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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 guidance in the form of a Technical Update explaining the impact of Pension Protection Act of 2006 (PPA, P.L. 109-280) changes affecting the variable rate premium on reporting and disclosure requirements. The PPA reinstated retroactively to January 2006 the assumptions affecting the variable rate premium interest rate (VRP). The PBGC recently issued guidance revising the 2006 VRP interest rates that were published prior to enactment of the PPA to reinstate the rate calculations that were effective under the Pension Funding Equity Act of 2004 (PFEA, P.L. 108-218) for 2004 and 2005 (see CCH Pension Plan Guide ¶19,981C ). In particular, this guidance explains the impact of the PPA on employer annual reporting for controlled groups, and certain post-event reporting, advance reporting, and Participant Notice requirements.
The PBGC had previously waived annual reporting required under the ERISA §4010 "Gateway Test" for Information Years ending on or after December 31, 2005, and on or before December 30, 2006, if the PFEA Corporate Rate was used for valuing vested benefits for plan years ending on or after December 31, 2005. ERISA §4010 generally requires controlled groups to report to the PBGC if the aggregate unfunded vested benefits in plans maintained by the controlled group exceed $50 million disregarding plans with no unfunded vested benefits (the "4010 Gateway Test"). Vested benefits are calculated on a plan-by-plan basis as of the last day of the plan year that ends within the Information Year, which is usually the calendar year.
The PPA reinstated the prior PFEA Corporate Rate to 4010 Gateway Testing Dates between December 31, 2005 and December 30, 2007. The PBGC will issue at a later time guidance on what interest rate to use for 4010 Gateway Testing Dates between December 31, 2007 and December 30, 2008 (for information years beginning in 2007).
The post-event reporting rules in ERISA §4043(a) and corresponding PBGC regulations (at ¶15,461 and following) 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 (post-event reporting). The PBGC's reportable events regulation contains a variety of reporting waivers that are tied to the VRP status of a plan for the plan year in which the reportable event occurs (the "Event Year"), and a variety of reporting extensions that are tied to the VRP status of a plan for the plan year preceding the Event Year. In addition, post-event reporting for certain small employers that fail to make quarterly contributions was waived by the PBGC in Technical Update 976 (see CCH Pension Plan Guide ¶19,974J). One requirement for the application of that waiver is the determination of whether a variable-rate premium is required for the plan year in which the quarterly contribution is owed or for the prior plan year.
For any reportable event that occurs in a plan year beginning between January 1, 2006, and December 31, 2007, the PFEA Corporate Rate is used to value vested benefits for purposes of determining whether a waiver (other than a waiver pursuant to Technical Update 97-6) of post-event reporting (based on no variable-rate premium) applies.
For determining whether a reporting extension (based on no variable-rate premium) applies, the PFEA Corporate Rate is used to value vested benefits if the plan year preceding the event year begins between January 1, 2006, and December 31, 2007.
For purposes of determining whether a waiver under Technical Update 97-6 applies to a reportable event, the PFEA Corporate Rate is used for determining whether a variable-rate premium is due for plan years to be tested beginning between January 1, 2006, and December 31, 2007.
The PBGC has updated the guidance provided in the instructions to Form 10 (see the note on p. 13 of those instructions under Part IV - Funding Based Waivers and Extensions).
Advance reporting applies to a small group of privately-held controlled groups with significantly underfunded plans under ERISA §4043(b). Generally, a company is subject to advance reporting if: (1) the aggregate unfunded vested benefits of plans maintained by the controlled group exceed $50 million (disregarding plans with no unfunded vested benefits) and (2) the aggregate funded vested benefit percentage for those plans that are underfunded is less than 90%. Vested benefits for both the $50 million and the 90% gateway tests are computed as of the premium snapshot date for the plan year that includes the effective date of the reportable event, using the VRP interest rate for that plan year.
For advance reporting of a reportable event with an effective date in a plan year beginning between January 1, 2006, and December 31, 2007, the PFEA Corporate Rate is used to value vested benefits for purposes of determining whether a company is subject to advance reporting, according to the PPA.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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