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
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.