2003 Enrolled Actuaries Meeting


Questions to the PBGC


and Summary of Their Responses


March 2003

Summary of Discussions between the Enrolled Actuaries Program Committee


and Staff of the Pension Benefit Guaranty Corporation


on January 23 and February 12, 2003


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


Corporation at discussions on January 23 and February 12, 2003, 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, Mercer Human Resource Consulting


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


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


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


Deborah C. Murphy, Staff Attorney


The Program Committee would like to thank the practitioners who submitted questions for this 

booklet. 

Copyright © 2003, 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 not extend to making copies for general distribution, for advertising or promotional purposes, for 

inclusion in new collective works, or for sale or resale. 
INDEX


Subject Matter Questions 

1.Premiums ....................................................................................................................... 1 - 10


2.Standard Terminations .................................................................................................. 11 - 12


3.Guaranteed Benefits ............................................................................................................. 13


5.Valuations ............................................................................................................................ 14


6. Participant Notices ....................................................................................................... 15 - 17


7. Employer Reporting ..................................................................................................... 18 - 19

QUESTION 1 

Premiums — ACM for Newly Covered Plan 

May a newly covered plan that filed Form 5500 Schedule B for the prior plan year (when it was 

not a covered plan) use the alternative calculation method (“ACM”) to determine its variable rate 

premium for the current plan year? 

RESPONSE: 

Yes. For example, suppose a calendar year professional services plan that has never had more 

than 25 active participants (and thus, under ERISA section 4021(b)(13), has not been covered by 

Title IV of ERISA) acquires a 26th active participant on 1/1/03 and thus becomes covered and 

required to pay premiums for 2003. If (as required) the plan files Form 5500 Schedule B for 

2002, the plan could use the ACM, based on its 2002 Schedule B, to determine its variable rate 

premium for 2003. 
QUESTION 2 

Premiums — Full Funding Limit Exemption for Newly Covered Plan 

Suppose that a newly covered plan — such as a church plan that elects into Title IV coverage — 

was not subject to the funding requirements under Internal Revenue Code section 412 for the 

prior plan year (when it was not a covered plan) but can demonstrate that if it had been subject to 

those requirements, it would have been at the full funding limit for the prior plan year. May the 

plan claim the full funding limit exemption from the variable rate premium for the current plan 

year? 

RESPONSE: 

No. If the plan was not subject to the IRC section 412 funding requirements, it cannot be 

considered to have been at the full funding limit and it cannot claim the full funding limit 

exemption from the variable rate premium. 
QUESTION 3 

Premiums — ACM for Split-Funded Plan 

Under a literal interpretation of the PBGC’s alternative calculation method (“ACM”), a splitfunded plan (a plan funded with a combination of insurance contracts that are not irrevocable 

commitments and a “side fund”) that elects to exclude the value of insurance contracts from item 

1b(2) of the Schedule B may end up with a “mismatch” of assets and liabilities under the ACM. 

This mismatch, which arises where the ACM assets figure excludes the value of these insurance 

contracts and the ACM liability figure includes the related liabilities, can serve only to increase 

the plan’s variable rate premium. Is there any way to avoid this mismatch? 

RESPONSE: 

Under the PBGC’s regulations governing the ACM, there is no way of avoiding the “mismatch,”


other than not making the election. 


When using the alternative calculation method (“ACM”), if (as is common) a plan’s funding


valuation for the Schedule B plan year (the plan year preceding the premium payment year) is


performed as of the first day of the Schedule B plan year, the ACM requires the plan


administrator to use, as the assets figure, the actuarial value of plan assets as of that funding


valuation date from item 1b(2) on Schedule B, Form 5500. In the less common case where the


plan’s funding valuation for the Schedule B plan year is performed as of some other day, the


ACM requires the plan administrator to use instead the market value of assets as of the first day


of the Schedule B plan year from item 2a of Schedule B. The liability figures under the ACM are


always taken from item 2b on Schedule B (“RPA ’94” current liability). Items 1c and 1d on


Schedule B (accrued and current liability, etc., as of the funding valuation date) also show


liabilities for benefits, but these figures are not used under the ACM. 


