Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
By Sean Forbes
March 22 — The Pension Benefit Guaranty Corporation finalized changes to its annual financial and actuarial information reporting regulations for pension plans to account for funding stabilization provisions passed and then extended by Congress in recent years.
The rule, issued March 22, makes changes involving pension plans' funding target attainment percentage and that percentage's relationship to requirements that plans report to the PBGC. It also modifies waivers from reporting and adds new ones.
The modifications codify changes made by the 2012 Moving Ahead for Progress in the 21st Century Act (MAP-21), the Highway Transportation and Funding Act of 2014 (HAFTA) and the Bipartisan Budget Act of 2015. Those laws included pension “smoothing” provisions designed to ease the impact low interest rates have had on single-employer plans' minimum funding requirements.
MAP-21's rules limit the volatility of certain interest rates used for funding purposes by constraining them within a range, and that “corridor” was set to begin phasing out in 2013. HAFTA extended the beginning of the phaseout to 2018, and the budget deal pushed it back again, to 2021 .
The effective date of the new rule (RIN 1212-AB30) is April 22. The first filings under the regulation will be due April 17, 2017.
With regard to the funding target attainment percentage (FTAP), the rule codifies the statutory changes—and guidance in two pieces of PBGC guidance, Technical Updates 12-2 and 14-2. It changes the definition of the FTAP in PBGC regulations to provide that it's determined without regard to the pension smoothing rules. The rule also renames FTAP the “4010 funding target attainment percentage.”
The rule also clarifies under PBGC regulations that the plan's funding target as of the valuation date is also determined without regard to interest rate stabilization rules.
In addition, the rule codified a waiver from Technical Update 12-2 for plans meeting certain funding requirements.
The final rule also changed a waiver for plans whose aggregate underfunding—called the “4010 funding shortfall” for Section 4010 of the Employee Retirement Income Security Act—is $15 million or less.
The proposed rule, issued in July 2015, would have limited the waiver to controlled groups of a certain size .
However, in response to comments, the PBGC is allowing plans of any size to use the waiver, but is modifying how the Section 4010 funding shortfall is determined—by using non-stabilized rates.
The rule also includes new waivers that the PBGC said will reduce Section 4010 reporting and duplicative reporting.
In addition, the rule provides alternative methods of compliance for reporting certain actuarial information, including the funding target of the plan determined as if the plan has been in at-risk status for at least five plan years and determined without regard to the interest rate stabilization rules.
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A copy of the rule is at http://src.bna.com/dtQ.
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