Technical Update 14-2 provides PBGC guidance about the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on annual financial and actuarial information reporting under section 4010 of the Employee Retirement Income Security Act (ERISA) and part 4010 of PBGC’s regulations. HATFA extends relief provided in the Moving Ahead for Progress in the 21st Century Act (MAP-21)—passed in 2012—which allowed defined benefit plans to discount future benefit payments to a present value using a 25-year average of bond rates rather than a two-year average. 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.
In 4010 filings, defined benefit (DB) retirement plans are required to provide, among other things, the following actuarial information for plans other than exempt plans:
- The funding target attainment percentage (FTAP), average funding target attainment percentage (AFTAP), and funding target determined as if the plan has been in at-risk status for funding purposes for five years, which are reported directly on Schedule P; and
- The actuarial valuation report submitted as an attachment to the 4010 filing.
The filings are due 105 days after the end of the “information year” (e.g., April 15th after year end if the information year is the calendar year). The required actuarial information relates to the plan year ending within the information year.
PBGC Technical Update 12-2 provides guidance about how the MAP-21 stabilization rules affect 4010 reporting. It specifies the calculations where the stabilization rules are to be disregarded (e.g., 80% gateway test) and the calculations where the stabilization rules are to be used (e.g., $15 million funding shortfall waiver, actuarial valuation report data). The rules and concepts set forth in PBGC Technical Update 12-2 continue to apply, PBGC says.
HATFA’s retroactive application for 2013 may cause a timing issue for some 4010 filers, the agency warns. If a 4010 filing contains actuarial information for 2013 based on segment rates that differ from those the plan ultimately uses, ordinarily the filing would need to be amended, but the PBGC said it appreciates that it would be unduly burdensome to require such amendments. Therefore, 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.
The text of PBGC Technical Update 14-2 is here.