2002 Enrolled Actuaries Meeting

Questions to the PBGC

and Summary of their Responses

March 2002
Summary of Discussions between the Enrolled Actuaries Program Committee

and Staff of the Pension Benefit Guaranty Corporation

on January 24 and February 12, 2002

The following pages set forth the questions posed to Staff of the Pension Benefit Guaranty

Corporation at discussions on January 24 and February 12, 2002, with representatives of the

Enrolled Actuaries Program Committee. Included also are summaries of the responses to those

questions. The summary responses to the questions are intended to reflect as accurately as

possible the statements made by the government representatives. However, those responses are

merely the current views of the individuals and do not represent the positions of the Pension

Benefit Guaranty Corporation or of any other governmental agency, and cannot be relied upon by

any person for any purpose. Moreover, the PBGC has not in any way approved this booklet or

reviewed it to determine whether the statements herein are accurate or complete. 

The following representatives of the Enrolled Actuaries Program Committee took part in the

discussions: 

Bruce A. Cadenhead, William M. Mercer, Inc.

Curtis M. Cartolano, Hewitt Associates LLC

James G. Durfee, Towers Perrin

Marjorie R. Martin, Aon Consulting

Jay P. Rosenberg, Buck Consultants, Inc.

Donald J. Segal, The Segal Company

Lawrence J. Sher, Buck Consultants, Inc.

Kenneth A. Steiner, Watson Wyatt Worldwide

The following representatives of the Pension Benefit Guaranty Corporation took part in the

discussions: 

Stuart A. Sirkin, Director, Corporate Policy and Research Department (CPRD)

C. David Gustafson, Chief Policy Actuary

Jane D. Pacelli, Chief Research Actuary

Gail A. Sevin, Manager, Policy, Regulations, and Legislative Analysis Division, CPRD

Harold J. Ashner, Assistant General Counsel for Legislation and Regulations

Deborah C. Murphy, Staff Attorney

The Program Committee would like to thank Jay P. Rosenberg, Buck Consultants, Inc., for his

significant efforts in the development of this booklet. The Committee also thanks the many

practitioners who submitted questions for this booklet.

Copyright © 2002, Enrolled Actuaries Meeting

All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited

number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the

condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled

Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting

does no t extend to makin g copies f or gene ral distribution , for adve rtising or pr omotio nal purp oses, for inc lusion in

new collective works, or for sale or resale.
INDEX

Subject Matter Questions

1. Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 - 9

2. Standard Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 - 16

3. Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

5. Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

6. Employer Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 - 21
1

QUESTION 1

Premiums — Discounting Contributions Receivable

Because of the terrorist attacks of September 11, 2001, the Internal Revenue Service is treating

certain contributions to calendar-year pension plans as timely made for crediting to the 2000 funding

standard account even though the contributions are made after September 15, 2001. If a contribution

made after September 15, 2001, qualifies for this treatment, may the period from September 15,

2001, to the date the contribution is actually made be disregarded in discounting the contribution for

purposes of determining the 2001 variable rate premium? 

RESPONSE:

Yes. If a contribution to a calendar-year plan is made after September 15, 2001, but is properly

treated, under IRS disaster relief rules relating to the terrorist attack of September 11, 2001, as

having been made for the 2000 plan year, the contribution may be discounted from September 15,

2001, for premium purposes. Analogous rules apply for non-calendar-year plans. 
2

QUESTION 2

Premiums — "Rolling Forward" a Prior Actuarial Valuation Under the General Rule

(a) In determining unfunded vested benefits (UVBs) for purposes of the variable rate premium, may

an actuary start with the minimum funding valuation performed for purposes of section 412 of the

Internal Revenue Code for the plan year preceding the premium payment year and “roll it forward”

to the premium snapshot date — i.e., adjust the results to reflect changes between the valuation date

and the snapshot date? 

(b) If so, what requirements must be met when rolling forward a valuation for this purpose? 

RESPONSE:

(a) Yes. An actuary may roll forward the minimum funding valuation performed — for purposes of

section 412 of the Code — as of the minimum funding valuation date for the plan year preceding the

premium payment year. 

