Pension & Benefits News PBGC final regs simplify reporting and disclosure requirements for terminated/insolvent multiemployer plans
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Tuesday, June 4, 2019

PBGC final regs simplify reporting and disclosure requirements for terminated/insolvent multiemployer plans

By Pension and Benefits Editorial Staff

The Pension Benefit Guaranty Corporation (PBGC) has issued final regulations that simplify certain reporting and disclosures of plan information by terminated and/or insolvent multiemployer plans to PBGC, participants, and beneficiaries. The PBGC states that the changes make the reporting and disclosure of multiemployer plan information to the PBGC and interested parties more efficient and reflect the repeal of the multiemployer plan reorganization rules. The final rule is effective July 1, 2019.

Certain multiemployer plans must provide notices of insolvency and notices of insolvency benefit level. The final rule removes outdated information included in the notices and eliminates the requirement to provide most annual updates to the notice of insolvency benefit level. These changes are applicable July 1, 2019.

Under current regulations, multiemployer plans terminated by mass withdrawal must perform an annual actuarial valuation of the plans’ assets and liabilities. Under the final rule, smaller plans terminated by mass withdrawal may perform actuarial valuations less frequently. The final rule also adds new filing requirements for plan sponsors of certain terminated and/or insolvent multiemployer plans to file their actuarial valuations and withdrawal liability information with the PBGC. These new filing requirements are applicable for plan years ending after July 1, 2019.

The PBGC explains that, based on comments received, it is making changes to the forms and instructions associated with these final regulations. However, the final regulations are substantially the same as the proposed regulations, according to the PBGC.

Annual actuarial valuations. The plan sponsor of a multiemployer plan terminated by mass withdrawal is responsible for specific duties, including an annual actuarial valuation of the plan’s assets and benefits. Currently, PBGC regulations provide that if the value of nonforfeitable benefits for a plan terminated by mass withdrawal is $25 million or less as determined for a plan year, the plan sponsor may use the actuarial valuation for the next two years and perform a new actuarial valuation for the third plan year. The final regulations reduce administrative burden by allowing the plan sponsor to perform an actuarial valuation only once every five years if the present value of the plan’s nonforfeitable benefits is $50 million or less. If the present value of a plan’s nonforfeitable benefits exceeds $50 million, the plan must continue to perform actuarial valuations annually. Plans may move in and out of the five-year or annual valuation cycle, as applicable, as the value of nonforfeitable benefits changes.

Under existing regulations, plans receiving financial assistance from the PBGC are excluded from the annual actuarial valuation requirement. To estimate the PBGC’s multiemployer plan liabilities, the PBGC is adding the annual actuarial valuation requirement for insolvent plans receiving financial assistance from the PBGC (whether terminated or not terminated) and plans terminated by plan amendment that are expected to become insolvent. The provision allowing smaller plans to use less frequent actuarial valuations is available to these plans. In addition, where the present value of the plan’s nonforfeitable benefits is $50 million or less, a plan receiving financial assistance from the PBGC could comply with the actuarial valuation requirement by filing alternative information as specified in valuation instructions on the PBGC’s website.

The final rules add a new requirement for plan sponsors of certain terminated or insolvent plans to file actuarial valuations with the PBGC. The PBGC currently obtains actuarial valuations for plans receiving financial assistance by contacting plan sponsors. The final regulations require a plan sponsor to file the plan’s actuarial valuation with the PBGC within 180 days after the end of the plan year for which the actuarial valuation is performed. The PBGC states that having plans file the actuarial valuation or alternative valuation information within the required time period provides for a more efficient process for plans and the PBGC.

Withdrawal liability payments. The plan sponsor of a multiemployer plan is responsible for determining, giving notice of, and collecting withdrawal liability. The plan sponsor must also file a certification with the PBGC that notices have been provided to employers that include the amount of the employer’s liability and a schedule of payments. The PBGC states that it uses information about withdrawal liability payments and settlements, and whether employers have withdrawn from the plan but have not yet been assessed withdrawal liability, to estimate the PBGC’s multiemployer liabilities for purposes of its financial statements and to provide financial assistance to plans.

The final regulations require plan sponsors of plans subject to the actuarial valuation requirement (plans terminated by mass withdrawal, plans terminated by plan amendment that are expected to become insolvent, and insolvent plans receiving financial assistance from the PBGC (whether terminated or not terminated)) to file with the PBGC information about withdrawal liability, in the aggregate and by employer, concerning whether the plan has or has not yet assessed withdrawn employers. The information is specified in the withdrawal liability instructions on the PBGC’s website. Plan sponsors are required to electronically file the withdrawal liability information with the PBGC within 180 days after the earlier of the end of the plan year in which the plan terminates or becomes insolvent, and each plan year thereafter. If a plan sponsor has previously filed the withdrawal liability information with the PBGC, the plan sponsor may satisfy the filing requirement by submitting a statement that there is no change in the information from what was filed in the previous year.

