Pension Benefit Guaranty Corporation.
Title IV of ERISA established the plan termination insurance program that guarantees the benefits of participants and beneficiaries involved in certain defined benefit plans that, upon plan termination, do not have sufficient assets to cover the actuarially determined benefits that the plan is obligated to pay. In addition, Title IV established the rules applicable to defined benefit plan terminations.
ERISA Section 4002 established the Pension Benefit Guaranty Corporation (PBGC) to administer the plan termination insurance program and to administer and enforce the defined benefit plan termination rules. As a self-financing federal government corporation, the PBGC protects the retirement incomes of approximately 44 million workers and retirees in about 32,500 pension plans. PBGC is financed through premiums collected from companies that sponsor insured pension plans, investment returns on PBGC assets, and recoveries from employers responsible for underfunded terminated plans. The PBGC's Board of Directors consists of the Secretaries of Labor, Treasury, and Commerce with the Secretary of Labor serving as Chair. PBGC is aided by a seven-member Advisory Committee appointed by the President to represent the interests of labor, management, and the general public. PBGC is headed by an Executive Director.
The plan termination insurance program is a self-funded program in which covered defined benefit plans participating in the program fund it through premium payments based upon the number of plan participants.
Update--Pension Protection Act of 2006: On August 17, 2006, the Pension Protection Act of 2006 ("PPA") was signed into law. This legislation affects many PBGC requirements. PBGC will provide guidance on how the changes affect practitioners and other persons as this information becomes available. (1)
790. What are the investigative powers and authority of the PBGC and which plans do they cover?
ERISA Section 4003(a) provides that the PBGC "may make such investigations as it deems necessary to enforce any provision of this title (Title IV, Termination Insurance Program) or any rule or regulation thereunder, and may require or permit any person to file with it a statement in writing, under oath or otherwise as the corporation shall determine, as to all the facts and circumstances concerning the matter to be investigated."
ERISA Section 4003(b) permits any member of PBGC's Board of Directors or any officer designated by the chairman to conduct investigations, subpoena witnesses, and require the production of books, papers, correspondence, memoranda, and other records related to an investigation.
ERISA Section 4021(a) provides that the termination insurance program administered by the PBGC applies to any defined benefit plan, which, for a given plan year:
1. Is an employee pension benefit plan established or maintained:
(a) By an employer engaged in commerce or in any industry or activity affecting commerce; or
(b) By any employee organization, or organization representing employees, engaged in commerce or in any industry or activity affecting commerce; or
(c) Both (a) and (b); and
2. Has been a qualified pension plan, or has been operated as a qualified pension plan for the five plan years prior to the year in which the plan terminates.
791. What ERISA covered plans are exempt from PBGC coverage?
ERISA Section 4021(b) exempts the following plans from PBGC coverage:
1. All individual account (defined contribution) plans;
2. All government plans, including those established pursuant to the Railroad Retirement Act;
3. Any church plan (unless that plan has made an election under Internal Revenue Code Section 410(d), and has notified the PBGC that it wishes to be subject to PBGC coverage);
4. Any plan maintained outside of the United States primarily for the benefit of nonresident aliens;
5. Any plan that is unfunded and maintained by an employer primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees;
6. Any plan that is established and maintained exclusively for substantial owners (sole owner of a trade or business or a greater than 10% owner of shares or a greater than 10% partner); and
7. Any plan that is established and maintained by a professional service employer that at no time has more than 25 active participants.
Further, there are certain nonqualified plans detailed under ERISA Section 4021(b) that are also excluded from the coverage of the PBGC.
792. What is the PBGC premium program?
The primary reason for the establishment of the Pension Benefit Guaranty Corporation (PBGC) is to provide an insurance program that guarantees the provision of pension benefits (within certain limitations) to plan participants and beneficiaries of terminated defined benefit plans. The PBGC program will provide these benefits when a covered plan terminates with insufficient trust assets to cover the actuarially determined vested benefits of participants and beneficiaries.
The maximum benefit that PBGC will guarantee for retirees in underfunded singleemployer defined benefit plans that terminate in the year 2010 will be $54,000.00 per year ($4,500/month). (1)
Premium Filings: All plans, regardless of size, must now electronically submit all premium filings for plan years. (2) PBGC's online application, My Plan Administration Account (My PAA), is a secure Web-based application available through the Pension Benefit Guaranty Corporation's Web site (www.pbgc.gov). This application enables pension plan practitioners to electronically submit their premium filings and payments to PBGC, in accordance with PBGC's regulations.
PBGC's mandatory e-filing requirements apply to estimated and final filings, including both original and amended filings. (3)
ERISA Section 4006(a)(3)(A) (4) establishes premium rates for PBGC covered single employer plans at $30 for each plan participant during the plan year. Multiemployer plans are required to submit premium payments at an annual rate of $8 per participant. (5) In the case of underfunded plans, an additional premium is required, which is equal to $9 for each $1,000 of a single-employer plan's unfunded vested benefits divided by the number of participants for whom PBGC coverage premiums were being paid as of the close of the prior plan year. (6) Plan administrators have the option of paying prorated premiums for short plan years instead of paying the premium on a full year and requesting a refund at a later date. (7) After adjustment for inflation, the flat-rate premium for 2010 has been set at $35.00 per participant for the Single-Employer Program and $9.00 per participant for the Multiemployer Program.
