The DOL announced the release of a Field Assistance Bulletin (FAB) concerning new disclosure requirements mandated by the PPA.
Washington - The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today released Field Assistance Bulletin (FAB) 2009-01 concerning new disclosure requirements mandated by the Pension Protection Act of 2006 (PPA).
The PPA amended the Employee Retirement Income Security Act of 1974 (ERISA) to require plan administrators of defined benefit pension plans to provide participants and others with information annually about the funding status of their plans. An estimated 1,500 multiemployer plans covering approximately 10 million participants and beneficiaries plus 29,000 single-employer plans covering approximately 33.8 million participants and beneficiaries are subject to the new disclosure requirements. Many of these plans must furnish their first annual funding notice under the new law no later than April 30, 2009.
The FAB addresses a need for interim guidance pending the adoption of regulations or other guidance under section 101(f) of ERISA by announcing a "good faith" enforcement policy. The FAB also includes technical assistance in the form of questions and answers and model annual funding notices.
The FAB provides some background information:
Section 101(f) of the Employee Retirement Income Security Act (ERISA) sets forth requirements applicable to furnishing annual funding notices. Before the Pension Protection Act of 2006 (PPA), section 101(f) applied only to multiemployer defined benefit plans. Section 501(a) of the PPA amended section 101(f) of ERISA, making significant changes to the annual funding notice requirements. These amendments require administrators of all defined benefit plans that are subject to title IV of ERISA, not only multiemployer plans, to provide an annual funding notice to the Pension Benefit Guaranty Corporation (PBGC), to each plan participant and beneficiary, to each labor organization representing such participants or beneficiaries, and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan. An annual funding notice must include, among other things, the plan's funding percentage, a statement of the value of the plan's assets and liabilities and a description of how the plan's assets are invested as of specific dates, and a description of the benefits under the plan that are eligible to be guaranteed by the PBGC.
The PPA amendments to section 101(f) apply to plan years beginning after December 31, 2007, with special rules for disclosing "funding target attainment percentage" or "funded percentage" with respect to any plan year beginning before January 1, 2008. Section 501(c) of the PPA requires the Department to develop a model annual funding notice within one year of the date of enactment of the PPA.
Recently, concerns have been expressed about the imminent compliance date of the new annual funding notice requirements, the absence of regulatory guidance from the Department, and the cost and burdens attendant to annual funding notice compliance efforts prior to the adoption of annual funding notice regulations and the issuance of a model annual funding notice by the Department. In recognition of the foregoing, this memorandum provides guidance to the Employee Benefits Security Administration's national and regional offices concerning good faith compliance with the new annual funding notice requirements.
It provides for good faith compliance and a model annual funding notice for single-employer and multiemployer defined benefit plans. It also contains 17-Q&As:
- When must plans first comply with the new annual funding notice requirements?
- What is the benefit to plan administrators of using the model notices?
- May the plan administrator of a multiemployer plan use the model in the Appendix to 29 C.F.R. 2520.101-4 for purposes of compliance with section 101(f) for plan years beginning on or after January 1, 2008?
- Must a plan administrator furnish an annual funding notice to the Pension Benefit Guaranty Corporation?
- Are all ERISA-covered defined benefit pension plans subject to the new annual funding notice requirement?
- Section 101(f)(2)(B)(i)(I) of ERISA states that an annual funding notice must include, "in the case of a single-employer plan, a statement as to whether the plan's funding target attainment percentage (as defined in section 303(d)(2)) for the plan year to which the notice relates, and for the 2 preceding plan years, is at least 100 percent (and, if not, the actual percentages)[.]" How should plan administrators calculate this percentage for the model?
- Section 101(f)(2)(B)(ii)(I)(bb) of ERISA states that an annual funding notice must include, in the case of a single-employer plan, "the value of the plan's assets and liabilities for the plan year to which the notice relates as of the last day of the plan year to which the notice relates determined using the asset valuation under sub clause (II) of section 4006(a)(3)(E)(iii) and the interest rate under section 4006(a)(3)(E)(iv)[.]" How should plan administrators calculate year-end assets and liabilities for the model?
- Section 101(f)(2)(B)(i)(II) of ERISA states that an annual funding notice must include, "in the case of a multiemployer plan, a statement as to whether the plan's funded percentage (as defined in section 305(i)) for the plan year to which the notice relates, and for the 2 preceding plan years, is at least 100 percent (and, if not, the actual percentages)[.]" How should plan administrators calculate this percentage for the model?
- Section 101(f)(2)(B)(ii)(II) of ERISA, as amended by the Worker, Retiree, and Employer Recovery Act of 2008, Pub. L. No. 110-458, states that an annual funding notice must include, "in the case of a multiemployer plan, a statement, for the plan year to which the notice relates and the preceding 2 plan years, of the value of the plan assets (determined both in the same manner as under section 304 and under the rules of sub clause (I)(bb)) and the value of the plan liabilities (determined in the same manner as under section 304 except that the method specified in section 305(i)(8) shall be used)[.]" How should plan administrators calculate these assets and liabilities for the model?
- Section 101(f)(2)(B)(iii) of ERISA states that an annual funding notice must include "a statement of the number of participants who are (I) retired or separated from service and are receiving benefits, (II) retired or separated participants entitled to future benefits, and (III) active participants under the plan[.]" What is the meaning of the terms "active" and "retired or separated" for purposes of section 101(f)(2)(B)(iii) of ERISA? On what day of the plan year must the administrator focus when counting participants for purposes of this statement?
- Section 101(f)(2)(B)(iv) of ERISA states that an annual funding notice must include "a statement setting forth the funding policy of the plan and the asset allocation of investments under the plan (expressed as percentages of total assets) as of the end of the plan year to which the notice relates[.]" How should a plan administrator state the asset allocation on the model?
- Section 101(f)(2)(B)(vi) states that an annual funding notice must include, "in the case of any plan amendment, scheduled benefit increase or reduction, or other known event taking effect in the current plan year and having a material effect on plan liabilities or assets for the year (as defined in regulations by the Secretary), an explanation of the amendment, scheduled increase or reduction, or event, and a projection to the end of such plan year of the effect of the amendment, scheduled increase or reduction, or event on plan liabilities." When does an amendment, scheduled increase, or other known event have a "material effect" on plan liabilities or assets for purposes of section 101(f)(2)(B)(vi)?
- May plan administrators add additional or explanatory information to a model?
- May the annual funding notice be furnished to recipients electronically?
- For multiemployer plans, how is "each employer that has an obligation to contribute to the plan" defined for purposes of furnishing a model notice?
- Section 101(f) of ERISA requires the disclosure of plan funding information not only for the plan year to which the notice relates, but also for the two plan years preceding that year. Thus, for example, an annual funding notice for the 2008 plan year must include PPA funding information pertaining to the 2007 and 2006 plan years (both pre-PPA years). What funding information for these pre-PPA years should the plan administrator include in its model?
- Do the new annual funding notice requirements apply to plans for which the effective date of the PPA funding rules is delayed in accordance with sections 104 through 106 of PPA, or that are subject to special funding rules in accordance with section 402 of the PPA? May such plans use the model notice in Appendix A?
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