United States: PBGC Issues Updates To Reportable Events

ERISA Section 4043 requires plans or sponsors to notify the Pension Benefit Guaranty Corporation (PBGC) upon the occurrence of certain company or plan events that may put pensions at risk. Reportable events provide PBGC an opportunity to assess a company's or plan's financial problems, encourage plan continuation, or, if necessary, maximize participant recovery upon a termination.

Last fall, PBGC published its final rules, making significant updates to the reportable events structure. Under the new rules, the PBGC believes it is better able to monitor and address situations most likely to result in problems for the pension insurance system. In addition, PBGC predicts 94 percent of plans and sponsors will be exempt from many reporting requirements, resulting in an overall reduction in reporting.

The following is a brief summary of the reportable event triggers and new waivers.

Reportable Events

Effective January 1, 2016, a company or plan must generally report the following events within 30 days of occurrence:

Active participant reduction: The active participant count falls below 80 percent of the count at the beginning of the current plan year or 75 percent of the count from the preceding plan year following a single-cause event or due to attrition.

Missed contributions: A sponsor fails to make minimum funding contributions required by ERISA Sections 302 or 303, or a contribution required as a condition of a funding waiver. However, no report is required if the missing contribution is made within 30 days of the due date, or if it was missed solely because of the sponsor's failure to timely make a funding balance election.

Inability to pay benefits when due: A plan is currently unable or projected to be unable to pay benefits. A plan is "currently unable" when it is unable to provide a participant (or beneficiary) with the full benefits at the time and in the form the benefits are due. A plan is not "currently unable" if it is unable to locate the participant (or beneficiary), if the payment is limited by IRC Section 436, or if the delay is purely administrative and is less than two months or two benefit payment periods. A plan is projected to be unable to pay benefits if as of the last day of any quarter, the plan's liquid assets are less than two times the amount of disbursements from the plan for that quarter.

Distribution to substantial owner: A sponsor makes distribution to a substantial owner (i.e., greater than 10 percent owner) where:

  • Total distributions to the substantial owner made over the previous 12 months exceeds $10,000;
  • Distribution is not made on account of the substantial owner's death;
  • The plan is underfunded; and
  • The sum of all distributions to any one substantial owner within the preceding 12 months is more than one percent of the year-end plan assets for each of the previous two years, or the sum of all distributions to all substantial owners over the preceding 12 months is more than five percent of the year-end plan assets for each of the previous two years.

If the distribution is in the form of an annuity only, the sponsor only needs to report the event once (at the time of the first payment).

Controlled group change: If a transaction results, or will result, in one or more entities ceasing to be members of a plan's controlled group. However, the merger of one member into another is not a reportable event.

Extraordinary dividends/stock redemption: A member of plan's controlled group declares a dividend or redeems its own stock, the value of which, when combined with other such distributions during the same fiscal year, exceeds the recipient's net income before after-tax gain or loss on any assets for the prior fiscal year, as determined in accordance with generally accepted accounting principles.

Transfer of benefit liabilities: A plan transfers liabilities to a person(s) (or a plan maintained by a person(s)) outside of the transferor's controlled group and the amount of liabilities transferred, combined with the other liabilities transferred during the prior 12-month period, is three percent or more of the plan's total liabilities. Lump-sum payments or purchases of an irrevocable commitment to provide an annuity in satisfaction of a benefit liability are not transfers of benefit liabilities.

Loan default: With respect to a loan to a member of the plan's controlled group with an outstanding balance of $10 million or more:

  • An acceleration of payment or default under the loan agreement, or
  • Waiver or amendment of any covenant in the loan agreement that will cure or avoid a breach that would trigger default.

Liquidation: A member of plan's controlled group is involved in any transaction to implement its complete liquidation, institutes (or has instituted against it) a proceeding to be dissolved or is dissolved, or liquidates in a case under the Bankruptcy code (or any similar law).

Insolvency or similar settlement: A member of the plan's controlled group commences (or has commenced against it) any insolvency proceeding, other than one under the Bankruptcy code; commences (or has commenced against it) a proceeding to effect a composition, extension or settlement with creditors; executes a general assignment for the benefit of creditors; or undertakes to effect any other nonjudicial composition, extension or settlement with substantially all its creditors.

Application for minimum funding wavier: A plan submits an application for a minimum funding wavier.

Reportable Event Waivers

PBGC retained and expanded many of the waivers existing under the old regulations. These waivers (small plan, de minimis segment, foreign entity and public entity) now cover more events and sponsors where the risk of default is low.

PBGC added two new safe harbor waivers: (1) the low-default-risk waiver; and (2) the well-funded plan waiver. The new safe harbors cover five of the reportable events: active participant reduction, distribution to substantial owner, extraordinary dividend, transfer of benefit liabilities and change in controlled group.

The low-default-risk safe harbor waives reporting if company financial metrics show the company has adequate financial capacity to meets its obligations on time and in full. Criteria for satisfying the safe harbor are detailed in the regulations and are based on existing financial information companies commonly use for business purposes. Both the company and its highest-level U.S. parent must meet the stated criteria for the safe harbor to apply.

The well-funded plan safe harbor exempts reporting for plans that do not owe a variable-rate premium (VRP) for the plan year preceding the year in which the reportable event occurs. VRPs are not required where plans are 100 percent funded.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions