Tag Archives: PBGC

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

New process for DB plan determination letter applications
The Internal Revenue Service (IRS) published a post on its website highlighting the new process for defined benefit plan determination letter applications.

To read the entire post, click here.

IRS releases draft Form 5300
The IRS issued a draft of the revision for Form 5300, Application for Determination for Employee Benefit Plan. Form 5300 is used to request a favorable determination letter (DL) from the IRS on the qualified status of these plans and the exempt status of any related trust.

Form 5300 has undergone major revisions in format and information required. Many of the revisions reflect the changes affecting individually designed plans described in Announcement 2015-19, and Revenue Procedure 2016-37. The revised form significantly simplifies the information that plan sponsors must provide and is expected to reduce the taxpayer burden in filling out the form.

The IRS expects the final version of Form 5300 to be available by December 2016. If you wish, you can submit comments about the draft Form 5300.

Federal agencies release proposed revisions to improve Form 5500
The Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) are seeking public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. The EBSA also published a related notice of proposed changes to its annual reporting regulations under Title I of ERISA.

Form 5500 is the primary source of information about the operations, funding, and investments of private-sector, employment-based pension and welfare benefit plans in the United States.

To read the proposed rule, click here.


Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC issues interim final rule on adjustment of civil penalties
The Pension Benefit Guaranty Corporation (PBGC) is amending its regulations to adjust the penalties provided for in sections 4071 and 4302 of ERISA. This interim final rule adjusts the maximum civil penalties that PBGC may assess. The new maximum amounts are $2,063 for section 4071 penalties and $275 for section 4302 penalties.

The amendments are effective August 1, 2016. The increases in the civil monetary penalties under sections 4071 and 4302 provided for in this rule apply on and after August 1, 2016.

To read the entire rule, click here.

FAF releases updated print editions of FASB and GASB accounting standards codifications
The Financial Accounting Foundation (FAF) has released updated print editions of the FASB Accounting Standards Codification, from the Financial Accounting Standards Board (FASB), and the Codification of Governmental Accounting and Financial Reporting Standards, from the Governmental Accounting Standards Board (GASB).

The FASB codification is the single, authoritative source of GAAP for public and private companies and not-for-profit organizations. For more information, click here.

The GASB codification is the single, authoritative source of GAAP for state and local governments. For more information, click here.

The Multiemployer Pension Reform Act and the Central States Pension Plan controversy: What is at stake?

Connor_TimThe Multiemployer Pension Reform Act of 2014 (MPRA) allows certain multiemployer plans that are projected to become insolvent to reduce benefits indefinitely. Ordinarily, when a multiemployer plan goes insolvent, it receives annual financial assistance from the Pension Benefit Guaranty Corporation (PBGC) to support payment of retiree benefits at maximum guaranteed levels. However, the PBGC program itself is in dire straits, recently projecting its own multiemployer program insolvency by 2025. At that point, the PBGC is essentially predicting it will not have enough money to provide the support needed to maintain retiree benefit levels. This means that retiree benefits in an insolvent plan could potentially be reduced below the PBGC-guaranteed levels because there wouldn’t be enough combined money available from the plan and the PBGC to support those levels.

The Central States, Southeast and Southwest Areas Pension Plan (Central States) reported that its own projected insolvency will occur in 2026 in its application to the U.S. Treasury Department in 2015 to implement MPRA suspensions. The plan has close to 400,000 total participants, roughly half of whom are retired. The MPRA cuts, some of which are as high as 70%, are actually designed to produce higher benefit amounts than would be paid if the plan actually went insolvent, although MPRA cuts would be effective July 1, 2016, instead of upon actual insolvency.

The Treasury is scheduled to approve or deny the Central States application by May 7, 2016. During the review, the Treasury has heard from participants and advocate groups that cuts were not designed in an equitable manner; steps were not properly taken by the plan to avoid the current situation; future projections are not based on reasonable assumptions; and, in general, the law is unjust and unfair to the participants involved. Ultimately, it would take Congressional action to address that last concern. In the present, the Treasury will have to review and decide if Central States followed the terms of MPRA in designing its solution to avoid insolvency. If the Treasury approves the application, it will go to a vote. However, even if the participants vote no, it may not matter because the Treasury is likely obligated by MPRA to override the vote and implement some form of suspensions anyway because Central States is likely deemed to be a “systemically important plan,” one which requires $1 billion or more of PBGC assistance.

For now, all eyes are on May 7, waiting to see how the Treasury proceeds. Multiemployer plan sponsors and participants will no doubt pay close attention and stay tuned to any whispers of potential success in attempts by various parties in repealing or changing MPRA in any material way, despite those attempts looking unlikely today. In the meantime, the task for other sponsors in keeping their plans healthy and adequately funded is more essential than ever, and needs to be continually executed with careful attention.

For more perspective, read Tim’s article “Central States Pension Plan and the Multiemployer Pension Reform Act.”

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC issues proposed rule on payment of premiums, late payment penalty relief
The Pension Benefit Guaranty Corporation (PBGC) proposes to lower the rates of penalty charged for late payment of premiums by all plans, and to provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. PBGC seeks public comment on its proposal.