(b) A rolled-forward valuation must satisfy the same requirements as an original valuation

performed as of the premium snapshot date. The PBGC’s regulation on Premium Rates (29 CFR

Part 4006) says that UVBs must be determined, 

• based on the plan provisions and the plan’s population as of the premium snapshot date , 

• in a manner consistent with generally ac cepted actuarial principles and practices, 

• using the actuarial assumptions and methods used for determining the additional funding

requirement under section 412(l) of the Internal Revenue Code for the plan year preceding

the premium payment year (or, for a new or newly covered plan, for the premium payment

year), except to the extent that other actuarial assumptions or methods are specifically

prescribed by § 4006.4 of the premium rates regulation or are necessary to reflect the

occurrence of a significant event between the date of the funding valuation and the premium

snapshot date. 

Section 4006.4 prescribes the use of a required interest rate in determining the value of vested

benefits; rules for valuing assets; restrictions on the contributions that can be included in plan assets;

and rules for discounting contributions. 

The premium rates regulation defines UVBs for premium purposes as the excess, as of the premium

snapshot date, of vested current liability (determined at the required interest rate) over plan assets. 

Thus, if an actuary rolls forward a minimum funding valuation performed as of an earlier date, the

actuary must make any modifications necessary to reflect the experience gains and losses for the

period from the earlier date to the premium snapshot date . 
3

QUESTION 3

Premiums — Calculations Using Valuation Date in Prior Plan Year

How are premium determinations affected by section 412(c)(9)(B)(ii) of the Internal Revenue Code,

which provides that a funding valuation in one year may be used for the following year in certain

circumstances? 

RESPONSE:

The PBGC expects to be able to provide guidance to premium payers after the Internal Revenue

Service issues guidance on the application of this new rule. However, for purposes of the 2002

premium, it would not be appropriate to simply treat the results of the funding valuation performed

as of the beginning of the 2001 plan year as if they had been determined as of the beginning of the

2002 plan year and then roll them back one day to the premium snapshot date, rather than rolling

them forward to the snapshot date from the beginning of the prior year. 
4

QUESTION 4

Premiums — Vested Benefit Liability for Benefit Assumed Payable As Lump Sum

IRS Notice 90-11 requires that for purposes of calculating current liability, the value of a benefit

should be determined using the current liability interest rate, even if it is reasonable to assume that

the benefit will be paid in a lump sum and the actuarial assumptions used to determine the amount of

the lump sum differ from those used to determine current liability. In such a case, how is the benefit

to be valued for purposes of determining the variable rate premium using the general rule method? 

Does it make a difference if the plan is a cash balance plan? 

RESPONSE:

For purposes of determining the variable rate premium using the general rule method, the value of a

vested benefit is equa l to the plan’s current liability for the vested benefit, except that the interest

rate required under the PBGC's regulation on Premium Rates (29 CFR Part 4006) must be used

instead of the current liability interest rate. Thus, if plan lump sum assumptions are disregarded in

determining the plan’s current liability for a vested benefit, they are similarly disregarded in

determining the value of the vested benefit for purposes of the variable rate premium. Whether the

plan is or is not a cash balance plan is irrelevant. 
5

QUESTION 5

Premiums — Effect of Excess Assets on Liability for Premiums

(a) If a terminating plan has distributed all assets allocable to priority categories 1 through 6 under

ERISA section 4044 in its 2002 plan year but still has undistributed excess assets in its 2003 plan

year, how does this affect the plan’s liability to pay premiums for the 2003 plan year? 

(b) Suppose, instead, that at the beginning of the 2003 plan year, distributions for benefits in priority

categories 1 through 6 have been made for some but not all participants, and there are excess assets

in the plan. Suppose in addition that some of these excess assets are allocable to a participant who

had already received a full distribution of benefits in priority categories 1 through 6 before the 2003

premium snapshot date (the last day of 2002). Must that participant be included in the participant

count for purposes of the 2003 flat rate premium? 

