PBGC issues guidance on effect of HATFA on annual financial and actuarial reporting

The PBGC has issued a technical update providing guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA; P.L. 113-159) on annual financial and actuarial reporting under ERISA Sec. 4010.

The Moving Ahead for Progress in the 21st Century Act (MAP-21) provides stabilization rules that limit the volatility of discount rates, used for certain funding and benefit restriction purposes, by constraining them within a range around the 25-year average segment rates. Under MAP-21, the range, or “corridor,” was scheduled to widen over time starting with plan years beginning in 2013 plan years. HATFA extends the period during which the narrowest range applies. Under HATFA, the narrowest range applies through the 2017 plan year. HATFA applies retroactively to the 2013 plan year.

Plan sponsors may elect to wait until the 2014 plan year to use HATFA rates for funding purposes, in which case the MAP-21 rates will apply for the 2013 plan year. Plans may decide whether to use MAP-21 or HATFA rates for 2013 funding determinations as late as December 31, 2014 (or, if later, the due date for the 2013 Form 5500 Annual Return/Report).
Potential timing issue

The PBGC notes that HATFA’s retroactive application for 2013 may cause a timing issue for some 4010 filers (for example, for two employers that each sponsor a calendar-year plan but that have different 4010 filing information years).

Under the technical update, the PBGC states that 4010 filings need not be amended solely to revise actuarial information that changed because of a decision to use HATFA rates for the 2013 plan year of a plan reported in the filing. This relief applies regardless of when the 4010 filing is submitted (i.e., before or after HATFA was enacted).

The PBGC reserves the right to request that a filer submit revised actuarial information for 2013 reflecting the rates the plan ultimately uses for 2013, in the event the PBGC decides it needs the information for its monitoring and enforcement activities. If the PBGC requests such information, it will provide sufficient time to comply with the request.

Because of the retroactive application of HATFA, it is possible that a 4010 filing that has already been submitted is no longer required because of HATFA. The PBGC provides that if a filer in that situation stated in the filing that an actuarial valuation report would be submitted by the alternative due date, the filer need not submit the report. And if a 4010 filing is also not required for the next information year, the filer need not report to the PBGC the reason why that filing is not required, as would ordinarily be required for previous filers.

Source: PBGC Technical Update 14-2

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