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Fewer large defined benefit plan sponsors will be able to skip Section 4010 reporting under a rule change the PBGC will propose shortly.
Section 4010 of the Employee Retirement Income Security Act requires plan sponsors to report annual financial and actuarial information to the Pension Benefit Guaranty Corp. if a plan is less than 80% funded or has missed more than $1 million in required contributions.
Plans funded more than 80% or underfunded by less than $15 million have been able to obtain waivers that were intended to help smaller plans. Thanks to higher interest rates allowed by MAP-21 that caused many plans' funding levels to increase, some large plan sponsors also have qualified for those waivers in recent years. To curtail that, PBGC officials plan to add a cap of 500 participants or fewer.
PBGC officials estimate that as many as 200 larger plans no longer would qualify for the waiver, but note sponsors also could contribute more to their plans to avoid the less-than-80%-funded trigger.
The 4010 filings provide PBGC “more current and more useful underfunding information than any other source,” and are the only way that sponsors report underfunding on a termination basis, the agency wrote in its July 10 report to Congress on 4010 reporting results for 2013. It is also one of the sources of financial information for all pension plans within a corporate control group rather than a single plan sponsor.
“However, in practice, the 4010 reporting criteria fail to properly target plans, resulting in both over- and under-inclusiveness,” the agency said. PBGC officials also recommend Congress consider further changes to make the reporting “better targeted and less burdensome.”
The proposal is scheduled for publication in the Federal Register on July 27. Public comments are due Sept. 25.
Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.
The number of single-employer pension plans insured by the Pension Benefit Guaranty Corp. continues to tumble.