RESPONSE:

(a) In the preamble to the final premium regulation published in the Federal Register on July 10,

1989 (54 FR 28944, 28951), the PBGC stated as follows: 

[T]he obligation to pay premiums continues through the plan year in which all plan assets are

distributed pursuant to a plan’s termination or in which a trustee is appointed under section

4042 of ERISA, whichever occurs first. For purposes of this rule, a plan’s assets are

considered distributed pursuant to a termination procedure upon the distribution of all assets

that must be allocated to Priority Categories 1 through 6 of ERISA section 4044(a),

irrespective of whether there are any [excess] assets to be allocated and distributed under

ERISA section 4044(d). 

Thus, if a terminating plan has distributed all assets allocable to priority categories 1 through 6 under

ERISA section 4044 in its 2002 plan year, it has no premium obligation for the 2003 plan year, even

if excess assets remain to be distributed. 

(b) The PBGC would not treat as a participant for purposes of the 2003 premium any individual

who received a full distribution before the end of 2002 of his or her benefits in priority categories 1

through 6. This would be true even if the individual remained entitled to a distribution of excess

assets in the 2003 plan year. 
6

QUESTION 6

Premiums — Interpretation of Significant Event 7

Certain plans are required to take into account the occurrence of "significant events" in calculating

unfunded vested benefits for purposes of the variable-rate premium. Significant event 7 (described

in § 4006.4(d)(2)(vii)) is "[a]ny other event or trend that results in a material increase in the value of

unfunded vested benefits." Does this include investment losses on a plan's assets if those losses

result in a material increase in the value of the plan's unfunded vested benefits? 

RESPONSE:

A plan need not recognize under significant event 7 investment losses sustained in the ordinary

course of business, provided that the plan's assets are invested in accordance with applicable legal

requirements. 
7

QUESTION 7

Premiums — Full Funding Limit Exemption In Case of Spinoffs

Plan A is a calendar year plan that is exempt from the variable rate premium for the 2002 plan year

because it was at the full funding limit for the 2001 plan year. Plan A spins off new Plan B as of the

beginning of Plan A’s 2002 plan year. There are no other spinoffs, mergers, or other transfers of

assets or liabilities involving Plan A or Plan B. 

(a) Does Plan B qualify for the full funding limit exemption from the variable rate premium for its

first plan year? 

(b) Suppose that instead of spinning off new Plan B, Plan A splits up into two new plans — Plans B

and C. Assume again that there are no other spinoffs, mergers, or other transfers of assets or

liabilities involving Plan A, Plan B, or Plan C. Do new Plans B and C both qualify for the full

funding limit exemption from the variable rate premium for their first plan year? 

(c) Do the answers change if the spinoff or split-up occurs as of the end of the 2001 plan year, rather

than the beginning of the 2002 plan year? 

RESPONSE:

The PBGC has been trying to develop rules of general applicability that would address the

complexities that can arise in applying the full funding limit exemption rules to cases involving

spinoffs and split-ups, but has not yet done so. However, the PBGC interprets its existing rules in

the beginning-of-year spinoff and split-up situations described above as follows: 

(a) Plan B qualifies for the full funding limit exemption for its first plan year. 

(b) Plans B and C qualify for the full funding limit exemption for the ir first plan year. 

(c) The answers do not change if the spinoff or split-up occurs as of the end of the 2001 plan year,

rather than the beginning of the 2002 plan year. For this purpose, the end of the 2001 plan year is

considered to be the same as the beginning of the 2002 plan year. 
8

QUESTION 8

Premiums — Full Funding Limit Exemption In Case of Mergers

Plan A is a calendar year plan that is at the full funding limit for the 2001 plan year (and thus would

qualify for the full funding limit exemption from the variable rate premium for the 2002 plan year). 

Plan B merges into Plan A as of the beginning of Plan A’s 2002 plan year. There are no other

mergers, spinoffs, or other transfers of assets or liabilities involving Plan A or Plan B. 

(a) If Plan B was at the full funding limit for its plan year ending December 31, 2001, does

surviving Plan A qualify for the full funding limit exemption for its 2002 plan year? 

