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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The PBGC has issued a Technical Update, providing guidance on the applicability of changes made by the Pension Protection Act of 2006 (PPA; P.L. 109-280) as they relate to PBGC’s reportable events regulations under ERISA §4043 . In general, the Technical Update provides that for purposes of the reportable events regulation, a plan’s unfunded vested benefits (UVBs) and the value of its assets and vested benefits are determined for a plan year beginning in 2009 in the same manner as for premiums for the preceding plan year. It also provides options for applying the “Form 1 extension” for plan years beginning in 2009.
Reportable events
ERISA §4043(a) and the regulations require plan administrators and contributing sponsors to notify the PBGC within 30 days after they know or have reason to know that a reportable event has occurred. The regulations provide certain waivers based on the level of UVBs or vested benefits amounts, calculated as of the testing date (generally the last day of the plan year preceding the event year) using the variable-rate premium (VRP) interest rate for the event year. The regulations also provide for a Form 1 extension of some reporting due dates if funding-based waiver criteria are met for the plan year preceding the event year. Certain non-public companies are required to notify the PBGC at least 30 days before the effective date of certain reportable events. Generally, a company is subject to advance reporting if a “threshold test” is met: (1) in the aggregate, the UVBs of plans maintained by the controlled group exceed $50 million (disregarding plans with no UVBs) and (2) the aggregate funded vested benefit percentage (the ratio of assets to vested benefits) for those plans that are underfunded is less than 90%. UVBs and vested benefits are calculated as of the testing date (generally the last day of the plan year preceding the event year) using the VRP interest rate for the event year.
The PPA modified the way the VRP is determined. The modifications, which apply to plan years beginning after 2007, affect the valuation of vested benefits and assets and the determination of UVBs. In March 2008, the PBGC issued final regulations implementing the PPA changes. Under the regulations, the VRP is determined as of the “UVB valuation date” -the funding valuation date for the premium payment year. For plan years after 2007, therefore, the testing date under the reportable events regulation no longer corresponds to the VRP determination date under the premium regulations. Pending amendment of the reportable events regulations, the PBGC issued Technical Update 07-2 to provide temporary guidance about how to apply the advance reporting threshold test and the funding-based waivers under the reportable events regulation. Technical Update 07-2 provides that, for purposes of the reportable events regulation, a plan’s UVBs and vested benefits amounts (for event years beginning in 2008) are determined as of the testing date using the rules for determining the VRP under the law in effect prior to the enactment of the PPA. The testing date for a plan year beginning in 2008 would typically fall in a plan year (the prior plan year) to which the PPA premium rules did not apply. For plan years beginning after 2008, however, the prior plan year will always be one to which the PPA premium rules apply.
Guidance for 2009
Under the new Technical Update, the value of assets and vested benefits and the amount of UVBs as of the testing date for an event year beginning in 2009 are generally to be determined in the same manner as for premiums for the plan year preceding the event year under the premium regulations as amended in 2008. In applying the “Form 1 extension” for an event year beginning in 2009, the value of assets and vested benefits and the amount of UVBs for 2008 may be determined either under the rules in Technical Update 07-2 or under the premium rules applicable to 2008 under the PPA and the PBGC’s premium regulations as amended in 2008.
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