ERISA Section 4006(a)(7), as added by the Deficit Reduction Act of 2005, creates a new termination premium of $1,250 per participant to be levied on companies reorganizing under federal bankruptcy laws, payable for the first three years after coming out of bankruptcy. (8)
Participants, for purposes of assessing premium charges, are defined as:
1. Any individual who is currently in employment covered by the plan and who is earning or retaining credited service; this does not include individuals who are earning or retaining credited service if, on the "snapshot" date (see below), they have no accrued benefits (and the plan does not have any other benefit liabilities with respect to them);
2. Any non-vested individual who is not currently in employment covered by the plan, but who is earning or retaining credited service under the plan (excluding any non-vested former employees who (a) have experienced a 1-year break in service, (b) are deemed to be cashed out under the terms of the plan, or (c) have died);
3. Any individual who is retired or separated from employment covered by the plan and who is receiving benefits under the plan;
4. Any individual who is retired or separated from service covered by the plan and who is entitled to begin receiving benefits under the plan in the future;
5. Any deceased individual who has one or more beneficiaries who are receiving or entitled to receive benefits under the plan; and
6. All other individuals identified as participants under the terms of the plan. (1)
The participant count is made as of the last day of the prior plan year, or for a new defined benefit plan, on the date that it becomes subject to PBGC jurisdiction.
ERISA Section 4007(b) imposes a penalty of up to 100% of the amount due as a late payment charge on unpaid premiums. The late payment penalty charge is based upon the number of months from the due date to the date when payment is made. For any premium payment year beginning after 1995, the penalty rate is 1% per month on any amount of unpaid premium paid on or before the date when the PBGC issues a written notice of the premium delinquency, and 5% per month on any amount of unpaid premium paid after that date. The penalty rate for pre-1996 premium payment years is 5% per month for all months on any amount of unpaid premium. (2)
The PBGC has expanded its safe-harbor relief from late payment penalty charges effective for all PBGC determinations issued on or after December 27, 1999, with respect to premiums for plans years beginning before 1999, as well as PBGC determinations with respect to premiums for 1999 and later plan years. Under the safe harbor, a plan administrator must do two things to qualify and avoid late payment penalty charges:
1. By February 28th of the premium payment year, the plan administrator must pay the lesser of: (1) 90% of the flat-rate premium due for the premium payment year; or (2) 100% of the flat-rate premium that would be due for the premium payment year, if that amount were determined by multiplying the actual participant count for the prior year by the flat-rate premium for the premium payment year; and
2. By October 15th of the premium payment year, the plan administrator must pay any remaining portion of the flat rate premium for the premium payment year.1
ERISA Section 4011 requires plans that are obligated to pay the variable premium as a result of insufficient funding to provide notice to plan participants and beneficiaries of the plan's funding status and the limit on the PBGC's coverage should the plan terminate while underfunded. If a plan administrator fails to provide a participant with notice of the plan's funding status within the specified time limit or omits material information from such notice, the PBGC may assess a penalty of up to $1,100 a day for each day that the failure continues. (2) The plan administrator must issue the notice no later than two months after the deadline (including extensions) for the filing of the annual report for the previous plan year (i.e., seven months after the close of the plan year). (3)
The PBGC has issued a proposed policy statement on the assessment of penalties for failure to provide participant notices under ERISA Section 4011. The proposed policy would apply to 2004 and later notices, and to certain earlier years' notices that are ineligible for penalty relief under PBGC's newly established Participant Notice Voluntary Correction Program (VCP). (4)
The proposed guideline penalty amount is equal to the number of plan participants, multiplied by the per-participant penalty rate. There are increases in the penalty for repeat violations and where the corrections occur after the PBGC issues notice of a pending audit. Pre-audit notice corrections would be subject to a $5 per-participant penalty, increased to $20 per participant for a repeat violation. The penalty is increased to $40 per participant and $100 per participant for a repeat violation if the PBGC has issued written notice that it is auditing a plan's compliance with the participant notice requirements. If the corrections have taken place within one year of the notice distribution date, the PBGC will prorate the penalty, based on the number of days before correction. No increases would occur solely because the period exceeds one year.
A repeat violation is a violation occurring after the plan administrator knew, or should have known, that there was a non-de minimis failure for an earlier plan year.
If a plan administrator corrects a notice failure on or before the date on which PBGC issues a written notice that it is auditing the plan's compliance with the notice requirements, the correction would be valid if PBGC determines, based on the facts and circumstances, that the corrective notice serves the statutory purposes of the notice requirement.
There is a "safe harbor" wherein the PBGC will treat a corrective notice as valid if the notice satisfies both of the following requirements:
1. In addition to the information that must be provided in a participant notice, the corrective notice includes all information that was required in all later notices due on or before the corrective notice is issued.
2. The plan administrator provided the notice to the persons who were entitled to receive the most recent participant notice that was due on or before the date on which the corrective notice was issued.
