Segal warns in a Bulletin that the decisions trustees will have to make require more consideration than they appear on the surface.
Funding Relief Choices
For the 2009 plan year, trustees will have the option to freeze their plan’s zone status at the level determined for 2008, the Bulletin said. A plan in the red zone or yellow zone for 2008 that has its zone status frozen would not have to update its funding improvement or rehabilitation plan or its contribution and benefit schedules for 2009.
Segal points out that even if trustees choose to freeze their plan’s zone status, the plan’s actuary must still certify its actual 2009 zone status. If the certification shows that the plan would have been in the red zone in 2009 without the status freeze, the contributing employers will be protected from excise taxes and penalties for a minimum funding deficiency as if it were operating under red zone rules.
The election to freeze must be filed with the IRS, in general, at the same time as the actuary files the 2009 zone certification.
Plans that elect to freeze their zone status must notify the plan participants, contributing employers and other stakeholders of the election, subject to IRS rules.
Trustees of a plan in the yellow or red zone can also elect to extend their funding improvement period by three years (from 10 to 13), Segal notes. For a seriously endangered plan (deep yellow or orange zones), the 15-year period can be extended to 18 years.
According to the Segal Bulletin, Pension Protection Act technical corrections included in the pension relief bill that could affect multiemployer plans include:
- The ban on payment of lump sums, partial lump sums, and Social Security level income benefits from a plan in the red zone now applies only to people who retire after being notified of the plan's status. Consequently, red zone plans will not be forced to recalculate benefits for people who were already receiving benefits in that type of form.
- For the annual funding notice, both the actuarial value and the market value of the plan's assets must be reported, as of the valuation date for the plan being reported and on the two preceding plan years. Segal notes that as originally enacted, the PPA did not explain which approach should be used in reporting these values, and it required that they be given as of the end of the relevant plan years.
- When a plan discloses a financial report requested by a stakeholder, it does not have to delete individually identifiable information with respect to an investment manager, adviser, or any other person (other than a plan employee) who prepared the report. The information must still be removed with respect to plan employees, contributing employers, and other service providers and fiduciaries.
The Segal Bulletin is here .