For more information, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Withdrawal of proposed nondiscrimination rules
The Department of the Treasury and the Internal Revenue Service (IRS) announced that they will withdraw certain provisions of proposed regulations published on January 29, 2016, relating to nondiscrimination requirements applicable to qualified retirement plans under § 401(a)(4).

The provisions of the proposed regulations that will be withdrawn are the provisions that would modify § 1.401(a)(4)-2(c) and § 1.401(a)(4)-3(c). These provisions were intended to address certain qualified retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending that formula to a classification of employees that is reasonable and established under objective business criteria.

For more information, click here.

New PBGC multiemployer data tables
The Pension Benefit Guaranty Corporation (PBGC) released the “2013 PBGC data tables: Multiemployer supplement” containing 10 charts that illustrate zone status over time (participant); zone status over time (plans); direction of zone status changes; zone status and tests for declining status; and administrative expenses (across various parameters).

To download the tables, click here.

GASB releases pension guidance addressing issues raised by stakeholders during implementation
The Governmental Accounting Standards Board (GASB) issued guidance addressing practice issues raised by stakeholders during implementation of the GASB’s pension accounting and financial reporting standards for state and local governments. GASB Statement No. 82, Pension Issues, addresses:

• Presentation of payroll-related measures in required supplementary information
• Selection of assumptions and the treatment of deviations from guidance in Actuarial Standards of Practice for financial reporting purposes
• Classification of payments made by employers to satisfy plan member contribution requirements.

The statement is designed to improve consistency in the application of the pension standards by clarifying or amending related areas of existing guidance.

For more information, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Comment request for the annual return/report of employee benefit plan
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). The Internal Revenue Service (IRS) is currently soliciting comments concerning the Annual Return/Report of Employee Benefit Plan.

For more information, click here.

PBGC report suggests multiemployer program needs additional premiums
The Pension Benefit Guaranty Corporation (PBGC) issued the study “PBGC insurance of multiemployer pension plans: A five year report.” The study assesses revenues needed for the agency to continue to protect participants in multiemployer plans that are likely to run out of money.

While the Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) increased premiums paid by multiemployer pension plans to PBGC, the program is still deeply underfunded. The report illustrates the effects of increasing premium revenues on PBGC’s continued solvency under a variety of scenarios, reflecting different assumptions as to how many plans would suspend benefits or apply for partition under MPRA. Under each scenario in the study, the likelihood that the multiemployer program will be insolvent before 2034 exceeds 50%, even if premium revenues are doubled.

To download the entire study, click here.

FASB issues update on improvements to employee share-based payment accounting
The Financial Accounting Standards Board (FASB) issued “Accounting Standards Update No. 2016-09, Compensation—stock compensation (topic 718): Improvements to employee share-based payment accounting.” The Accounting Standards Update (ASU) affects all organizations that issue share-based payment awards to their employees. The ASU simplifies the accounting for share-based payment award transactions, including: the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For more information, click here.

IRS issues data book showing 22% fewer determination letters in 2015
The IRS released the 2015 Internal Revenue Service Data Book, which covers the period October 1, 2014, through September 30, 2015. The data book provides an annual snapshot of agency activities for the fiscal year.

According to the report, in FY 2015, the IRS issued a total of 8,976 determination letters on employee retirement plans. They consisted of 2,829 determination letters for defined benefit plans and 6,147 determination letters for defined contribution plans. The number of determination letters was down 22% from the 11,478 it issued the year before.

For more information, click here.

Will more corporations need to file PBGC Form 4010 for their defined benefit pension plans for the 2016 fiscal year?

Kamenir-JeffThis blog post was originally published on January 5, 2016. It has been updated to reflect the PBGC’s final rule in March 2016.

The Pension Benefit Guaranty Corporation (PBGC), the federal agency responsible for insuring unfunded liability for single-employer defined benefit pension plans in the event of a distress plan termination, issued final guidance in March 2016 that will likely increase the number of companies required to submit a 4010 filing for the 2016 fiscal year and beyond. An example of a circumstance in which a distress plan termination can occur is when a company files for bankruptcy.

The PBGC is charged under federal law with monitoring poorly funded defined benefit pension plans in part by requiring a special filing under ERISA Section 4010, commonly referred to as a “4010 filing.” This filing requires the employer to submit defined benefit pension plan financial and actuarial information as well as the company’s financial information. The filing is generally due three and a half months after the end of the fiscal year. The PBGC keeps this information shielded from public disclosure, which protects the privacy of closely held companies, which are not required to follow U.S. Securities and Exchange Commission (SEC) regulatory rules for listed companies.

Under current rules, employers with defined benefit pension plans that are less than 80% funded based on prescribed interest rates are required to report under Section 4010 unless they can meet the requirements for certain limited exemptions. Plans with under 500 participants are exempt if they are underfunded by $15 million or less. Companies that sponsor one or more pension plans with a combined participant count of 500 or more are exempt if the combined underfunding of all plans is $15 million or less.