Defined benefit plans that meet the requirements of Internal Revenue Code Section 412(i) (plans funded exclusively by the purchase of individual insurance contracts), are exempted from the variable rate premium requirements if the plan fits the description of an Internal Revenue Code Section 412(i) plan on a pre-determined "snap-shot" date in the previous plan year (which in most cases, the PBGC advises, is the last day of the preceding plan year). (1) This is a change from the prior requirement that the elements of Internal Revenue Code Section 412(i) be met on every day of the preceding plan year.
Single employer plans that are exempt from the variable premium payment arrangements are required to submit their final premium filing for the year on a simplified Premium Form 1-EZ instead of Form 1 and Schedule A. Non-exempt single employer plans are still required to file Form 1 and Schedule A. Multiemployer plans are required to file Form 1 only. (2) New and existing Form 1 and schedules may be downloaded from the PBGC website at: http://www.pbgc.gov.
The PBGC has extended the premium filing deadline for most plans to nine and one-half months after the beginning of the premium payment year (October 15th for calendar year plans).
PBGC has issued a proposed rule that would make permanent a procedure that PBGC has been using on a case-by-case basis to compute liability when employers with underfunded pension plans close down a facility and lay off a significant percentage of their workforce. (3)
793. What are the PBGC proposed regulations that implement PPA changes to variable-rate premiums for single-employer plans?
PBGC has proposed amendments to its premium payment regulations to implement provisions of the Pension Protection Act of 2006 that would change the variable-rate premium for plan years beginning on or after January 1, 2008.
The PPA enacted changes to the ERISA funding rules on which the variable-rate premium is based, and amended the variable rate provisions of ERISA Section 4006 to conform with those changes and to eliminate the full-funding limit exemption from the variable-rate premium. The proposed amendments will provide much needed clarity to statutory ambiguity concerning when "unfunded vested benefits" are to be measured. The PBGC proposal establishes dates for variable-rate premium determinations, and revising the premium due date and penalty structure.
A plan's per participant variable-rate premium is based on the plan's unfunded vested benefits "as of the close of the preceding plan year." (ERISA Section 4006(a)(3)(E)) Prior to the changes made under PPA, unfunded vested benefits were based on unfunded "current liability." PPA eliminated the "current liability" provisions from the funding rules for single-employer plans. PPA also changed the definition of unfunded vested benefits to reflect the "funding target" for a plan year under ERISA Section 303(d), and amended that provision to establish that the first day of the plan year is the valuation date (with noted exceptions).
Because of PPA's failure to amend ERISA's variable rate premium rule, there is now ambiguity about the date on which unfunded vested benefits are to be determined.
Due to the burdens imposed in requiring plans to conduct valuations as of the first day of a plan year to do separate valuations as of the last day for variable rate premium purposes, the proposed regulations (Prop. PBGC Reg. [section] 4006.4) establish a "UVB determination date" that requires that unfunded vested benefits be measured as of the valuation date for the premium payment year.
The proposed regulations (Prop. PBGC Reg. [section] 4006.5) also create an "alternative premium funding target" that is intended to be less of a burden.
The proposed regulations allow smaller plans more time to file. They also provide larger plans the ability to make estimated variable rate premium filings and to correct them without penalty. Under the proposed regulations, PBGC creates a new "mid-size" category of plans and has separate rules for small plans (those with fewer than 100 participants), mid-size plans (those with 100 or more participants, but fewer than 500), and large plans (those with 500 or more participants). Following are the respective due dates for the 2010 premiums:
* Small plans: April 30, 2011 for both the flat rate premium and variable rate premium;
* Mid-size plans: October 15, 2010 for flat rate premiums and for estimated variable rate premiums, and April 30, 2011 for latest variable rate premium penalty starting date;
* Large plans: February 28, 2010 for flat rate premiums, October 15, 2010 for flat rate premium reconciliation date and for estimated variable rate premiums, and April 30, 2011 for latest variable rate premium penalty starting date. (1)