(b) Does it matter what Plan B’s pre-merger plan year was (i.e., whether it was a full plan year or a

plan year that was cut short by the merger)? 

(c) Would Plan A qualify for the full funding limit exemption for its 2002 plan year if Plan B was

not at the full funding limit for its plan year ending December 31, 2001, but the combination of Plans

A and B would have satisfied an “aggregate” full funding test for the plan year ending December 31,

2001, where — 

(1) the figures for Plans A and B for their respective plan years ending on December 31,

2001, would be determined for each plan in accordance with the actuarial assumptions and

methods used by that plan for that plan’s plan year, and 

(2) in other respects, the full funding limit determination would be made in accordance with

PBGC Technical Update 00-4? 

(d) If the answer to question (c) is yes, could the “aggregate” full funding test also be used to qualify

the surviving plan for the full funding limit exemption for its 2002 plan year if it was not at the full

funding limit for its 2001 plan year? 

(e) Do the answers to questions (a) through (d) change if the transaction is a consolidation instead of

a merger, i.e., if the surviving plan is new Plan C? Does it matter whether the consolidation occurs

at the beginning of one of the consolidating plans’ plan years? 

(f) Do the answers change if the merger or consolidation occurs as of the end of the 2001 plan year,

rather than the beginning of the 2002 plan year? 
9

RESPONSE:

The PBGC has been trying to develop rules of general applicability that would address the

complexities that can arise in applying the full funding limit exemption rules to cases involving

mergers and consolidations, but has not yet done so. However, the PBGC interprets its existing rules

in the beginning-of-year merger and consolidation situations described above as follows: 

(a) Surviving Plan A qualifies for the full funding limit exemption for 2002. 

(b) It doesn’t matter what Plan B’s pre-merger plan year was. However, if Plan B were the

surviving plan, Plan B’s plan year would matter, because the response to question (a) assumes that

the merger occurs at the beginning of the surviving plan’s plan ye ar. 

(c) In the circumstances described, surviving Plan A qualifies for the full funding limit exemption

for 2002. 

(d) Yes. The “aggregate” full funding test can be used no matter which plan is at the full funding

limit. 

(e) The answers are the same in the consolidation situations. It does not matter whether or not the

consolidation occurs at the beginning of one of the consolidating plans’ plan years. A consolidation

by its nature always oc curs at the beginning of the consolidated plan’s first plan year. 

(f) The answers do not change if the merger or consolidation occurs as of the end of the 2001 plan

year, rather than the beginning of the 2002 plan year. For this purpose, the end of the 2001 plan year

is considered to be the same as the beginning of the 2002 plan year. 
10

QUESTION 9

Premiums -- Participant Count (Deceased Par ticipants)

If a plan administrator knows that a terminated vested participant is deceased, but does not know

whether the participant has a surviving beneficiary, must the plan administrator take account of the

participant and/or the potential beneficiary's benefit in determining the plan's premium? 

RESPONSE:

For premium purposes, a plan may disregard a deceased terminated vested participant for purposes

of the flat rate premium, and disregard any potential beneficiary's benefit for purposes of the variable

rate premium, when the plan administrator reasonably believes that the deceased participant has no

living beneficiary who may be entitled to benefits from the plan. There is no hard-and-fast rule

about when this point may be reached. Factors to be considered include the length of time since the

participant terminated employment, the length of time since the participant died, the participant's age

at death, whether the participant was known to be married, how old the spouse (or other beneficiary)

would be if still alive, when a benefit would (or would have) become payable to the participant

and/or to a beneficia ry, and what measures the plan has taken to locate any possible beneficiary. 

Note that this response is limited to the premium area. The circumstances in which a benefit could

be disregarded in other contexts, such as plan termination, may be different. 
11

QUESTION 10

Standard Terminations — Use of Excess Assets

May excess assets that are not distributable to participants be used for termination expenses? 

RESPONSE:

This issue is governed by ERISA Title I, rather than Title IV, and is thus within the purview of the

Department of Labor, rather than the PBGC. 
12

QUESTION 11

Standard Terminations — Failure to Make Election; Treatment as Missing Participant

If a participant in a standard termination refuses or otherwise fails to sign and return a benefit

election form, may the plan treat the participant as a missing participant and pay the participant's

designated benefit to the PBGC under the missing participants program? 