Beginning with the 2016 fiscal year, PBGC modified the actuarial assumptions used for determining the underfunding exemption if the combined pension plan participant count is 500 or more. The modified assumptions use lower interest rates for determining pension plan liabilities that will increase liabilities and therefore make it more difficult to qualify for the underfunding exemption. For example, a plan with 500 or more participants that is less than 80% funded and may have been exempt from submitting a 4010 filing because the underfunding was less than $15 million may no longer qualify for the exemption under the new final rules. A guess is that this plan deficit would swell to over $15 million and a 4010 filing will be required. On the other hand, if the combined participant count is less than 500, the final rules automatically exempt the plans from 4010 filing requirements.

Companies that sponsor pension plans with 500 or more participants that wish to avoid the 4010 filing requirements under the final rules should work with their actuaries to take steps to bring each plan up to at least 80% funded for the 2016 plan year or to meet the $15 million or less underfunding exemption based on the newly required actuarial assumptions.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC issues final rule on ERISA 4010 reporting
The Pension Benefit Guaranty Corporation (PBGC) released a final rule amending its regulation on annual financial and actuarial information reporting under ERISA section 4010. Some key provisions of the final rule include interest rate stabilization, changes to the $15 million aggregate underfunding waiver, and new waivers.

The final rule also provides alternative methods of compliance for reporting certain actuarial information and makes a few technical changes to the regulation.

To read the final rule, click here.

PBGC issues notice of arbitration association’s request for fee update
The PBGC has released a notice stating that the agency has received a request to update the fee schedule—which will affect disputed multiemployer plan withdrawal liability determinations—from the American Arbitration Association.

For more information, read the entire notice here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Revisions to the employee plans determination letter program
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) has issued guidance regarding the elimination of the five-year remedial amendment cycle system for individually designed plans under the employee plans determination letter program, effective January 1, 2017. Notice 2016-03 provides guidance on (1) controlled groups and affiliated service groups that have previously made a Cycle A election and are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 31, 2017; (2) expiration dates on determination letters issued prior to January 4, 2016, that are no longer operative; and (3) the period during which certain employers may, on or after January 1, 2016, establish or adopt a defined contribution preapproved plan and, if permissible, apply for a determination letter, which has been extended from April 30, 2016, to April 30, 2017.

For more information, click here.

IRS updates 2016 revenue procedures for employee plans and exempt organizations
The IRS has published its latest Internal Revenue Bulletin. The bulletin includes various revenue procedures for issuing letters, rulings, determination letters, and technical advice on specific issues related to employee benefits.

To read Internal Revenue Bulletin 2016-1, click here.

IRS announces beginning of processing electronic Form 1094 and 1095, B and C
The IRS announced that the processing of electronic Forms 1094 B/C and Forms 1095 B/C will begin on January 21, 2016. The IRS posted a November 2015 revision of Publication 5165, Guide for Electronically Filing ACA Information Returns for Software Developers and Transmitters (processing year 2016). This version represents the most current technical information and should replace previous “Early Look” versions.

For more information, click here.

PBGC ready to accept 2016 premium filings
The Pension Benefit Guaranty Corporation (PBGC) announced that My PAA is now ready to accept electronic premium filings for plan years beginning in 2016.

For additional information, see the following pages: Premium payment instructions and addresses, What’s new in My PAA, Online demos, and Online premium filing with My PAA.

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Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC to modify collection of information on locating and paying participants
The Pension Benefit Guaranty Corporation (PBGC) is modifying its collection of information on locating and paying participants and is requesting that the Office of Management and Budget (OMB) approve the revised collection of information under the Paperwork Reduction Act for three years. This notice informs the public of the PBGC’s request and solicits public comment on the collection of information.

For more information, click here.

Employers’ Tax Guide for 2016
The Internal Revenue Service (IRS) has published Publication 15, Employer’s Tax Guide, for 2016. This publication explains the tax responsibilities of an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms that must be given to employees, those that employees must give to the employer, and those that must be sent to the IRS and U.S. Social Security Administration (SSA). This guide also has tax tables needed to figure the taxes to withhold from each employee for 2016. References to “income tax” in this guide apply only to federal income tax.

To download Publication 15, click here.

Employer’s tax guide for fringe benefits for 2016
The IRS has published Publication 15-B, Employer’s Tax Guide to Fringe Benefits, for 2016. This publication supplements Publication 15, Employer’s Tax Guide, and Publication 15-A, Employer’s Supplemental Tax Guide. It contains information for employers on the employment tax treatment of fringe benefits.

To download Publication 15-B, click here.

U.S. public pension holdings drop to $3.2 trillion in third quarter
According to the U.S. Census Bureau, the holdings of the largest 100 U.S. public pension systems dropped 4.9% from the previous quarter to $3.2 trillion in the third quarter because of negative earnings. Earnings fell from a gain of $32.6 billion in the second quarter of 2015 to a loss of $145.9 billion in the third. Total holdings were also 2.5% lower than the same quarter last year.

To learn more, click here.