794. What are the reportable events that must be directed to the attention of the PBGC?
Within 30 days after the plan administrator or the contributing sponsor knows or has reason to know that a reportable event has occurred, he must notify the PBGC. (2) This 30-day notice is required if any of the following reportable events has occurred:
1. The plan has been disqualified by the IRS, or the DOL has notified the plan that it is not in compliance with the regulatory provisions of ERISA; (3)
2. There has been a plan amendment that would result in a decrease in benefits to any participant payable from employer contributions; (1)
3. Active participation drops below 80% of those participating at the beginning of the plan year, or to fewer than 75% of those participating at the beginning of the previous plan year; (2)
4. A termination or partial termination has occurred; (3)
5. The plan has been unable to pay vested accrued benefits when they become due; (4)
6. The plan has failed to make the required minimum funding payment; (5)
7. Bankruptcy, liquidation, or dissolution of the plan sponsor, or any member of the plan's controlled group has occurred; (6)
8. Any distribution has been made to a substantial owner of a contributing sponsor; (7)
9. Plans have been merged or consolidated, or assets or liabilities have been transferred; (8)
10. Any transaction has occurred that resulted in a change in the contributing sponsor or in persons discontinuing membership in the controlled group where the plan had less than $1,000,000 in unfunded benefits or no unfunded vested benefits; (9)
11. Any declaration of an extraordinary dividend or stock redemption above stated levels has been made by any member of the plan's controlled group; (10)
12. Any transfer has been made within a 12-month period (ending on the date of the transfer) of an aggregate of 3% or more of the plan's total benefit liabilities to any person or to a plan maintained by a person who is not a member of the contributing sponsor's controlled group; (11)
13. Any application for a minimum funding waiver has been submitted; (12)
14. Any default on a loan has occurred with an outstanding balance of $10,000,000 or more by a member of the plan's controlled group; or (13)
15. Any other event detailed in the regulations has occurred that indicates a need to terminate the plan (1)
Any failure to make minimum quarterly contributions by small employers (generally, those with fewer than 100 plan participants, although, in some cases, as many as 500 participants) need not be reported to the PBGC if the employer makes the payments within 30 days of the due date. (2)
ERISA Section 4010 requires the following information to be included in any 30-day notice submitted to the PBGC:
1. The name of the plan;
2. The name, address, and telephone number of the plan sponsor;
3. The name, address, and telephone number of the plan administrator;
4. The plan sponsor identification number (EIN), and the plan number (PN);
5. A brief statement of the facts relating to the reportable event;
6. A copy of the current plan document;
7. A copy of the plan's most recent actuarial statement and opinion; and
8. A statement of any material change in the assets or liabilities of the plan that has occurred after the date of the most recent actuarial statement and opinion relating to the plan.
The PBGC has established PBGC Form 10 and PBGC Form 10-Advance for use in filing a notice of a reportable event. PBGC Form 10 is to be used by plan sponsors or administrators of single employer defined benefit plans to notify the PBGC within 30 days of the occurrence of a reportable event (replacing Form 10-SP). PBGC Form-10 Advance is to be filed by single employer defined benefit plans when they are required to provide the PBGC an advance notice of any reportable event.
The PBGC has made available from their web site (www.pbgc.gov/repevents.htp) the following reportable event forms, which plan sponsors and administrators may fill out and e-mail to the PBGC: Form 10, Form 10-Advance, and Form 200. (3)
Any failure to file a required notice or to include any required information may be subject to a penalty of up to $1,100 per day. This is assessed separately against each individual who is required to provide the PBGC with any notice. (4)
PBGC's Early Warning Program
The PBGC, in July, 2000, issued a model participant notice to plans covered by the termination insurance program that provides details on the PBGC "Early Warning Program." The program is designed to assist the PBGC in avoiding the institution of plan termination proceedings under ERISA Section 4042(a)(4) by identifying plan sponsors in need of protection before business decisions or business transactions significantly increase the risk of loss to the corporate sponsored retirement plan covered by the termination insurance program. The PBGC will screen plans covered by the termination insurance program by focusing on two types of companies:
1. Financially troubled companies; and
2. Companies with pension plans that are underfunded on a current liability basis.
Financially troubled companies will be identified by a below investment grade bond rating under the most recent ratings published by the major rating agencies (i.e., Moody's and A.M. Best).
Companies with pension plans that have current liability in excess of $25 million and that have an unfunded current liability in excess of $5 million will be identified through data reported to the PBGC on the most recent Form 5500, Schedule B. Such plans, once identified, will be targeted for PBGC intervention under the Early Warning Program.
The PBGC has issued a final rule mandating that sponsors of insured defined benefit plans submit their premium filings to PBGC electronically.The requirement becomes effective for large plans (those with 500 or more participants) with filings for the 2006 plan year that are made on or after July 1, 2006, and for smaller plans starting with filings for plan years beginning on or after January 1, 2007. With minor modifications, the final rule adopts the proposed rule that was issued in March 2005. (1)
Those plans identified under the Early Warning Program as being "at risk" will be contacted by the PBGC with a request for further information. This information will assist the PBGC in accurately assessing whether a transaction or financial situation poses a legitimate risk to the underlying pension plan. If, in the estimation of the PBGC, there is a substantial risk to the plan, the PBGC will negotiate with the plan sponsor to obtain protections for the pension insurance program in lieu of terminating the plan. (2) Details on the Early Warning Program, such as a review of those business transactions that are of concern to the PBGC, are available in the text of the model participant notice, which is available on the Internet at: http://www.pbgc.gov/legal_info/tech_updates/tech00-3.htm.
795. What are the details of the PBGC streamlined filing and notice requirements to facilitate use of electronic media?
In October 2003, the PBGC finalized rules that simplify and consolidate:
1. The methods that may be used to send a filing to PBGC, or provide an issuance to a third party;
2. The determination of the date on which:
(a) A filing is treated as made, or
(b) An issuance is provided;
3. The computation of time periods, e.g., for filings and issuances; and
4. The rules for maintaining records by electronic means.
The new regulations consolidated the PBGC's filing, notice, and electronic recordkeeping rules into five categories, as follows:
1. Information on how to file with the PBGC (Subpart A of the regulations; see Q 796);
2. How to issue notices to third parties (i.e., persons other than the PBGC) (Subpart B of the regulations; see Q 797);
3. How the PBGC determines the date of a filing or an issuance (Subpart C of the regulations; see Q 798);
4. How to compute time periods (Subpart D of the regulations; see Q 799); and
5. How to comply with record keeping requirements under the PBGC regulations using electronic means (Subpart E of the regulations; see Q 800).
