PBGC Issues Guidance on Financial and Actuarial Reporting Changes

November 30, 2007 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation has issued Technical Update 07-2, providing guidance on changes made by the Pension Protection Act of 2006 (PPA) relating to PBGC regulations on reporting of annual financial and actuarial information under ERISA sections 4010 and 4043.

In general, the Technical Update says that for purposes of the annual employer reporting and reportable events regulations, a plan’s unfunded vested benefits (UVBs) and vested benefits amounts (for the transition plan years covered by the Technical Update) are determined as of the relevant year-end “testing date” using the rules for determining the variable-rate premium (VRP) under the law in effect before the PPA. The agency said it expects to amend both the annual employer reporting regulation and the reportable events regulation to conform to and implement the premium-related changes under PPA 2006, but the current Technical Update is intended to provide guidance for the period before those amendments apply.

Currently, Employee Retirement Income Security Act (ERISA) section 4010 generally requires a controlled group to report to PBGC if the aggregate UVBs in plans maintained by the controlled group, as determined for VRP purposes under ERISA section 4006(a)(3)(E)(iii), exceed $50 million, disregarding plans with no UVBs (the “$50 million gateway test”). The PPA amends ERISA section 4010 to replace the $50 million gateway test with a new test, effective for “years beginning after 2007.”  However, according to the guidance, for information years beginning before 2008, the $50 million gateway test is still used.

UVBs for any plan year ending within the information year are to be determined as of the testing date using the premium rules in effect before 2008, the agency said.

Likewise, according to the guidance, vested benefits amounts and UVBs for an event year beginning in 2008 are to be determined for purposes of ERISA section 4043(a) and subparts A through C of reportable events regulation as of the testing date using the premium rules in effect before 2008.

The Technical Update provides example to aid understanding of the guidance.

Technical Update 07-2 is here .