The Pension Benefit Guaranty Corporation (PBGC) has issued Technical Update 17-1, which provides guidance about compliance with the active participant reduction event requirements of section 4043(c)(3) of the Employee Retirement Income Security Act (ERISA) and the PBGC’s regulation on Reportable Events and Certain Other Notification Requirements (29 CFR part 4043.23(a)).
The PBGC is providing an alternative method for determining whether reporting an attrition event to the PBGC is required under § 4043.23(a)(2) to avoid possible duplicative reporting.
This reportable event occurs when, as a result of a single cause (such as a reorganization or layoff), or through employee attrition, the number of active participants in a plan is reduced below 80% of the number at the beginning of the year or below 75% of the number at the beginning of the prior year.
Since publication, the agency has received questions from practitioners about whether the regulatory text requires a plan that files a single-cause event notice to file an “attrition event” notice at a later date due to the same active participant reduction. This was not the PBGC’s intent.
The agency plans to issue a new proposal to clarify this and avoid duplicative reporting, but because it has not yet issued a rule, there is a need for interim guidance to avoid duplicative reporting while complying with the existing (unamended) regulation.
To determine whether reporting is required for an attrition event for a plan year, a potential filer may disregard any cessations of active participant status reported to the PBGC for single-cause events during the plan year or preceding plan year.
- When determining whether the number of active plan participants at the end of the plan year is less than 80% of the number of active participants at the beginning of the plan year, plans may include in the year-end active participant count participants who ceased to be active participants during the plan year due to a reported single-cause event.
- When determining whether the number of active plan participants at the end of the plan year is less than 75% of the number of active participants at the beginning of the preceding plan year, plans may include in the year-end active participant count participants who ceased to be active participants during the current or prior plan year because of a reported single-cause event.
The Technical Update is here.
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