A split-funded plan may elect to exclude the value of insurance contracts from item 1b(2) (but


not from item 2a) of Schedule B, in which case the plan must exclude the related liabilities for


benefits from items 1c and 1d (but may not exclude them from item 2b) of Schedule B. If (as is


common) the split-funded plan’s funding valuation is performed as of the first day of the


Schedule B plan year, the ACM assets figure must come from item 1b(2) (from which the value


of the insurance contracts is excluded) even though the liabilities figures must come from item


2b (which includes the related liabilities for benefits). 


This mismatch may not be avoided by using the item 2a figure instead of the item 1b(2) figure. 


Nor does the ACM permit the actuarial value of the insurance contracts to be added back to the


item 1b(2) figure from the Schedule B, or permit the value of the related liabilities to be


subtracted from the item 2b figures. 


The ACM was designed to be a simplified method of approximating the value of unfunded


vested benefits. The emphasis on simplicity in the ACM can work to the advantage or


disadvantage of a particular filer, as compared to the result the filer would get by using the

general rule method. For most plans, the actuarial value of assets in item 1b(2) of the Schedule 

B is consistent with the value of liabilities in item 2b (the source of the liability figures for the 

ACM). An inconsistency arises only where a split-funded plan reports a first-of-the-year assets 

figure in item 1b(2) that excludes the value of insurance contracts. In such a case, the filer may 

want to use the general rule method if that would result in a lower premium. 
QUESTION 4 

Premiums — Participant Count; Year-End $0 Cashouts 

If a plan provides that $0 cashouts are deemed made on the last day of the plan year in which 

employment terminates, and that date is the premium snapshot date for the following plan year, 

is an individual who gets such a $0 cashout considered to be a participant for purposes of the 

following year’s premium? 

RESPONSE: 

In this circumstance, the PBGC would treat the individual as not being a participant for premium 

purposes. 
QUESTION 5 

Premiums — Participant Count; IRC Section 401(h) Account 

If a plan has purchased an irrevocable commitment covering all benefits with respect to an 

individual under the plan, other than benefits provided by an Internal Revenue Code section 

401(h) account, is the individual considered to be a participant for premium purposes? Are the 

section 401(h) benefits and assets included in determining the plan’s variable rate premium? 

RESPONSE: 

IRS staff has advised the PBGC that section 401(h) assets are not available to pay benefits under 

the defined benefit portion of a plan that includes section 401(h) accounts and that section 401(h) 

benefits are not considered to be benefit liabilities. 

An individual is considered to be a plan participant for premium purposes under § 4006.6 only if 

the plan has benefit liabilities with respect to the individual. Since section 401(h) benefits are 

not considered to be benefit liabilities, the individual in this question would not be a participant 

for premium purposes and would not be counted in determining the flat-rate premium. 

Because a section 401(h) benefit is not included in benefit liabilities, it is not part of a plan’s 

current liability and thus is disregarded in determining the variable rate premium. In addition, 

since section 401(h) assets are not available to pay benefits under the defined benefit portion of a 

plan, they are also excluded in determining the variable rate premium. 
QUESTION 6 

Premiums — Snapshot Date; Newly Created Plan 

The response to question 10 in the 2001 Bluebook indicates that the plan administrator of a 

newly created plan that is adopted with a retroactive effective date may claim either the earlier 

date or the later date as both (1) the beginning of the plan year for purposes of determining 

whether premium proration is available (and what the proration fraction is) and (2) the premium 

snapshot date. Was that response intended to apply to all plan years, thus allowing a plan 

administrator to apply for a refund of premiums for a prior plan year in which the plan was a 

newly created plan and that would be affected by a change in the date used? 

RESPONSE: 

Yes. Note, however, that any request for a refund of premiums paid for a previous plan year 

must be requested within the period specified in the applicable statute of limitations (generally 6 

years from the date of payment). 
QUESTION 7 

Premiums — Pre-Participation Service Phase-In 

If a plan elects not to use the pre-participation service phase-in provided for in Internal Revenue 

Code section 412(l)(7)(D) to calculate current liability for funding purposes, may the plan 

nevertheless use the phase-in for purposes of determining the variable rate premium? 

