The Pension Benefit Guaranty Corporation (PBGC) recently issued two important pieces of guidance that change certain of the PBGC’s notice requirements for both single-employer and multiemployer pension plans.
Reportable Event Rules for Pension Plans
First, the PBGC issued final regulations setting forth changes to the rules regarding waivers from its reportable event requirements. Defined benefit pension plans governed by ERISA are required to notify the PBGC upon the occurrence and in advance of certain events that may compromise the plan sponsor’s ability to continue the plan, such as insufficient funding, missed contributions, loan defaults, and controlled group changes.
The final regulations put in place a new waiver structure that focuses on large plans and, in particular, on plans and plan sponsors that present the most substantial risk of defaulting on their benefit payment obligations. For example, the final rules eliminate reporting requirements based on modest levels of plan underfunding and establish a “low-default-risk” safe harbor based on a plan sponsor’s financial health (e.g., positive net income or lack of loan defaults over the previous two years). Under the low-default-risk safe harbor, reporting requirements are waived for plan sponsors that may have been required to report under the PBGC’s previous reporting rules. The PBGC stated that the low-default-risk safe harbor is entirely voluntary and uses many financial metrics that are readily available and already used by many companies for other business purposes. The final rules also contain reporting waivers for public companies, small plans, foreign entities, and entities that represent a de minimissegment of a controlled group.
These final regulations generally apply to reportable events occurring after January 1, 2016.
Multiemployer Plans Required to Electronically File Certain PBGC Notices
The PBGC finalized a rule proposed in April 2015 that requires the electronic filing of certain notices filed by financially troubled or terminated multiemployer plans. Following the implementation of this final rule, multiemployer plans are required to electronically file with the PBGC notices of termination, insolvency, insolvency benefit levels (which states the level of benefits that will be paid during an insolvency year), and applications for financial assistance, all of which are required under ERISA.
The PBGC will grant case-by-case exemptions to the electronic filing requirement “in appropriate circumstances for filers that demonstrate good cause for exemption.” This rule will apply for filings made on or after January 1, 2016.