EBSA issues guidance on annual funding notice requirements under MAP-21

The Employee Benefits Security Administration (EBSA) has released a field assistance bulletin (FAB) that provides guidance on the annual funding notice requirements mandated by the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141). The guidance is provided in a question-and-answer format. An appendix to the FAB contains a supplement to the model annual funding notice that plan administrators may use to comply with the MAP-21 requirements.

New disclosure requirements

MAP-21 amended ERISA §101(f) to require plan administrators of single-employer defined benefit pension plans to provide participants and others additional information regarding the impact of MAP-21’s interest rate stabilization rules on the plan’s funding status. Specifically, MAP-21 added ERISA §101(f)(2)(D) which requires plan administrators of single-employer defined benefit plans to disclose additional information in the annual funding notice for a plan year beginning after December 31, 2011, and before January 1, 2015, if such plan year is an “applicable plan year” under ERISA. MAP-21 requires the Labor Department to modify the annual funding notice to prominently include the supplemental information under ERISA §101(f)(2)(D).

The FAB provides interim guidance pending the adoption of regulations or other guidance under the new rules. Pending further guidance, the Labor Department, as a matter of enforcement policy, will treat a plan administrator of a single-employer defined benefit plan as satisfying ERISA §101(f)(2)(D) if the plan administrator has complied with the guidance in the FAB and “has acted in accordance with a good faith, reasonable interpretation of section 101(f)(2)(D) with respect to matters not specifically addressed” in the FAB.

Questions and answers

The MAP-21 annual funding notice requirements only apply to single-employer defined benefit plans subject to both Titles I and IV of ERISA where the plan year is an “applicable plan year.” The MAP-21 requirements generally apply to plan years beginning after December 31, 2011. The first annual funding notices to include the MAP-21 disclosures will be the annual funding notices for the 2012 plan year for calendar year plans (other than certain small plans) due no later than April 30, 2013.

ERISA §101(f)(2)(D)(ii) defines an “applicable plan year” as any plan year beginning after December 31, 2011, and before January 1, 2015, for which the plan meets the following requirements: (1) The funding target is less than 95% of the funding target determined without regard to the MAP-21 segment rates; (2) The plan’s funding shortfall determined without regard to the MAP-21 segment rates is greater than $500,000; and (3) The plan had 50 or more participants on any day during the preceding plan year. A plan year beginning on or after January 1, 2015, is not an applicable plan year and the additional MAP-21 disclosures are not required.

The technical guidance explains how the 95% test works, how the funding shortfall is calculated, and how participants are counted. The FAB also provides guidance as to the content requirements of the notice.

Supplement to model notice

The appendix to the FAB contains a model supplement to the single-employer defined benefit plan model annual funding notice. Use of the MAP-21 Supplement is not mandatory; plan administrators may use other notice forms to satisfy the MAP-21 content requirements. However, pending further guidance, use of an appropriately completed MAP-21 Supplement, together with the model annual funding notice, will, as a matter of DOL enforcement policy, satisfy the content requirements of ERISA §101(f)(2).

Source: Field Assistance Bulletin 2013-01.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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