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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 proposed amendments to rules governing annual financial and actuarial information reporting to implement provisions of the Pension Protection Act of 2006 (PPA; P.L. 109-280). The PPA changed the standards for reporting for underfunded controlled groups under ERISA §4010 (Authority to Require Certain Information). In addition to implementing the PPA changes, the PBGC proposes waiving reporting in certain cases for controlled groups with aggregate plan underfunding of $15 million or less, modifying the standards for determining which plans are exempted from the actuarial information requirements, and revising the actuarial information requirements to conform with other PPA changes. The proposed rules also clarify the use of the term “information year,” as well as provide reporting relief for certain multiple employer plans.
In order to give the PBGC an opportunity to anticipate and minimize potential liabilities that may arise from the termination of significantly underfunded plans, ERISA §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 Title 5 of the United States Code and may not be made public, except as may be relevant to any administrative or judicial action or proceeding.
Section 505 of PPA amended ERISA §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. ERISA §4010 (b) (1), as amended, will require 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. Conforming changes will also be made to the other two funding triggers found in paragraphs (b)(2) and (b)(3) of ERISA §4010 .
The PBGC finds no indication that the PPA alters the use of the concept of “information year” that has been integral to the process of reporting under ERISA §4010 since 1995. Therefore, under the proposed regulations, reporting will continue to be based on the concept of “information year.” In addition, reporting 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 rules make provision for reporting in unusual circumstances, 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 rules, 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 rules 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.
ERISA §4010 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. Generally, ERISA §303(g) (2) provides that the valuation date of a plan for any plan year is the first day of the plan year (a different rule applies to small plans). This creates an ambiguity with regard to the date as of which the funding target attainment percentage is to be calculated for purposes of ERISA §4010 (b)(1). The proposed regulations 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.
In addition, the 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). The waiver, however, would not apply if reporting is required for any reason other than having a funding target attainment percentage below 80 percent.
Currently, reporting actuarial information is not required for plans with fewer than 500 participants. The PBGC has discovered that some of these plans are significantly underfunded. Therefore, the PBGC is proposing that the exemption from reporting actuarial information be modified. Under the proposed rules, actuarial information would not be required if (1) the plan has fewer than 500 participants, and (2) the plan’s ERISA §4010 funding shortfall does not exceed $15 million.
The PBGC has also proposed reduced reporting under ERISA §4010 for contributing sponsors of 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.
Section 505(e) of the PPA provides that the amendments made by section 505 apply with respect to “years beginning after 2007.” The PBGC notes that this applicability provision of the PPA uses the term “year” rather than “plan year,” although the term “plan year” appears in other applicability provisions in the PPA. The PBGC interprets this section of the 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 the PBGC to obtain a reporting extension. However, the changes made to paragraphs (a) and (b) of ERISA Reg. §4010.8 (Plan actuarial information) would be effective only for plan years beginning after December 31, 2007.
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