PBGC to Begin Requesting Pension Risk Transfer Information

The PBGC is revising its premium filing procedures to require reporting of pension risk transfer actions.

The Pension Benefit Guaranty Corporation (PBGC) says it is revising the 2015 premium filing procedures and instructions to require after-the-fact reporting of certain defined benefit plan risk transfers through lump-sum windows and annuity purchases. The announcement was made in a request for Office of Management and Budget (OMB) approval filed in the Federal Register.   

The agency explains that risk transfers can substantially reduce the premiums plans otherwise would pay to the PBGC, and because premiums and the investment income earned on them are a major source of income for the agency, information about risk transfers is critical to its ability to assess its future financial condition. There is currently no available comprehensive, detailed, and reliable source for information about risk transfers.

In September 2014, the PBGC gave public notice that it intended to submit the revised procedures and instructions to OMB for review. The agency said it received nine comment letters from representatives of employers, pension practitioners, annuity providers, and participants that focused almost exclusively on the new risk transfer items.

In its comment letter, the ERISA Industry Committee (ERIC) said plan sponsors can increase the strength and longevity of their DB plans through a variety of de-risking methods, and the PBGC, accordingly, should support the efforts of companies that continue to sponsor and/or administer defined benefit plans.

The agency said it has made changes to the revised premium filing items (both the questions and the instructions) in response to some of the comments. It is requesting comments on the revisions, to be submitted by February 11, 2015.

The new PBGC Participant and Plan Sponsor Advocate, Constance Donovan, earlier this month released her first annual report of issues, in which she said: “[P]ension de-risking may be the greatest threat to PBGC’s single-employer program, as it has the potential to substantially reduce PBGC’s premium base.”