for a plan year equals the funding target attainment
percentage as determined under 26 CFR 1.436-1(j)(2)(iii), except--
(i) Current liability is determined using the highest rate of
interest allowable under Code section 412(l)(7) (as in effect for plan
years beginning before 2008) for that plan year, regardless of whether
that rate was actually used to determine current liability for the plan
year; and
(ii) The value of net plan assets is determined without regard to
the second sentence of 26 CFR 1.436-1(j)(2)(iii)(B)(2) (i.e., for this
purpose, there is no special rule that provides that assets are not
reduced by the credit balance if the value of plan assets is greater
than or equal to 90 percent of the plan's current liability).
* * * * *
(d) Transition rule; failure to make required contribution; minimum
funding waiver. For plan years beginning before 2008, the reference in
paragraph (a)(2) of this section to ``ERISA section 303(k) or Code
section 430(k)'' is replaced by a reference to ``ERISA section
302(f)(1)(A) and (B) or Code section 412(n)(1)(A) and (B)'', and the
reference in paragraph (a)(3) of this section to ``ERISA section 302(c)
or Code section 412(c)'' is replaced by a reference to ``ERISA section
303 or Code section 412(d)'' as those provisions are in effect for plan
years beginning before 2008.
(e) Minimum funding waiver--(1) General. For purposes of Sec.
4010.4(a)(3), a portion of the minimum funding waiver for a plan is
considered outstanding unless prior to the plan year ending within the
information year the statutory amortization period has ended or, as of
the valuation date for the plan year ending within the information
year, the amortization bases are deemed to be reduced to zero pursuant
to ERISA section 303(e)(5) and Code section 430(e)(5). However, the
statutory amortization period will not be deemed to have ended merely
because the funding waivers granted with respect to plan years
beginning before 2008 are not carried over as a separate amortization
base for the post-2007 plan years.
(2) Example. Company A sponsors Plan X, which received a minimum
funding waiver of $700,000 for the plan year ending December 31, 2004,
and another waiver of $500,000 for the plan year ending December 31,
2008. Assume that the amortization bases of the waivers are not reduced
to zero pursuant to ERISA section 303(e)(5) and Code section 430(e)(5),
and the waivers are therefore outstanding for the full five-year
statutory amortization period. Also, assume Company A has a calendar
information year. For the 2009 information year, Company A must report
under ERISA section 4010. However, for the 2010 information year,
Company A, assuming no other obligation to report under ERISA section
4010, is not required to report.
(f) Certain plans to which special funding rules apply. Except as
described in Sec. 4010.8(a)(9)(xiii), the provisions of sections 104,
105, 106, and 402 (as amended by U.S. Troop Readiness, Veterans' Care,
Katrina Recovery, and Iraq Accountability Appropriations Act, 2007,
Pub. L. 110-28) of PPA 2006 are disregarded for purposes of this part.
6. In Sec. 4010.5:
a. Paragraph (c)(1) is amended by adding to the end of the
paragraph the words ``(If any two members of the controlled group
report financial information on the basis of different fiscal years,
the determination of whether an entity is an exempt entity is based on
a calendar year information year for purposes of this paragraph (c)(1)
and Sec. 4010.4(c).)''.
b. Paragraph (c)(2) is revised and new paragraph (d) is added to
read as follows:
Sec. 4010.5 Information year.
* * * * *
(c) Controlled group members with different fiscal years.
* * * * *
(2) Examples. (i) Companies A and B are the only members of the
same controlled group, and both are contributing sponsors to nonexempt
plans. Company A has a July 1 fiscal year, and Company B has an October
1 fiscal year. The information year is the calendar year. Company A's
financial information with respect to its fiscal year ending June 30,
2009, and Company B's financial information with respect to its fiscal
year ending September 30, 2009, must be submitted to PBGC following the
end of the 2009 calendar year information year.
(ii) The facts are the same as in example (i) except that Company B
is not a contributing sponsor of a plan and would be an exempt entity
using the calendar year as the information year. Because Company B is
an exempt entity based on a calendar information year, it is excluded
when determining the information year. Thus, the information year is
the July 1 fiscal year. Note that Company B is an exempt entity even if
it would not be exempt based on the July 1 information year.
(iii) The facts are the same as in example (i) except that Company
B would not be an exempt entity using the calendar year information
year but would be exempt based on an information year that is the July
1 fiscal year. Since Company B is not exempt based on a calendar year
information year, it may not be excluded when determining the
information year. Therefore, the information year is the calendar year
and Company B is not an exempt entity.
