More retirement-related regulatory news for plan sponsors, including links to detailed information.
MAP-21 pension extension moves in highway trust fund bills from congressional panels
The House Ways and Means Committee has approved by voice vote a bill (H.R.5021) that would provide highway funding through May 2015 in part by using about $6.4 billion from an extension of the MAP-21 pension funding stabilization provision. The House is expected to vote on the “Highway and Transportation Funding Act” next week.
Regarding the pension smoothing provisions, the House bill, as described by the Joint Committee on Taxation:
Applicable minimum and maximum percentages and annual funding notice
The proposal revises the specified percentage ranges (that is, the range from the applicable minimum percentage to the applicable maximum percentage of average segment rates) for determining whether a segment rate must be adjusted upward or downward. Under the proposal, the specified percentage range for a plan year is determined by reference to the calendar year in which the plan year begins as follows:
• 90 percent to 110 percent for 2012 through 2017
• 85 percent to 115 percent for 2018
• 80 percent to 120 percent for 2019
• 75 percent to 125 percent for 2020
• 70 percent to 130 percent for 2021 or later
In addition, for purposes of the additional information that must be provided in a funding notice for an applicable plan year, an applicable plan year includes any plan year that begins after December 31, 2011, and before January 1, 2020, and that otherwise meets the definition of applicable plan year.
To read the Congressional Budget Office’s report on the bill, click here.
PBGC issues moratorium on 4062(e) enforcement
The Pension Benefit Guaranty Corporation (PBGC) has announced a moratorium, until the end of 2014, on the enforcement of 4062(e) cases. The moratorium will enable PBGC to ensure that its efforts are targeted to cases where pensions are genuinely at risk. The six-month period will also allow the PBGC to work with the business community, labor, and other stakeholders.
During the moratorium, from July 8 to December 31, 2014, PBGC will cease enforcement efforts on open and new cases. Companies should continue to report new 4062(e) events, but PBGC will take no action on those events during the moratorium.
For more information, click here.
GAO report: Private pensions – targeted revisions could improve usefulness of Form 5500 information
In a two-phase online GAO survey, stakeholders identified problems with the usefulness, reliability, and comparability of data from the Form 5500 (see table). Despite longstanding concerns with the Form 5500—the annual report that employee benefit plans file with the federal government—agency officials have made only minimal changes over the last 3 years.
Key challenges identified with Form 5500:
• Weaknesses in the format
Plan asset categories break out plan assets differently from the investment industry, and provide little insight into plan investments, their structure, or the level of associated risk. In particular, the majority of respondents indicated that the “other” plan asset category in the form is too broad because it can include many disparate types of investments. Respondents also indicated challenges in identifying the underlying holdings of plan assets invested in indirect investments.
• Challenges in finding key information
The form lacks detailed information on plan investments because there is no structured, data-searchable format for attachments to the form and the filing requirements on plan investments is limited for small plans, which have less than 100 participants.
• Inconsistent data
Naming conventions and identification numbers may be inconsistent, making it difficult to collect and accurately match records.
To read the entire GAO report, click here.