EBSA Issues Final Rule On New Annual Funding Notice Requirements For DB Plans

The Employee Benefits Security Administration (EBSA) has issued a final rule (Text: EBSA Final Regulations, Annual Funding Notice For Defined Benefit Plans) implementing the annual funding notice requirement of section ERISA §101(f). ERISA §101(f) requires the administrators of defined benefit plans (single employer and multiemployer) to furnish an annual funding notice to participants, beneficiaries, and the PBGC, among other entities. The rule is designed to enhance retirement security pension plan transparency by ensuring that workers receive timely and accurate notification annually of the funded status of their defined benefit pension plans. This document also contains necessary conforming amendments to other regulations under ERISA, such as the summary annual report regulation.

The Pension Protection Act of 2006 (PPA), (P.L.109-280) enhanced existing funding notice requirements by adding to the content of the notice, shortening the timeframe for providing notices, and expanding the requirement to provide funding notices from multiemployer defined benefit plans to all defined benefit plans. Defined benefits plan administrators must now furnish funding notices annually to participants, beneficiaries, labor organizations representing such participants or beneficiaries, employers obligated to make contributions to a multiemployer plan, and the PBGC. Large plans must furnish the notice by the 120th day following the end of the plan year to which the notice relates and small plans may furnish the notice on or before the due date, with extensions, of the plan’s Form 5500 Annual Return/Report.

As set forth in proposed regulations issued in November 2010, the regulations dictate that the funding notice show the plan’s funding percentage, the assets and liabilities that determine the funding percentage, the fair market value of the plan’s assets on the last day of the plan year, the plan’s funding and investment policies and allocation of assets, known events that are projected to have a material effect on the plan’s funding, and other information.

Significant changes from the proposal include: exempting certain terminating single-employer plans from furnishing their funding notices; establishing alternative methods of compliance for multiemployer pension plans that have terminated by mass withdrawal and for plans described in Code Sec. 412(e)(3); and including a rule of administrative convenience that if an otherwise disclosable material event first becomes known to the plan administrator 120 days or less before the due date of the funding notice, the event is not required to be disclosed in the notice.

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