(d) Special rules for certain plan years. If a plan maintained by
the members of the contributing sponsor's controlled group has two plan
years that end in the information year or has no plan year that ends in
the information year, the last plan year ending on or immediately
before the end of the information year is deemed to be the plan year
ending within the information year.
Sec. 4010.6 [Amended]
7. In Sec. 4010.6:
a. Paragraphs (a)(1) and (a)(2) are amended by removing the words
``the PBGC's website'' (which appear once in each paragraph) and adding
in their place the words ``PBGC's Web site''.
b. Paragraphs (b) and (c) are amended by removing the words ``the
PBGC'' (which appear once in each paragraph) and adding in their place
the word ``PBGC''.
8. In Sec. 4010.7:
a. Paragraphs (a) introductory text and (b) introductory text are
amended by removing the words ``the PBGC's website'' (which appear once
in each paragraph) and adding in their place the words ``PBGC's Web
site''.
b. Paragraph (b)(2) is amended by removing the words ``maintaining
the plan'' and adding in their place the words ``maintaining the plan
(if applicable)''; and by removing the words ``paragraph (b)(1)'' and
adding in their place the words ``paragraph (b)(1) of this section''.
c. New paragraph (c) is added to read as follows:
Sec. 4010.7 Identifying information.
* * * * *
(c) Multiple employer plans. A filer that is a contributing sponsor
of a
[[Page 9251]]
multiple employer plan need not provide identifying information for
another contributing sponsor of the multiple employer plan if that
other contributing sponsor is not a member of the filer's controlled
group, and need not provide identifying information for another plan if
neither the filer nor any member of the filer's controlled group is a
contributing sponsor of that other plan.
9. In Sec. 4010.8:
a. Introductory text is added to the section.
b. Paragraph (a) introductory text is amended by removing the words
``For each plan'' and adding in their place the words ``Except as
provided elsewhere in this part, for each plan''; by removing the words
``the PBGC's website'' and adding in their place the words ``PBGC's Web
site''; and by removing the words ``actuarial information'' and adding
in their place the words ``actuarial information (except as specified
below, determined as of the end of the plan year ending within the
filer's information year)''.
c. Paragraph (a)(3) is amended by removing the words ``value of the
plan's benefit liabilities'' and adding in their place the words
``amount of benefit liabilities under the plan''; by removing the words
``setting forth separately the value'' and adding in their place the
words ``setting forth separately the amount''; and by removing the
words ``participants, determined (in accordance with paragraph (d) of
this section) at the end of the plan year ending within the filer's
information year'' and adding in their place the words ``participants
(for this purpose, the amount of benefit liabilities equals the value
of benefit liabilities determined in accordance with paragraph (d) of
this section)''.
d. Paragraph (a)(4) is amended by removing the words ``for interest
(i.e., the specific interest rate(s), such as 5%), mortality,
retirement age, and loading for administrative expenses, as''; and by
removing the word ``and'' after the semi-colon at the end of the
paragraph.
e. Paragraphs (a)(5) and (a)(6) are redesignated as paragraphs
(a)(9) and (a)(10) respectively.
f. The introductory text of redesignated paragraph (a)(9) is
amended by removing the word ``information'' and adding in its place
the words ``information for that plan year''.
g. Paragraph (v) of redesignated paragraph (a)(9) is redesignated
as paragraph (xii) of redesignated paragraph (a)(9).
h. Redesignated paragraph (a)(9)(xii) is amended by removing the
words ``retirement factors'' and adding in their place the words
``retirement factors; in the case of a plan that provides lump sums,
other than de minimis lump sums, the summary must include information
on how annuity benefits are converted to lump sum amounts (for example,
whether early retirement subsidies are reflected)''.
i. Paragraph (b) introductory text is amended by removing the
figures ``(a)(5)'' and adding in their place the figures ``(a)(9)''.
j. Paragraphs (b)(1) and (b)(2) are amended by removing the words
``the PBGC'' (which appear once in each paragraph) and adding in their
place the word ``PBGC''.
k. Paragraph (b)(2) is further amended by removing the figures
``(a)(6)'' and adding in their place the figures ``(a)(10)''.
l. Paragraphs (c)(1) and (c)(2) are redesignated as paragraphs
(c)(2) and (c)(3) respectively.