RESPONSE:

No. The missing participants program applies only to participants and beneficiaries who fall within

the definition of "missing participant" in the PBGC's regulation on Missing Participants (29 CFR

Part 4050). The plan administrator must be unable to locate the missing participant despite a diligent

search. Thus, the program does not apply to a participant merely because the participant refuses or

otherwise fails to sign and return an election form. 
13

QUESTION 12

Standard Terminations — Small Annuity Benefits; Treatment as Missing Participants

Suppose a participant in a standard termination is entitled to a small (but not de minimis) benefit, but

does not elect a lump sum payment and cannot be involuntarily cashed out under the terms of the

plan. If the plan is unable to find an insurer willing to provide an annuity for the participant at a

reasonable price, may the plan treat the participant as a missing participant and pay the participant's

designated benefit to the PBGC under the missing participants program? 

RESPONSE:

No. As noted in the response to the previous question, the missing participants program applies only

to participants and beneficiarie s who fall within the de finition of "missing participant" in the PBGC's

regulation on Missing Participants (29 CFR Part 4050). Small benefits that must be provided in

annuity form must be provided for under an insurance contract in order for the plan to complete the

termination. If plan assets are not sufficient to purchase an insurance contract that provides for the

payment as annuities of all benefits so payable, and additional funds sufficient to enable the plan to

obtain the contract are not contributed, the termination cannot be completed. 
14

QUESTION 13

Standard Terminations — Payment of Designated Benefits for Missing Participants

May a plan undergoing a standard termination send a missing participant's designated benefit to the

PBGC before it has completed the distribution of all other benefits? 

RESPONSE:

Section 4050.6(a) of the PBGC's regulation on Missing Participants (29 CFR Part 4050) provides

that "[e]xcept as otherwise provided in the missing participant forms and instructions, the plan

administrator must submit the designated benefits . . . with the post-distribution certification." 

Under § 4041.29(a) of the PBGC's regulation on Termination of Single-Employer Plans (29 CFR

Part 4041), the post-distribution certification cannot be submitted until all plan benefits through

priority category 6 under ERISA section 4044 and the PBGC’s regulation on Allocation of Assets in

Single-Employer Plans (29 CFR Pa rt 4044) have been provided for. 
15

QUESTION 14

Standard Terminations — Extension of Distribution Period

(a) If a plan is unable to complete distributions by the distribution deadline in a standard

termination, can the plan get an extension of the deadline from the PBGC, even if the applicable

distribution deadline is 120 days after receipt of a favorable determination letter from the IRS under

§ 4041.28(a)(1)(ii) of the PBGC’s regulation on Termination of Single-Employer Plans (29 CFR Part

4041)? 

(b) If so, how must the plan request the extension? 

(c) What circumstances does the PBGC consider in deciding to grant such an extension? 

RESPONSE:

(a) Under § 4041.30 of the termination regulation, the PBGC will extend the distribution deadline

where it finds compelling reasons why it is not administratively feasible to meet the deadline and the

delay is brief, whether the applicable deadline is the normal 180-day deadline under

§ 4041.28(a)(1)(i) or the alternative deadline under § 4041.28(a)(1)(ii). 

(b) A plan administrator may request the PBGC to extend a deadline under the termination

regulation. There is no prescribed form for such a request. (See the standard termination forms and

instructions package for where and how to send the request.) If the extension request is filed later

than 15 days before the deadline, it must include a justification for the failure to file earlier. 

(c) The PBGC will consider the length of the delay and whether ordinary business care and

prudence is exercised in attempting to meet the deadline. Failure to file an extension request at least

15 days before the deadline may be an indication that ordinary business care and prudence are not

being exercised. In analyzing the degree of business care and prudence being exercised, the PBGC

may also consider such facts and circumstances as the size of the plan, the nature of the event or

circumstance causing the delay, whether that event or circumstance could have been anticipated, and

how the plan responded to it. 
16

QUESTION 15

Standard Terminations — “Woodwork” Participants

What happens if, after completion of a standard termination, a participant or beneficiary entitled to a

distribution but mistakenly overlooked in the termination process appears “out of the woodwork”? 