These rules apply wherever a particular regulation calls for their application. (1) The PBGC states that these new requirements will facilitate electronic filing and electronic issuances by treating most types of submissions as filed or issued on the date sent rather than on the date received. The regulations finalize proposed rules that PBGC published on February 14, 2003. The final regulations are generally effective on November 28, 2003; however, certain transitional rules were also included. (2)
Under provisions in effect before November 28, 2003, the rules for filings and issuances were provided under applicable PBGC regulations in each respective area for which filings or issuances were required (e.g., payment of premiums, voluntary plan terminations, reportable events, etc.).
796. What are the methods of filing provided under the PBGC's streamlined rules?
Regulations finalized in 2003 provide the filing methods for any submission (including a payment) to the PBGC.These methods include submission of paper filings by hand, mail, or commercial delivery. The PBGC has removed the filing addresses for required filings from the regulations and has placed them on its website. (3)
In addition, the PBGC provides current information on electronic filings, including permitted methods, fax numbers, and e-mail addresses:
1. On the PBGC's website, http://www.pbgc.gov;
2. In printed PBGC forms and instruction packages; and
3. Through the PBGC's Customer Service Center (1200 K Street, NW, Washington, DC 20005-4026, 1-800-400-7242 (for participants), 1-800-736-2444 (for practitioners) (TTY/TDD users may call the federal relay service toll-free at 1-800-877-8339)). (1)
797. What are the methods of issuance under the PBGC's streamlined rules?
The 2003 regulations include rules for the issuance of a notice (or other information) to a person other than the PBGC. (2)
Generally, the method must include measures reasonably calculated to ensure actual receipt of the material by the intended recipient. Posting is not a permissible method of issuance, and payments to third parties are not covered by these rules.Where existing PBGC regulations require compliance with other rules, those other rules must be satisfied (for example the 60-day notice requirement of intent to terminate under PBGC Reg. [section] 4041.21; see Q 803). (3)
Safe Harbor Method
The PBGC provides a safe harbor method of providing an issuance by electronic media. This safe harbor generally follows Labor Reg. [section] 2520.104b-1 concerning disclosure of employee benefit information through electronic media (see Q 59 for details). Any person using electronic media to satisfy issuance obligations under PBGC regulations may utilize this safe harbor method. (4)
798. What are the dates of filing or issuance under the PBGC's streamlined rules?
The 2003 regulations provide rules for determining the date a submission is filed with the PBGC, and the date an issuance is provided to someone other than the PBGC (e.g., participants and beneficiaries), for purposes of filings made under applicable PBGC regulations. (5)
Most types of submissions to the PBGC are treated as filed on the date the submission was sent, provided certain requirements are satisfied. If these requirements are not met, the submission, if in a permitted format and sent to the proper address, is treated as filed on the date received. (6)
If a submission is received after 5:00 p.m. on a business day, or any time on a weekend or a federal holiday, the submission is treated as received on the next business day.
The following filings are always treated as filed when the submission is received:
1. Applications for benefits and related submissions (unless the applicable form's instructions provide an earlier date);
2. Advance notices of reportable events;
3. Notices of missed contributions exceeding $1 million; and
4. Requests for approval of a multiemployer plan amendment.
Most types of issuance are treated as provided on the date of issuance, if certain requirements are satisfied. These rules are similar to the rules for the date of filing, except for electronic filings. (1)
The PBGC cautions that these rules do not cover payments to third parties or filings with the PBGC that are not provided for under applicable regulations such as procurement filings, litigations filings, and applications for employment.
Postal Service Delivery. For paper and computer disc submissions or issuances sent by first class mail (or an equivalent class, such as priority or express) and properly sent by the last scheduled mail collection of the day, the filing or issuance date is the date mailed. If a filing or issuance is properly mailed after the last scheduled mail collection for the day, the filing or issuance date is the date of the next scheduled collection.
If the submission or issuance has a United States Postal Service postmark, the filing or issuance date is presumed to be the date of the postmark, although an earlier date may be proven. The same rule applies if there is a postmark of a private postage meter (but no legible U.S. postmark) and the submission or issuance arrives at the proper address by the time reasonably expected. Postal Service and private postage meter postmarks must be legible. (2)
For submissions and issuances delivered from a foreign postal service, the date of receipt at the proper address will be the applicable filing/issuance date. (3)
Commercial Delivery Service. For a paper or computer disc submission or issuance that is deposited with a commercial delivery service that is a "designated delivery service," (4) and for which it is reasonable to expect that the submission or issuance will arrive at the proper address by 5 p.m. on the second business day after the date of collection, the filing or issuance date is the date of the deposit if the deposit was made by the last scheduled mail collection of the day for the type of delivery utilized. If the deposit is made later than the last scheduled collection for the day, or if there is no scheduled collection, the filing or issuance date is the date of the next scheduled collection. (5)
The PBGC website provides a detailed listing of the "designated delivery service" providers acceptable under Internal Revenue Code Section 7502(f).