m. Redesignated paragraph (c)(2) is amended by removing the words
``Has received'' and adding in their place the words ``The plan has
received''; and by removing the words ``section 302 of ERISA or section
412 of the Code'' and adding in their pace the words ``ERISA sections
302 and 303 and Code sections 412 and 430''.
n. Redesignated paragraph (c)(3) is amended by removing the words
``Has no'' and adding in their place the words ``The plan has no''; and
by removing the words ``Sec. 4010.4(e) of this part'' and adding in
their place the figures ``Sec. 4010.4(a)(3)''.
o. Paragraph (d)(3) is amended by removing the words ``section
302(d) of ERISA or section 412(l) of the Code'' and adding in their
place the words ``section 303 of ERISA (without regard to the at-risk
assumption of section 303(i) of ERISA)''.
p. Paragraphs (i), (ii), (iii), (iv), (vi), (vii), and (viii) of
redesignated paragraph (a)(9), paragraph (c) introductory text, and
paragraph (d)(2) are revised, and a new introductory note before
paragraph (a), new paragraphs (5), (6), (7), and (8) of paragraph (a),
new paragraphs (v), (ix), (x), (xi), (xiii), and (xiv) of redesignated
paragraph (a)(9), new paragraph (c)(1), and new paragraphs (e), (f),
and (g) are added, to read as follows:
Sec. 4010.8 Plan actuarial information.
The requirements described in paragraphs (a) and (b) of Sec.
4010.8 prior to their amendment to comply with the changes made to
ERISA section 4010 by the Pension Protection Act of 2006 (rather than
those described in paragraphs (a) and (b) of this section) are
applicable to plan years beginning before 2008.
(a) Required information. * * *
* * * * *
(5) The funding target (as of the valuation date) for the plan year
ending within the information year determined in accordance with ERISA
section 303(i) as if the plan has been in at-risk status for a
consecutive period of at least 5 plan years;
(6) The funding target attainment percentage (as of the valuation
date) for the plan year ending within the information year;
(7) The adjusted funding target attainment percentage as defined in
ERISA section 206(g)(9)(B);
(8) Whether the plan, at any time during the plan year, was subject
to any of the limitations described in ERISA section 206(g) and, if so,
which limitations applied, when such limitations applied, and when (if
applicable) they were lifted;
(9) * * *
(i) The funding target calculated pursuant to ERISA section 303
without regard to subsection 303(i)(1), setting forth separately the
value of the liabilities attributable to retirees and beneficiaries
receiving payment, terminated vested participants, and active
participants (showing vested and nonvested benefits separately);
(ii) A summary of the actuarial assumptions and methods used for
purposes of ERISA section 303 and any change in those assumptions and
methods since the previous valuation and justifications for any change;
in the case of a plan that provides lump sums, other than de minimis
lump sums, the summary must include the assumptions on which
participants are assumed to elect a lump sum and how lump sums are
valued;
(iii) The effective interest rate (as defined in ERISA section
303(h)(2)(A));
(iv) The target normal cost calculated pursuant to ERISA section
303 without regard to subsection 303(i)(2);
(v) For the plan year and the four preceding plan years, a
statement as to whether the plan was in at-risk status for that plan
year;
(vi) In the case of a plan that is in at-risk status, the target
normal cost calculated pursuant to ERISA section 303 as if the plan has
been in at-risk status for 5 consecutive years;
(vii) The value of the plan's assets (reflecting any averaging
method) as of the valuation date and the fair market value of the
plan's assets as of the valuation date;
(viii) The funding standard carryover balance and the prefunding
balance
[[Page 9252]]
(maintained pursuant to ERISA section 303(f)(1)) as of the beginning of
the plan year and a summary of any changes in such balances in the past
year (e.g., amounts used to offset minimum funding requirement, amounts
reduced in accordance with any elections under ERISA section 303(f)(5)
or Code section 430(f)(5), interest credited to such balances, and
excess contributions used to increase such balances);
(ix) A list of amortization bases (shortfall and waiver) under
ERISA section 303, including the year the base was established, the
original amount, the installment amount, and the remaining balance at
the beginning of the plan year;
(x) An age/service scatter for active participants including
average compensation information for pay-related plans and average
account balance information for hybrid plans presented in a format
similar to that described in the instructions to the Form 5500 schedule
for single-employer defined benefit plan actuarial information;
(xi) Expected disbursements (benefit payments and expenses) during
the plan year;
* * * * *
(xiii) Details of any special funding rules that apply to the
determination of the plan's minimum required contribution (e.g.,
special amortization schedules or interest rate assumptions applicable
to certain plans of commercial airlines, or provisions for certain
plans of rural cooperatives, defense contractors, or employers with
PBGC settlement agreements); and
(xiv) Any other similar information as specified in instructions on
PBGC's Web site; and
* * * * *
(c) Exempt plan. The actuarial information specified in this
section is not required with respect to a plan if--
(1) The plan--
(i) Has fewer than 500 participants as of the end of the plan year
ending within the information year and has a 4010 funding shortfall for
the plan year ending within the information year that is not in excess
of $15 million, or
(ii) Has benefit liabilities as of the end of the plan year ending
within the filers' information year (determined in accordance with
paragraph (d) of this section) equal to or less than the fair market
value of the plan's assets;
* * * * *
(d) Value of benefit liabilities. * * *
* * * * *
(2) Actuarial assumptions and methods. The value of benefit
liabilities shall be determined using the assumptions and methods
prescribed in Sec. Sec. 4044.51 through 4044.57 of this chapter. In
addition to the assumptions described in Sec. Sec. 4044.51 through
4044.57, the following rules apply:
(i) Assumptions not included in Sec. Sec. 4044.51 through 4044.57.
