The Department of Labor’s Employee Benefits Security Administration (the “EBSA”) has released a proposed rule pertaining to the requirement under section 101(f) that annual funding notices be provided. The EBSA also released a Fact Sheet which discussed the proposed rule. Here is what the Fact Sheet says:
By way of background, prior to the Pension Protection Act of 2006 (the “PPA”), only multiemployer plans were required to provide annual funding notices under section 101(f) of ERISA. The PPA made significant changes to section 101(f) of ERISA by extending the requirement to provide the annual notices to single-employer plans, and by enhancing the content of the notice. In February 2009, the EBSA issued Field Assistance Bulletin 2009-01 to provide interim guidance on the annual funding notice requirement until final regulations are published.
The proposed rule requires the plan administrator of a defined benefit plan, which is subject to Title IV of ERISA, to furnish a funding notice each year. The recipients are: the Pension Benefit Guaranty Corporation (the “PBGC”), each plan participant and beneficiary, each labor organization representing the participants or beneficiaries, and, in the case of a multiemployer plan, each employer that has an obligation to contribute to the plan.
The contents of the notice must include:
(1) the plan’s funding percentage – Single-employer plans must report their “funding target attainment percentage”, and multiemployer plans must report their “funded percentage.” The funding percentage of a plan is a measure of how well the plan is funded on a particular date. In general, the higher the percentage, the better funded the plan. The funding percentage must be reported for the past three plan years.
(2) the plan’s assets and liabilities – The notices must include, among other things, a statement of the value of the plan’s assets and liabilities on the same date used to determine the plan’s funding percentage. The notices also must include a description of how the plan’s assets are invested as of the last day of the plan year and a statement of the plan’s funding policy.
(3) the PBGC guarantees and other Title IV information – The notices must include a general description of the benefits under the plan that are eligible to be guaranteed by the PBGC, along with an explanation of the limitations on the guarantee and the circumstances under which such limitations apply. Single-employer plan notices must include a summary of the rules governing plan termination and multiemployer plan notices must include a summary of the rules governing reorganization or insolvency.
The funding notices generally must be furnished no later than 120 days after the close of the plan year. Plans with 100 or fewer participants may furnish the notices no later than by the filing of the plan’s annual report, including filing extensions. The proposed rule includes two model notices (one for single-employer plans and one for multiemployer plans). Pending the adoption of a final rule, a plan administrator may use these models, or the models contained in Field Assistance Bulletin 2009-01, to meet the annual notice requirement.