Hand Delivery. The filing or issuance date of a hand-delivered paper or computer-disc filing or issuance is the date of receipt at the proper address. A hand-delivered issuance does not have to be delivered while the intended recipient is physically present. Unless the sender has reason to believe that the intended recipient will not receive the notice within a reasonable amount of time, a notice is deemed received when placed in the intended recipient's office mailbox. (1)
Electronic Delivery. The filing date for an electronic submission is the date the submission is transmitted to PBGC at the proper address, provided the technical requirements for the particular type of submission, as indicated on the PBGC's website, are met.
Issuances may be provided electronically and are treated as sent on the date transmitted, provided the PBGC Reg. [section] 4000.14 safe harbor rule for issuances made using electronic media (see above) is met.
For either filings or issuances, when sending e-mail with an attachment, the body of the email must contain the name and telephone number of a person for PBGC to contact if PBGC is unable to read the attachment.
If the requirements for electronic submission are not met, PBGC may treat the submission or issuance as invalid. But if the submission or issuance would meet the requirements except that it is sent to the wrong address, the filing or issuance date is the date of receipt at the proper address. (2)
Computer Disk. The regulations include a special requirement for the submission of filings and issuance on computer disc: a paper cover letter or the disk's label must include the name and telephone number of the person to contact if the PBGC or other recipient is unable to read the disk. (3)
Resending. A person sending a filing or issuance can have the benefit of his original filing or issuance date even if he had reason to believe that the PBGC or the intended recipient has not received the issuance (or has received it in a form that is not usable), if the filing or issuance is promptly resent. If the resending is not prompt, or does not include any evidence that PBGC requires in support of an original filing or issuance date, then the filing or issuance date is the date of the resubmission or reissuance.
If a person is asked to resubmit a filing or an issuance for technical reasons (e.g., inability to open an e-mail attachment), and the resubmission is made by the date that PBGC specifies for filings or within a reasonable time for issuances, then the original filing or issuance date applies. (4)
De Minimis Issuance Errors. PBGC will not treat an issuance as untimely based on a failure to provide it to a participant or beneficiary in a timely manner if:
1. The failure resulted from administrative error;
2. The failure involved only a de minimis percentage of intended recipients; and
3. The issuance is resent to the intended recipient promptly after the error is discovered. (5)
Under previous regulations, this rule applied only to standard and distress termination issuances (under former PBGC Reg. [section] 4041.3(c)(3)). The rule under PBGC Reg. [section] 4000.31 applies to all issuances under the PBGC's regulations.
799. What are the "computation of time" rules under the PBGC's streamlined requirements?
The "computation of time" rules are set forth at PBGC Regs. [subsection] 4000.41--4000.43. (1) In computing a time period (whether counting forwards or backwards) under the final regulations:
1. The day of the act, event, or default that begins the period is excluded;
2. The last day of the period is included; and
3. If the last day is a weekend or federal holiday, the period is extended or shortened (whichever benefits the person making the filing or providing the issuance) to the next regular business day.
The weekend and holiday rule also applies to deadlines for which counting is not required. (2)
If a time period is measured in months, the period is measured by first identifying the day of the calendar month on which counting is started, and then looking to the corresponding day of the calendar month in which counting is stopped. If counting begins on the last day of a calendar month, the corresponding day of any later (or earlier) calendar month is the last day of that calendar month.
Special February Rule. If counting begins on the 29th or 30th day of a calendar month, the corresponding day of February is the last day of February. (3)
800. What are the electronic means of record retention rules under the PBGC's streamlined requirements?
The regulations generally follow the rules for retaining records by electronic means set forth in Labor Reg. [section] 2520.107-1 (see Q 59 for details).Therefore, electronic media can satisfy the record maintenance and retention requirements if the electronic recordkeeping system has reasonable controls to ensure the accuracy, integrity, authenticity, and reliability of records kept in electronic form, and if the records are maintained in reasonable order and in a safe and accessible place. (4)
The electronic records must also be readily convertible into legible and readable paper copy, and must exhibit a high degree of legibility when displayed on a video display terminal or other method of electronic transmission. There must also be no agreement or restriction that would, directly or indirectly, compromise or limit a person's ability to comply with any reporting and disclosure requirement.