A filer may choose whether to include assumptions for pre-retirement
decrements other than mortality (such as turnover or disability
assumptions), provided that if such pre-retirement decrements are used,
the assumptions used are the same as those used to determine the
minimum required contribution under ERISA section 303 for the plan year
ending within the filer's information year. Any other assumptions used
to determine the minimum required contribution that are not overridden
by Sec. Sec. 4044.51 through 4044.57 (assumed marital status, cost-of-
living increase, if applicable, etc.) must be used when determining
benefit liabilities.
(ii) Benefits to be valued. The value of benefit liabilities
includes liabilities for all benefits accrued under the plan (including
benefits that are not protected from the anti-cutback provisions of
Code section 411(d)(6)) as of the end of the plan year ending within
the filer's information year.
(iii) Future service. Future service expected to be accrued by an
active participant in an ongoing plan during future employment (based
on the assumptions used to determine the value of benefit liabilities)
must be reflected when determining the earliest retirement age at
valuation (ERA) and unreduced retirement age (URA) used to determine
expected retirement age (XRA). (For this purpose, ERA, URA, and XRA
have the meaning as provided in Sec. 4044.2.) Such expected future
service in an ongoing plan (at decrement) is also included in
determining an active participant's entitlement to early retirement
subsidies and supplements at XRA. (See the examples in paragraph (e) of
this section.)
* * * * *
(e) Examples. The following examples demonstrate how expected
retirement age (XRA) is determined and applied for purposes of
determining benefit liabilities under paragraph (d) of this section:
(1) Example 1--(i) Facts. Plan X has a normal retirement age of 65,
but allows benefits to commence as early as age 55 for participants who
complete at least 10 years service before termination. Early retirement
benefits are reduced (from age 65) for participants with fewer than 25
years of service. Employee A is an active participant who is age 40 and
has completed 5 years of service. Assume the ``medium'' XRA look-up
table applies and that for purposes of Sec. 4010.8(d), the filer has
decided not to take pre-retirement decrements other than mortality into
account as permitted under Sec. 4010.8(d)(2)(i).
(ii) Determination of XRA. If A continues working, the earliest age
A could start receiving benefits is age 55. Therefore, A's ERA is 55.
Because the earliest that A can receive an unreduced benefits is when A
completes 25 years of service (at age 60), A's URA is age 60. Under the
medium XRA look-up table, A's XRA is 58.
(iii) Determination of benefit liabilities. The benefit liability
is the present value of A's benefit accrued as of the measurement date
assuming A retires at age 58 and elects to have payments commence
immediately. Since A will not be eligible to receive unreduced benefits
at that time, the accrued benefit is reduced in accordance with the
plan's early retirement reduction provisions, including any subsidies
to which A would be entitled under the assumption that A works until
age 58.
(2) Example 2. Employee B is also an active participant in plan X
and is age 40 with 15 years of service. B will complete 25 years of
service at age 50. However, because the plan does not allow for benefit
commencement before age 55, B's ERA, URA and thus, XRA are all age 55.
(Note: the XRA tables in Appendix D to part 4044 do not show URA's
below age 60, but links to extended tables can be found on the PBGC's
Web site at the bottom of http://www.pbgc.gov/practitioners/law-regulations-informal-guidance/content/page14763.html.