RESPONSE:

If the employer that maintained the plan is still in existence, the PBGC expects the employer to

ensure that the participant receives the benefits and options to which the participant is entitled. (The

term “employer” includes members of the contributing sponsor’s controlled group, if any.) If the

employer is no longer in existence, the PBGC provides the individual’s guaranteed benefit in the

same form as under a trusteed insufficient plan. 
17

QUESTION 16

Standard Terminations — E-mail Acknowledgments

Can a plan filing a standard termination notice (Form 500) get an acknowledgment of receipt of the

filing from the PBGC by e-mail? 

RESPONSE:

Yes. The new termination notice forms include optional e-mail address blocks for the plan

administrator and representatives of the plan administrator. The PBGC intends to begin

acknowledging the receipt of standard termination notices electronically in April 2002 where e-mail

addresses are provided, in addition to the written acknowledgments that are now provided. 
18

QUESTION 17

Coverage — Application of Premium Definition in Part 4006 to section 4021(b)

How does the change in the definition of "participant" for premium purposes in the PBGC's

regulation on Premium Rates (29 CFR Part 4006) affect coverage determinations under ERISA

section 4021(b)(9) and (13)? 

RESPONSE:

The change in the definition of "participant" for premium purposes has no effect on coverage

determinations under ERISA section 4021(b)(9) and (13). As noted in the preamble to the final rule

that changed the definition, — 

The definition of “participant” in the premium rates regulation applies only for premium

purposes. Whether an individual is a participant in a plan for premium purposes has no

bearing on whether the individual is a participant in the plan for any other purpose under

Title IV of ERISA . . .. Similarly, an individual is not considered to be a participant in a plan

for premium purposes simply because the individual is a participant in the plan for other

purposes. 
19

QUESTION 18

Valuations — Interest Assumptions

What is the relationship between the interest assumptions prescribed under the PBGC's regulation on

Allocation of Assets in Single-Employer Plans (29 CFR Part 4044) and market interest rates? 

RESPONSE:

The interest assumptions in the asset allocation regulation are not market interest rates — they are

just interest “factors.” The factors are derived so that, along with a given mortality table (currently

83 GAM), they will reproduce average group annuity prices. The group annuity prices are reported

to us in quarterly surveys from insurance companies issuing group annuities and are net of

administrative expenses. The PBGC interest factors stand in for all the many components used in

annuity pricing that a re not reflected in the given mortality table (e.g., assumed yield on investments,

margins for profit and contingencies, premium and income taxes, marketing and sales expense).

If the PBGC's mortality table is varied, a different interest factor will result. For example, assume

the average quarterly survey price of a monthly life annuity for a 65 year old male is $120 per dollar

of monthly annuity. Using 83 GAM mortality would result in an interest factor of 5.88 percent. 

Using 94 GAM mortality would result in an interest factor of 6.41 percent. Yet both combinations

(83 GAM with 5.88 percent or 94 GAM with 6.41 percent) produce the same price.

Because of this relationship among annuity prices, a mortality table, and the derived interest factors,

it is never meaningful to compare PBGC's interest factors to market interest rates.
20

QUESTION 19

Employer Reporting — Determination of Expected Retirement Age (XRA)

Question 17 in the 2001 PBGC Blue Book asked how the actuary should determine a participant's

"earliest retirement age" ("ERA") and "unreduced retirement age" ("URA") for the XRA table

look-up when valuing benefit liabilities under ERISA section 4010. The PBGC responded that

eligibility service should be frozen at the valuation date. 

Consider a plan that provides the following benefits: 

• Unreduced benefits at normal retirement age of 65; 

• Unreduced benefits to participants who terminate service at or after age 55 with 10 or more

years of service; and 

• Actuarially reduced benefits at age 55 for participants who terminate service either before

55 or before completing 10 years of servic e. 

