PBGC proposed regs would create new structure for reportable event waivers

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed regulations which would amend the reportable events rules. The proposed regulations would create a new reportable event waiver structure that is more closely focused on risk than the current waiver structure. The proposed regulations would also reflect changes made to the funding and premium rules by the Pension Protection Act of 2006 (PPA; P.L. 109-280) and would revise and simplify the descriptions of several reportable events. Comments on the proposed rules are due by June 3, 2013. A public hearing is scheduled for June 18, 2013.

In November 2009, the PBGC proposed to increase reporting requirements by eliminating most reporting waivers. The PBGC has now reconsidered its current reportable events regulations and the 2009 proposed rules in light of Executive Order 13563, issued in January 2011, which directs federal agencies to review and improve their regulatory processes. These new proposed regulations would exempt most companies and plans from many reports, and would target reporting requirements to the minority of companies and plans that are at substantial risk of default.

Financial soundness safe harbors

Under the new proposed regulations, the PBGC proposes to establish safe harbors to enable “financially sound” businesses and plans to avoid having to report many events, particularly those events that seem to have little chance of threatening pension plans. A business would be considered in the safe harbor if it has adequate capacity to meet its obligations in full and on time, as evidenced by meeting five criteria, including passing a “credit report” test and four other criteria designed to measure various aspects of financial soundness. Rather than eliminating the small plan waiver for active participant reductions (as it proposed in 2009), the PBGC now proposes to retain a modified version of the waiver and to make it applicable to more events.

Overall, the PBGC expects the proposal to exempt or waive more than 90% of plans and sponsors from many reporting requirements. “The proposal will reduce the burden on the vast majority of companies (estimated at approximately three-fourths) that are financially sound,” the PBGC said. “This reduction may make them less likely to eliminate their defined benefit plans and thereby have a beneficial effect on retirement security generally.”

PPA changes

The PPA made changes affecting the test for whether advance reporting of certain reportable events is required. The test is based on the variable-rate premium rules, which were revised by the PPA. The proposed regulations would conform the advance reporting test to the PPA requirements.

Revised definitions of reportable events

The proposed regulations would simplify the descriptions of several reportable events and make some event descriptions narrower. One event would be broadened in scope, and another event would be clarified. The intent of the changes would be to make compliance easier and less burdensome.

Mandatory e-filing

The proposed regulations would make electronic filing of reportable events notices mandatory. This change is designed to further the PBGC’s ongoing implementation of the Government Paperwork Elimination Act. “E-filing is more efficient for both filers and PBGC and has become the norm for PBGC’s regulated community,” the PBGC said.

Applicability dates

The PBGC proposes to make the changes to the reportable events regulation in the proposed rules applicable to post-event reports for reportable events occurring on or after January 1, 2014, and to advance reports due on or after that date. Deferral of the applicability dates would provide time for plans and plan sponsors to institute any necessary event monitoring programs to comply with the new rules.

The PBGC said that it is also giving consideration to making the waiver and safe harbor provisions in the final regulation available (in addition to the waivers in the current regulation) during the period from the effective date of the final regulations (30 days after publication in the Federal Register) to January 1, 2014.

Source: 78 FR 20039, April 3, 2013.

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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