) The benefit
liability is the present value of B's benefit accrued as of the
measurement date assuming B retires at age 55 and elects to commence
benefits immediately. Since B will be eligible to receive an unreduced
benefit at that time, the full unreduced benefit amount is valued.
(3) Example 3--(i) Facts. Assume the same facts as in Example 1,
except that for purposes of Sec. 4010.8(d), the filer has decided to
take pre-retirement decrements other than mortality into account as
permitted under Sec. 4010.8(d)(2)(i). For the sake of simplicity,
assume the only pre-retirement decrement other than mortality is
turnover. The plan's turnover rates go from age 21 to age 54, and the
retirement rates go from age 55 to age 65.
(ii) Determination of XRA. If A terminates employment at or before
age 45, A will not be eligible to receive
[[Page 9253]]
benefits until age 65. Therefore, the portion of Employee A that is
assumed to terminate before age 45 has an ERA, URA, and XRA of 65. The
portion of A that remains in service to age 45, after the application
of the applicable turnover decrements, and then terminates at or after
age 45, but before age 55, will be entitled to receive a reduced
benefit as early as 55. Therefore, the portion of A that is assumed to
terminate during this period has an ERA of 55, a URA of 65 and an XRA
of 60. Since the turnover rates stop at age 55, the portion of A that
remains in service to age 55 is assumed to remain in service until the
XRA for that portion of A. For that portion of A, the ERA is 55, the
URA is 60 and the XRA is 58. Note that for purposes of Sec. 4010.8(d),
the plan's assumed retirement rates are replaced by the XRAs.
(iii) Determination of benefit liabilities. The benefit liability
for A is the sum of the present value of A's full accrued benefit at
age 65 for the portion of A that terminates between age 40 and age 45,
the present value of A's accrued benefit reduced for commencement at
age 60 for the portion of A that terminates between age 45 and age 54,
and the present value of A's accrued benefit reduced for commencement
at age 58 for the portion of A that remains employed until age 55.
(4) Example 4. Assume the same facts as in Example 3, except that
Employee B, the sole active participant, is age 40 with 15 years of
service. The portion of B that is assumed to terminate before age 50
would be entitled to receive a reduced benefit as early as age 55 or an
unreduced benefit at age 65. That portion of B has an ERA of 55, a URA
of 65, and an XRA of 60. The benefit liability for that portion of B is
the present value of B's benefit accrued as of the measurement date
assuming B commences a reduced benefit at age 60. The portion of B that
survives to age 50 would be entitled to receive an unreduced benefit as
early as age 55. That portion of B has an ERA, URA and XRA of 55. The
benefit liability for this portion of B is the present value of B's
benefit accrued as of the measurement date assuming B retires and
commences unreduced payments at age 55.
(f) Multiple employer plans. If, with respect to a multiple
employer plan, the actuarial information required under this section
4010 for the plan year ending within the filer's information year has
been filed under part 4010 by another filer, the filer may include this
actuarial information by reference. The filer must include a comment in
the submission reporting the name, EIN and plan number of the multiple
employer plan and the name of the other filer that submitted this
information. The filer is not relieved of responsibility for the filing
of the actuarial information. If the information filed by the other
filer is incomplete or erroneous, PBGC may assess a filing penalty
against the filer.
(g) Previous filing for plan year. If the actuarial information for
the plan year as required under this Sec. 4010.8 has been submitted by
the filer in a previous 4010 submission, the filing may include that
actuarial information by reference to the previous submission.
10. In Sec. 4010.9:
a. Paragraph (a) is amended by removing the words ``the PBGC's''
and adding in their place the word ``PBGC's''.
b. Paragraph (d) is amended by removing the words ``the PBGC''
where they appear three times and adding in their place each time the
word ``PBGC''.
c. New paragraph (f) is added at the end of the section to read as
follows:
Sec. 4010.9 Financial information.
* * * * *
(f) Multiple employer plans. A filer that is a contributing sponsor
of a multiple employer plan need not provide financial information for
another contributing sponsor of the multiple employer plan if that
other contributing sponsor is not a member of the filer's controlled
group.
11. Section 4010.10 is amended by removing the words ``the PBGC''
where they appear once in the section heading, once in paragraph (a),
once in paragraph (b), twice in paragraph (c), twice in paragraph (d),
and once in paragraph (e), and adding in their place each time the word
``PBGC''.