(a) For participants with the following age and service on the valuation date, what are the values of

ERA and URA used to look up the participant’s XRA for purposes of valuing benefit liabilities

under ERISA section 4010? 

• Age 54 and 9 years of service

• Age 55 with 9 years of service

• Age 54 with 10 years of service

(b) How would the answers change if the plan provided actuarially reduced benefits at 55 only for

participants who had completed 10 years of service and provided unreduced benefits at 65 for those

who terminated before completing 10 years? 

(c) Are the answers to question 17 from the 2001 Blue Book or question (a) or (b) above different if

doing an allocation of assets under ERISA section 4044? 
21

RESPONSE:

(a)

Age/Service on Valuation Date ERA URA

54/9 55 65

55/9 55 65

54/10 55 65

(b)

Age/Service on Valuation Date ERA URA

54/9 65 65

55/9 65 65

54/10 55 65

(c) No. The answers are the same. 
22

QUESTION 20

Employer Reporting — Multiple Employe r Plans; $50 Million Test

(a) In determining whether a controlled group meets the $50 million underfunding test in section

4010(b)(1) of ERISA, if a member of the controlled group is a contributing sponsor of a multiple

employer plan, what portion of that plan’s total unfunded vested benefits (UVBs) counts toward the

$50 million? 

(b) Does it matter whether assets and liabilities are allocated among plan sponsors under IRC

section 413(c)(4) for minimum funding purposes (as opposed to making minimum funding

determinations on a plan-wide basis)? 

RESPONSE:

(a) Both ERISA section 4010 and the PBGC’s regulation on Annual Financial and Actuarial

Information Reporting (29 CFR Part 4010) base the $50 million dollar test on the aggregate UVBs of

plans maintained by controlled group members. No special provision is made for counting less than

the total amount of UVBs for a multiple employer plan maintained by a controlled group member

(and by members of other controlled groups). However, § 4010.11 of the regulation provides for

waivers in appropriate circumstances. A potential filer may contact the PBGC’s Corporate Finance

and Negotiations Department to discuss a waiver where inclusion of the total UVBs of a multipleemployer plan in applying the $50 million underfunding test would lead to a reporting requirement

that would not further the purposes of the statute. 

(b) The answer is the same whether assets and liabilities are allocated among plan sponsors under

IRC section 413(c)(4) for minimum funding purposes or minimum funding determinations are made

on a plan-wide basis. 
23

QUESTION 21

Employer Reporting — Multiple Employer Plans; Reporting Assets And Liabilities

(a) When making a filing under ERISA section 4010 for a contributing sponsor of a multiple

employer plan (or a controlled group including such a contributing sponsor), must the filer report the

entire assets and benefit liabilities (BLs) of the plan, or an allocable amount of assets and BLs

determined in a manner similar to that used in the plan’s funding valuation under Internal Revenue

Code (IRC) section 412? 

(b) Does it matter whether assets and liabilities are allocated among contributing sponsors (or

controlled groups that include contributing sponsors) under IRC section 413(c)(4) for minimum

funding purposes (as opposed to making minimum funding determinations on a plan-wide basis)? 

RESPONSE:

(a) The PBGC’s regulation on Annual Financial and Actuarial Information Reporting (29 CFR Part

4010) requires that a filer report (for each plan other than an exempt plan) “the fair market value of

the plan’s assets” and “the value of the plan’s benefit liabilities” (emphasis supplied). No special

provision is made for counting less than the total amount of assets or BLs for a multiple employer

plan maintained by a controlled group member (and by members of other controlled groups). 

However, § 4010.11 of the regulation provides for waivers in appropriate circumstances. A potential

filer may contact the PBGC’s Corporate Finance and Negotiations Department (CFND) to discuss a

waiver where (for example) it might be unnecessarily burdensome to dete rmine the plan’s tota l BLs. 

The filer should be prepared to discuss with CFND the method for determining and allocating the

assets and BLs. 

(b) The answer is the same whether assets and liabilities are allocated among plan sponsors under

IRC section 413(c)(4) for minimum funding purposes or minimum funding determinations are made

on a plan-wide basis.