Adequate record management practices (e.g., procedures for labeling electronically maintained or retained records, creating back-up electronic copies for storage at an off-site location, etc.) also must be followed. (1)
Original paper records may be disposed of any time after they are transferred to an electronic record keeping system that complies with the electronic record keeping rules. But original paper records must not be discarded if the electronic record would not be a duplicate or substitute record under the terms of the plan and applicable federal or state law. (2)
The PBGC advises that these recordkeeping requirements are consistent with the goals of the Electronic Signatures in Global and National Commerce Act (3) and are designed to facilitate voluntary use of electronic records, while ensuring continued accuracy, integrity, and accessibility of records required to be kept under PBGC regulations. Furthermore, the PBGC cautions plan sponsors that they remain responsible for following the electronic recordkeeping rules "even if you rely on others for help." (4)
801. What is the PBGC Participant Notice Voluntary Correction Program?
PBGC has announced the creation of the "Participant Notice Voluntary Correction Program" (VCP), through which the plan administrator of an underfunded defined benefit plan may correct a recent failure to provide notice of the plan's underfunded status to participants. (5)
ERISA Section 4011 requires that the administrator of an underfunded defined benefit plan issue notice to the plan participants of the plan's funding status and the limits on the PBGC's guarantee of benefits. The administrator generally must issue the notice for a plan year if the plan is required to pay a variable rate premium for that year (and in certain other underfunded situations for 2002 and 2003), unless the plan satisfies the two Deficit Reduction Contribution ("DRC") exceptions.
Plan administrators are required to certify on their annual PBGC premium filings (Form 1 or Form 1-EZ) that, for the prior plan year, either:
1. No participant notice was required;
2. The participant notice was issued as required; or
3. The participant notice was not issued as required, along with an explanation of why the notice was late or otherwise deficient.
There is a penalty imposed for failure to timely file this required notice. The amount is determined utilizing a formula that takes into account the number of plan participants, multiplied by the perparticipant penalty rate.
As a result of the PBGC expanding its Participant Notice enforcement program, it has implemented the VCP to encourage administrators of underfunded pension plans who failed to issue notices on the plan's funding status to correct those failures and to facilitate future compliance with the Participant Notice requirements. The VCP is a transitional program for correcting Participant
Notice failures for the 2002 and 2003 plan. In order to qualify for the VCP, the Participant Notices must have been due before May 7, 2004 and, as of May 7, 2004, were not the subjects of PBGC audits. The PBGC will not assess penalties for these failures under VCP if the failure is corrected in accordance with the following guidelines:
1. A corrective notice is issued in accordance with the VCP no later than the 2004 participant notice due date; and
2. Notifying the PBGC within 30 days after the 2004 participant notice due date that the plan is participating in the VCP.
The PBGC will not pursue any failure to provide a pre-2002 participant notice for a plan unless there is a 2002 or 2003 participant notice covered by VCP that does not meet the requirements for penalty relief under the VCP.
The notice must include all other information required in a 2004 notice (current information on funding waivers, missed contributions and limitations on the PBGC's guarantee). The VCP corrective notice must provide the funded current liability percentage for the 2002 plan year and for the 2003 plan year (not the 2003 or 2004 plan year), and may include the funded current liability percentage for the 2004 plan year, as well. The plan administrator is not required to notify the participants of its failure for 2002, 2003, or both 2002 and 2003.The PBGC advises, however, that a plan administrator may choose to include that information in the VCP corrective notice.
The notification filed with the PBGC must include a copy of the VCP corrective notice and the name and telephone number of a person for PBGC to contact with any questions. Plan administrators may submit this notice electronically through the PBGC website at http://www.pbgc.gov/participantnotice, by fax at 202-336-4197, or by mail or other delivery at Contracts and Control Review Department, Pension Benefit Guaranty Corporation, 1200 K Street, N.W, Suite 580, Washington, DC 20005-4026. PBGC will issue prompt acknowledgement of its receipt of the notification. Plan administrators should keep the acknowledgment as proof of satisfying the PBGC notice requirement under the VCP.
If a plan administrator's only failure for a 2002 or 2003 participant notice was issuing it late, and the administrator corrected the failure before May 7, 2004, PBGC will treat the plan administrator as having participated in the VCP and will assess no penalty for that 2002 or 2003 failure (and will not pursue any pre-2002 participant notice failure) without requiring that the plan administrator issue a VCP corrective notice or notify the PBGC of the plan's participation in the VCP.
If a plan administrator previously issued an erroneous certification of compliance with the notice requirement as part of a premium filing notifies the PBGC of the plan's participation in the VCP, the PBGC will treat the notification as effectively amending any erroneous certification filed on or before May 7, 2004, for a 2002 or 2003 participant notice. The PBGC will take no enforcement action based on the erroneous prior certification if the plan administrator of a plan that meets the requirements for penalty relief under the VCP amends (or effectively amends) the erroneous prior certification.
Plan administrators of all plans that meet the requirements for VCP penalty relief will be required to check a box on their 2005 PBGC premium filings notifying the PBGC of the plan's participation in the VCP. This requirement supplements the requirement that the administrators notify the PBGC of their participation as a condition of participation in the VCP.
(1.) Source: http://www.pbgc.gov/practitioners/Whats-New/whatsnew/page15560.html.
(2.) As of July 1, 2006, large plans (those with 500 or more participants in the prior year) have been required to e-file for plan years beginning on or after January 1, 2006.
(3.) To access information about My PAA, go to http://www.pbgc.gov/practitioners/premium-filings/content/page13265.html., including "How to Get Started" and online demonstrations).
(4.) As amended by the Deficit Reduction Act of 2005 (P.L. 109-171).