12. In Sec. 4010.11:
a. The existing text of the section is redesignated as paragraph
(b).
b. Redesignated paragraph (b) is amended by adding the paragraph
heading ``Other waiver authority.''; by removing the words ``the PBGC''
where they appear three times and adding in their place each time the
word ``PBGC''; by removing the word ``must'' where it appears twice and
adding in its place each time the word ``should''; and by removing the
words ``of this part'' where they appear twice.
c. The section heading is revised, and new paragraphs (a), (c),
(d), and (e) are added, to read as follows:
Sec. 4010.11 Waivers, extensions, and exclusions.
(a) Aggregate underfunding not in excess of $15 million. Unless
reporting is required by Sec. 4010.4(a)(2) or (a)(3), reporting is
waived for an information year if, for the plan years ending within the
information year, the aggregate 4010 funding shortfall for all plans
(including any exempt plans) maintained by the members of the
contributing sponsor's controlled group (disregarding those plans with
no 4010 funding shortfall) does not exceed $15 million.
* * * * *
(c) 4010 funding shortfall for waivers and exemptions--(1) General.
Except as provided in paragraph (c)(2) of this section, a plan's 4010
funding shortfall for a plan year equals the funding shortfall as
provided under ERISA section 303(c)(4) determined as of the valuation
date for the plan year, except that the value of plan assets is
determined without regard to the reduction under ERISA section
303(f)(4)(b).
(2) Transition rule for plan years beginning before 2008. For plan
years beginning before 2008, a plan's 4010 funding shortfall for a plan
year equals the excess, if any, of the plan's current liability over
the value of plan assets. For this purpose, both current liability and
plan assets are determined in the manner provided in Sec.
4010.4(b)(3), except that assets are not reduced by the credit balance
in the funding standard account.
(3) Multiple employer plans. For purpose of Sec. 4010.8(c) and
paragraph (a) of this section, the entire 4010 funding shortfall of any
multiple employer plan for which the filer or any member of the filers
controlled group is a contributing sponsor is included.
(d) Reduced reporting for multiple employer plans--(1) In general.
Reporting is waived for a contributing sponsor of a multiple employer
plan if neither the contributing sponsor nor any member of the
contributing sponsor's controlled group is a contributing sponsor of
any other plan, provided at least one contributing sponsor (or the plan
administrator on behalf of a contributing sponsor) provides a timely
filing under this part 4010 containing the following information:
(i) Identifying information for each contributing sponsor of the
multiple employer plan (as required under Sec. 4010.7) determined as
of the plan year ending within the contributing sponsor's information
year;
(ii) Actuarial information for the multiple employer plan (as
required under Sec. 4010.8) for the plan year ending within the
contributing sponsor's information year; and
(iii) Financial information as required Sec. 4010.9 (or such
reduced information as PBGC may provide on its Web site) for every
contributing sponsor of the
[[Page 9254]]
multiple employer plan who, for a salary related plan formula, is one
of the ten largest contributing sponsors based on required
contributions for the plan year ending within the contributing
sponsor's information year, or, for an hourly plan formula, is one of
the ten largest contributing sponsors based on number of participants
for the plan year ending within the contributing sponsor's information
years (using the census data as determined under Sec. 4010.8(d)(1)).
(2) Information year. For purposes of this paragraph (d) (including
determining when a filing is due), if any two contributing sponsors
report financial information on the basis of different fiscal years,
the information year shall be the calendar year.
(e) Terminated plans. A plan may be excluded for purposes of
Sec. Sec. 4010.4(a)(1) and (3), 4010.8, and 4010.11(a) and (d), if, on
or before the last day of the information year, all of the assets
(excluding excess assets) have been distributed pursuant to a standard
termination under Subpart B of part 4041 of this chapter.
Sec. 4010.12 [Amended]
13. Section 4010.12 is amended by removing the words ``section
4010(c) of ERISA'' and adding in their place the words ``ERISA section
4010(c)''; and by removing the words ``the PBGC'' and adding in their
place the word ``PBGC''.
Sec. 4010.13 [Amended]
14. Section 4010.13 is amended by removing the words ``section 4071
of ERISA'' and adding in their place the words ``ERISA section 4071'';
and by removing the words ``the PBGC'' where they appear twice and
adding in their place each time the word ``PBGC''.
Issued in Washington, DC, this 14th day of February, 2008.
Charles E.F. Millard,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. E8-3124 Filed 2-19-08; 8:45 am]
BILLING CODE 7709-01-P