In Field Assistance Bulletin (“FAB”) No. 2013-01, the U.S. Department of Labor (the “DOL”) has provided guidance on the changes to the annual funding notice requirements of section 101(f) ERISA which were made by the recently enacted legislation entitled “Moving Ahead for Progress in the 21st Century Act” (or “MAP-21”). In general, MAP-21 requires additional disclosure of the effect of segment rate stabilization on the funding of single-employer defined benefit plans. The FAB also includes a supplement to the model annual funding notice that plan administrators of these plans may use to comply with these new requirements.
More specifically, the interest rates generally used to determine the present value of a single-employer defined benefit plan’s liabilities are the three segment rates described in section 303(h)(2)(C)(i), (ii), and (iii) of ERISA. The first segment rate for a month is the 24-month average of the yields on the top three tiers of investment grade corporate bonds maturing within five years. The second segment rate is the 24-month average of yields on such investment grade bonds maturing in years six through 20. The third segment rate is the 24-month average of yields on such investment grade bonds maturing after year 20. MAP-21 amended section 303(h)(2)(C) of ERISA by adding a new subclause (iv) to adjust the segment rates in section 303(h)(2)(C)(i)-(iii) as necessary to fall within a specified range, based on a 25-year average of the corresponding segment rates.
Section 101(f) of ERISA sets forth the requirements for the annual funding notices. MAP-21 amended section 101(f)(2) of ERISA by adding a new subparagraph (D). New section 101(f)(2)(D) of ERISA requires plan administrators of single-employer defined benefit plans to disclose additional information in the annual funding notice for a plan year beginning after December 31, 2011, and before January 1, 2015, if such plan year is an “applicable plan year” within the meaning of section 101(f)(2). The additional disclosures relate to the effect of the MAP-21 ERISA section 303(h)(2)(C)(iv) segment rate stabilization rules on plan liabilities and the plan sponsor’s minimum required contributions to the plan. The FAB provides guidance on the additional disclosures and related matters.