PBGC technical update explains effect of MAP-21 on 4010 reporting

The PBGC has issued a technical update providing guidance on the effect of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141) on annual financial and actuarial reporting under ERISA §4010. The Technical Update supersedes any inconsistent guidance in the PBGC’s 4010 filing instructions.

MAP-21 disregarded for determining FTAP

Effective beginning in 2012, MAP-21 establishes stabilization rules that limit the volatility of certain discount rates used for funding purposes by constraining them within a corridor.

However, under ERISA §4010(d)(3), as added by MAP-21, the stabilization rules do not apply for purposes of determining the funding target or funding target attainment percentage (FTAP) required to be reported under ERISA §4010(d).

4010 reporting is required if any plan sponsored by a member of the controlled group has a FTAP, “as determined as defined in subsection (d),” below 80% (referred to as the 80% Gateway Test). Because ERISA §4010(d), as amended by MAP-21, requires that the FTAP be determined without regard to the MAP-21 stabilization rules, the FTAP used for the 80% Gateway Test is also determined without regard to such rules, the PBGC said. Thus, the PBGC noted, the FTAP used for purposes of the 80% Gateway Test might not be the same as the FTAP reported on line 14 of the Schedule SB of Form 5500.

IRS Notice 2012-61 provides guidance on how to determine certain amounts in situations in which the stabilization rules do not apply, such as the FTAP for 4010 purposes. The IRS notice describes how to determine the value of plan assets underlying such calculation. Under that guidance, the asset value used to determine the FTAP for purposes of the 80% Gateway Test may differ from the asset value used for minimum funding purposes.

However, to reduce the administrative burden of determining whether a 4010 filing is required, the PBGC will waive reporting for a person for an information year if:

  • Reporting is not required under ERISA §§4010(b)(2) or (b)(3) for the person for that information year and
  • The FTAP (for the plan year ending within that information year) of each plan maintained by the person’s controlled group, determined without regard to the MAP-21 stabilization rules, would be at least 80% if the value of plan assets used for minimum funding purposes were substituted for the value described in IRS Notice 2012-61, Q&A NA-3.

Stabilization not disregarded for all other 4010 purposes

For all other 4010 requirements involving minimum funding-related determinations affected by the MAP-21 stabilization rules, ERISA §4010(d)(3) does not apply. Thus, the PBGC confirms that filers are to make such determinations using the same assumptions as those used for minimum funding or benefit restriction purposes. Accordingly, the PBGC said, to the extent the MAP-21 stabilization rules are used for those purposes, they are also to be used for purposes of determining the 4010 funding shortfall and reporting the actuarial information required under PBGC Reg. §4010.8.

Source: PBGC Technical Update12-2.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

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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