In response to comments expressing concern about the scope of information required to be filed, the PBGC has modified the withdrawal liability instructions to clarify that withdrawal liability information for plan years ending before the effective date of the final regulations will not be required to be filed. In addition, the PBGC is clarifying in the withdrawal liability instructions that a plan sponsor is not required to file withdrawal liability information already filed with the PBGC. In December 2018, the PBGC sent a withdrawal liability survey to plan sponsors of terminated plans and insolvent plans with 500 or more participants to obtain information about withdrawal liability assessed and not yet assessed withdrawn employers. The PBGC states that the information obtained from this survey will provide PBGC information about withdrawal liability that contributing employers owe or owed in prior plan years.

Insolvency notices and updates. The plan sponsor of a multiemployer plan terminated by mass withdrawal that is insolvent or is expected to be insolvent for a plan year must provide certain notices to the PBGC and to participants and beneficiaries. Similarly, a multiemployer plan that is certified by the plan’s actuary to be in critical status and that is expected to become insolvent under ERISA Sec. 4245 must provide certain notices to the PBGC, participants and beneficiaries, and other interested parties. Notices include a notice of insolvency and a notice of insolvency benefit level.

The final rules require a plan to provide notices of insolvency if the plan sponsor determines the plan is insolvent in the current plan year or is expected to be insolvent in the next plan year. The final regulations also make the timing of the delivery of the notice of insolvency and the notice of insolvency benefit level the same—by the later of 90 days before the beginning of the insolvency year or 30 days after the date the insolvency determination is made. In addition, the PBGC allows the plan sponsor to provide one combined notice for the same insolvency year.

The final regulations also eliminate the requirement to provide most annual updates to the notices of insolvency benefit level. The PBGC notes that its experience has been that virtually all multiemployer plans that become insolvent will remain insolvent. Therefore, once a plan sponsor has provided the initial notice of insolvency benefit level, there is little need to require the plan sponsor to provide similar subsequent notices. Therefore, under the final regulations, the plan sponsor is required to provide updated notices to the PBGC and to all participants and beneficiaries only if there is a change in the amount of benefits paid that affects participants and beneficiaries generally. If a participant or beneficiary enters pay status or is reasonably expected to enter pay status during the insolvency year, or there is a change in benefit level that affects only one participant or beneficiary or a participant class, a notice is only required to be provided to the PBGC and to each affected person.

Generally, plan sponsors are required to electronically file notices of termination, notices of insolvency, and notices of insolvency benefit level. The final rules move the content requirements for these notices filed with the PBGC from the regulations to instructions available on the PBGC’s website. The final regulations also make changes to the contents of the notice of insolvency and notice of insolvency benefit level by eliminating outdated information, and, consistent with the repeal of the rules on reorganization in the Multiemployer Pension Reform Act of 2014 (MPRA), by removing references to reorganization in the notice of insolvency regulations.

Applications for financial assistance. The plan sponsor of a multiemployer plan must apply to the PBGC for financial assistance if the plan sponsor determines that the plan’s resource benefit level will be below the level of benefits guaranteed by the PBGC or that the plan will be unable to pay guaranteed benefits when due for any month during the year. PBGC regulations require a plan sponsor to file an initial application with the PBGC at the same time that it files a notice of insolvency benefit level. When the plan sponsor determines an inability to pay guaranteed benefits for any month, the plan sponsor must file a recurring application within 15 days after the plan sponsor makes the determination.

To provide the PBGC with adequate time to review applications for financial assistance, the final regulations require an initial application to be filed no later than 90 days before the first day of the month for which the plan sponsor has determined that the resource benefit level will be below the level of guaranteed benefits. The final rules require a recurring application to be filed as soon as practicable after the plan sponsor determines the plan will be unable to pay guaranteed benefits when due for a month and makes other editorial changes. The contents of the applications for financial assistance are moved from the regulations to instructions on the PBGC’s website.

Applicability dates. The amendments of the multiemployer termination regulations that make changes to the definitions, the content of the notice of termination, and the determination of plan solvency will be applicable as of July 1, 2019. Changes to the content and timing of the notices of insolvency and notices of insolvency benefit level, and to the timing of an application for financial assistance will also be applicable as of July 1, 2019.

The amendments to the multiemployer termination regulations and to Part 4245 that require plan sponsors to file with the PBGC withdrawal liability information will be applicable for plan years ending after July 1, 2019. Similarly, the amendments to the multiemployer termination regulations and to Part 4245 that change the annual actuarial valuation requirement will be applicable to actuarial valuations prepared for plan years ending after July 1, 2019.

SOURCE: 84 FR 18715.

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