(5.) PBGC Regs. [subsection] 4006.3(a)(1), 4006.3(a)(2).
(6.) PBGC Reg. [section] 4006.3(b).
(7.) PBGC Reg. [section] 4006.5, as amended, 65 Fed. Reg. 75160 (2-01-2000).
(8.) See Summary, House-Senate Agreement, The Deficit Reduction Act of2005, February 1, 2006, p. 7, at: http://www.house.gov/budget/summarys1932.pdf.
(1.) PBGC Reg. [section] 4006.2, as amended, 65 Fed. Reg. 75160 (12-1-2000).
(2.) PBGC Reg. [section] 4007.8, as amended, 64 Fed. Reg. 66383 (11-26-99).
(1.) PBGC Reg. [section] 4007.8, as amended, 64 Fed. Reg. 66383 (11-26-99).
(2.) PBGC Reg. [section] 4011.3(c).
(3.) Labor Reg. [section] 2520.104a-5(a)(2).
(4.) See Q801. PBGC News Release 04-44 (5-06-2004); 69 Fed. Reg. 25797(5-07-2004).
(1.) PBGC Reg. [section] 4006.5(a)(3), as amended, 65 Fed. Reg. 75160 (12-1-2000).
(2.) PBGC Technical Update 00-6 (12-20-2000).
(3.) Prop. PBGC Reg. [section] 4062.8, 70 Fed. Reg. 9258, (2-25-2005).
(1.) PBGC Prop. Regs. [subsection] 4006.04, 4006.05, 4007.8, 4007.10, 4007.11; 72 Fed. Reg. 30308 (May 31, 2007).
(2.) ERISA Sec. 4043(a).
(3.) PBGC Reg. [section] 4043.21.
(1.) PBGC Reg. [section] 4043.22.
(2.) PBGC Reg. [section] 4043.23.
(3.) As defined under Internal Revenue Code Section 411(d)(3)(PBGC Reg. [section] 4043.24.
(4.) PBGC Reg. [section] 4043.26.
(5.) PBGC Reg. [section] 4043.25.
(6.) PBGC Regs. [subsection] 4043.35, 4043.30.
(7.) PBGC Reg. [section] 4043.27.
(8.) PBGC Reg. [section] 4043.28.
(9.) PBGC Reg. [section] 4043.29.
(10.) PBGC Reg. [section] 4043.31.
(11.) PBGC Reg. [section] 4043.32.
(12.) PBGC Reg. [section] 4043.33.
(13.) PBGC Reg. [section] 4043.34.
(1.) PBGC Reg. [section] 4043.35.
(2.) PBGC Technical Update 97-4.
(3.) PBGC News Release 98-20.
(4.) ERISA Sec. 4071; PBGC Reg. [section] 4043.3(e).
(1.) PBGC Regs 4006.4 and 5; PBGC Regs 4007.3; 4 and 11.
(2.) PBGC Technical Update 00-3 (July 24, 2000).
(1.) PBGC Reg. [section] 4000.1.
(2.) See PBGC Reg. [section] 4000 et. seq., 68 Fed. Reg. 61344 (October 28, 2003).
(3.) See PBGC Regs. [subsection] 4000.1--4000.10, 68 Fed. Reg. 61344 (October 28, 2003).
(1.) See PBGC Reg. [section] 4000.3.
(2.) See PBGC Regs. [subsection] 4000.11--4000.15, 68 Fed. Reg. 61344 (12-28-2003).
(3.) PBGC Reg. [section] 4000.11; PBGC Reg. [section] 4000.13.
(4.) PBGC Reg. [section] 4000.14.
(5.) See PBGC Regs. [subsection] 4000.21--4000.32, 68 Fed. Reg. 61344 (10-28-2003).
(6.) PBGC Reg. [section] 4000.23.
(1.) PBGC Reg. [section] 4000.23.
(2.) PBGC Reg. [section] 4000.24.
(3.) See PBGC Reg. [section] 4000.25.
(4.) Under Internal Revenue Code Sec. 7502(f)).
(5.) PBGC Reg. [section] 4000.26.
(1.) PBGC Reg. [section] 4000.27.
(2.) PBGC Reg. [section] 4000.29.
(3.) PBGC Reg. [section] 4000.28.
(4.) PBGC Reg. [section] 4000.30.
(5.) See PBGC Reg. [section] 4000.31.
(1.) 68 Fed. Reg. 61344 (10-28-2003).
(2.) See PBGC Reg. [section] 4000.43.
(3.) PBGC Reg. [section] 4000.43(c)(2).
(4.) See PBGC Regs. [subsection] 4000.51--4000.54, 68 Fed. Reg. 61344 (10-28-2003).
(1.) PBGC Reg. [section] 4000.53.
(2.) PBGC Reg. [section] 4000.54.
(3.) "E-SIGN," P.L. 106-229.
(4.) See Preamble, PBGC Reg. [section] 4000.1 et seq., 68 Fed. Reg. 61344 (10-28-2003).
(5.) PBGC News Release 04-44 (5-6-2004); 69 Fed. Reg. 25791 (5-7-2004).