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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 Pension Benefit Guaranty Corporation (PBGC) has issued proposed regulations that would conform its reportable events and other notice rules to statutory and regulatory changes resulting from the Pension Protection Act (PPA; P.L. 109-280).
The proposed regulations would amend the PBGC's reportable events regulations under ERISA §4043 to make the advance reporting threshold test consistent with the PPA funding rules and the PBGC's variable-rate premium rules. In addition, the proposed regulations would eliminate most automatic waivers and filing extensions; create two new reportable events based on provisions in the PPA dealing with funding-based benefit limits and with asset transfers to retiree health benefits accounts; reduce reporting of active participant reductions; clarify the provisions dealing with missed contributions and inability to pay benefits when due; clarify the benefit liability transfer event; remove from the regulations the lists of information items to be submitted (which are listed in the filing instructions); require filers to use PBGC forms to file reportable events notices; and eliminate the special "partial electronic filing" provision. Six other PBGC regulations would also be amended to revise statutory cross-references and otherwise accommodate the statutory and regulatory changes in the premium rules.
Advance reporting
Under ERISA §4043(a), plan administrators and contributing sponsors must notify the PBGC of certain "reportable events" within 30 days after they occur. ERISA §4043(b) requires advance reporting by a contributing sponsor for certain reportable events if a "threshold test" is met, unless the contributing sponsor or controlled group member to which an event relates is a public company.
According to the PBGC, current rules create an ambiguity with regard to the date as of which the advance reporting threshold test is to be applied. The proposed regulations would resolve this ambiguity by requiring that the advance reporting threshold test be applied as of the valuation date for "the preceding plan year." That is the same date as of which unfunded vested benefits, assets, and vested benefits must be determined for premium purposes for the preceding plan year under the premium rates regulation. Measuring these quantities as of that date for purposes of the advanced reporting threshold test would be less burdensome than requiring that separate computations be made as of the close of that year and would enable a plan to determine before a reportable event occurs (and before an advance report is due) whether it is subject to the advance reporting requirement.
Automatic waivers
The existing reportable events regulation provides that the PBGC may grant waivers and extensions on a case by case basis. Automatic waivers and extensions are provided for most of the reportable events. The PBGC proposes to eliminate most of these automatic waivers and extensions. The complete waivers provided for certain statutory events would be retained.
Active participant reduction
An active participant reduction may occur as the result of a substantial cessation of operations under ERISA §4062(e) or a substantial employer withdrawal under ERISA §4063(a). To avoid duplicative reporting, the PBGC proposes to limit the active participant reduction event by excluding from consideration--in determining whether a reportable active-participant-reduction event has occurred--active participant reductions to the extent that they (1) fall within the provisions of the above ERISA sections and (2) are timely reported to the PBGC. Rules are also proposed to reduce the frequency of such reporting.
Failure to contribute
The PBGC proposes to clarify the language in PBGC Reg. §4043.25, dealing with the reportable event of failure to make required contributions. The proposed revision would make it clear that this reportable event does not apply only to contributions required by statute, it also applies to contributions required as a condition of a funding waiver that do not fall within the statutory provisions on waiver amortization charges.
Inability to pay benefits when due
The PBGC proposes to clarify the language in the provision dealing with automatic waiver of the reporting requirement for inability to pay benefits when due. This provision reflects the PBGC's judgment that it need not require reporting of this event by larger plans that are subject to the "liquidity shortfall" rules imposing more stringent contribution requirements where liquid assets are insufficient to cover anticipated disbursement requirements. Accordingly, the proposed rules would waive reporting unless the plan is a small plan that is exempt from the liquidity shortfall provisions.
Transfer of benefit liabilities
ERISA §4043(c)(12) requires reporting to the PBGC when, in any 12-month period, 3% or more of a plan's benefit liabilities are transferred to a person outside the transferor plan's controlled group or to a plan or plans maintained by a person or persons outside the transferor plan's controlled group. The existing reportable events regulation does not make clear whether the satisfaction of benefit liabilities through the payment of a lump sum or the purchase of an irrevocable commitment to provide an annuity constitutes a transfer of benefit liabilities for purposes of this reporting requirement. The PBGC proposes to provide that such cashouts and annuitizations do not constitute transfers of benefit liabilities that must be reported under the regulation.
AFTAP below 60 percent
The PBGC proposes to create a new reportable event under ERISA §4043(c)(13) that would occur when an enrolled actuary certifies that a plan's adjusted funding target attainment percentage (AFTAP) is less than 60% or when the AFTAP is presumed to be less than 60% under one of the rules in Code Sec. 436(h) and ERISA §206(g)(7). This would be both a post-event notice event and an advance notice event (although the due date for the advance notice would be extended until ten days after the event occurs).
Transfers to retiree health account
Code Sec. 420(f) permits a pension plan to transfer "excess pension assets" to a health benefits account under the plan to fund health benefits for a transfer period of up to 10 years. "Excess pension assets" is the amount by which plan assets exceed 120% of plan liabilities for benefits (including benefits accruing during the year). If the ratio of assets to liabilities falls below 120% at any valuation date during the transfer period, additional contributions must be made to the pension plan, or assets must be transferred back from the health benefits account to the pension plan, to restore the funding ratio to 120%. The PBGC is concerned that large transfers under Code Sec. 420(f), especially if the funded ratio falls below 120% during the transfer period, may indicate a need to terminate the plan. The PBGC therefore proposes to create a new reportable event that would occur if a 420(f) transfer of $10 million or more is made or if, following such a transfer, the funded ratio falls below 120% during the transfer period. This would be a post-event notice event only.
Filing rules
The PBGC issues three reporting forms for use under the reportable events regulation. Form 10 is for post-event reporting under subpart B of the regulation; Form 10-Advance is for advance reporting under subpart C of the regulation; and Form 200 is for reporting under subpart D of the regulation. Under the existing regulation, use of PBGC forms for reporting events under subparts B and C of the regulation is optional. The data items in the forms do not correspond exactly with those in the regulation, and the regulation recognizes that filers that use the forms may report different information from those that do not use the forms. With a view to greater uniformity in the reporting process, the PBGC proposes to make use of prescribed reportable events forms mandatory. The PBGC also proposes to revise the forms and instructions. Consistent with this change, the PBGC proposes to eliminate from the regulation the lists of information items that must be reported, so that the information to be reported would be described in the filing instructions only (rather than in both the filing instructions and the regulation).
The existing regulation contains a "partial electronic filing" provision under which a filing is considered timely made if certain basic information is submitted on time electronically and followed up within one or two business days with the remaining required information. The PBGC believes that the partial electronic filing provision is no longer needed and that it is reasonable to require that all the information required for a filing be submitted on time, either electronically or on paper. Accordingly, the PBGC proposes to eliminate this provision.
Application of proposed rules
The proposed regulations would apply to post-event reports for reportable events occurring on or after the effective date of final regulations and to advance reports due on or after the effective date of the final rules. PBGC Technical Update 09-4 provides interim guidance for 2010 as to compliance with the existing reportable event rules to which the final regulations will not apply. The final regulations will supersede Technical Update 09-4 with respect to reportable events to which the final rules apply.
Comments sought by January 22, 2010
Comment on the proposed regulations should be submitted by January 22, 2010. They may be submitted via the Federal eRulemaking Portal at http://www.regulations.gov; via email to reg.comments@pbgc.gov; via fax to 202-326-4224; or by mail or hand delivery to Legislative and Regulatory Dept., PBGC, 1200 K Street, NW, Washington, DC 20005-4026.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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