RESPONSE: 

No. Unfunded vested benefits for premium purposes are based on current liability. Thus, 

whether the plan uses the alternative calculation method (based on Form 5500 Schedule B) or 

the general rule method to determine its unfunded vested benefits, an election not to use the 

phase-in under IRC section 412(l)(7)(D) for current liability would apply as well to the premium 

calculation. 
QUESTION 8 

Premiums — Full Funding Limit Exemption; Post-Merger Contribution 

Plans A and B are calendar year plans. Plan A merges into Plan B on 2/1/03. (Since the merger 

occurs during the 2003 plan year, both plans must pay premiums for 2003; in the absence of any 

other merger or spinoff, both plans will use a premium snapshot date of 12/31/02.) Plan B (the 

surviving plan) qualifies for the full funding limit exemption from the variable rate premium 

(VRP) for 2003 based on its contributions for 2002. At the time of the merger, Plan A (the 

disappearing plan) does not qualify for the full funding limit exemption for 2003 because it has 

not received sufficient contributions for 2002. May Plan A’s contributing sponsor qualify Plan 

A for the full funding limit exemption for 2003 by making a contribution for Plan A’s 2002 plan 

year to the trust of surviving Plan B after the merger? 

RESPONSE: 

Yes. IRS staff has advised the PBGC that contributions on behalf of Plan A may be made to the 

trust for the surviving plan. The contributions would be designated as for Plan A and reported 

on a Schedule B for Plan A. A situation like this is described in paragraph (8) of section 4.07 of 

Rev. Proc. 2000-40. If such a contribution is made by September 15, 2003, on behalf of Plan A 

for the 2002 plan year in an amount sufficient to meet the full funding limit exemption from the 

VRP for 2003, Plan A would be exempt from the VRP for 2003. Otherwise it would owe a fullyear VRP. (The premium for Plan A is not prorated, because the plan disappears by merger.) 

The premium filing is to be done by the plan administrator of the surviving plan. 
QUESTION 9 

Premiums — Counting Contributions Made After Early Filing 

A single-employer plan makes a final premium filing before the final filing deadline, counting 

(for variable rate premium purposes) only those contributions for the prior plan year that were 

made on or before the date of the premium filing. The sponsor then makes an additional 

contribution for the prior plan year, after the premium filing date but before the final premium 

filing deadline. May the plan make an amended filing, on or before the final premium filing 

deadline, that takes into account the additional contribution? How about an amended filing 

made after the final premium filing deadline? 

RESPONSE: 

Section 4006.4(b)(2)(iv) of the PBGC’s regulation on Premium Rates says that “[c]ontributions 

may be included only to the extent such contributions have been paid into the plan on or before 

the earlier of the due date for payment of the variable-rate portion of the premium under § 

4007.11 or the date that portion is paid.” However, the PBGC considers “the date that portion is 

paid” to refer to the last (original or amended) filing — whether or not the last filing is 

accompanied by a payment — because the intent of the provision is simply to prohibit variable 

rate premium computations based on contributions that the plan administrator may expect to be 

made but that have not in fact been made. Thus, the PBGC would permit the plan to make an 

amended filing in these circumstances, taking the additional contribution into account. 
QUESTION 10 

Premiums — Effect of Retroactive Benefit Increase 

Suppose a plan amendment increasing benefits under a calendar-year plan is adopted on 2/15/03, 

and the plan's current liability as of 1/1/02 reflects the effect of the benefit increase. To what 

extent, if at all, must the plan's variable rate premium computation for 2003 also reflect the 

increase? 

RESPONSE: 

Unfunded vested benefits (“UVBs”) for premium purposes are based on vested current liability. 


Thus, if the plan's current liability reflects the effect of the benefit increase, the premium


calculation must also reflect the increase to the extent the increase is vested. The benefit


increase with respect to each participant is vested to the extent of the participant’s vesting rights. 


For example, if the plan provides for 5-year cliff vesting, the benefit increase of each participant


with at least five years of vesting service would be included in UVBs. The vesting service


would be measured as of 1/1/02 if the plan were using the ACM and as of the premium snapshot


date (generally 12/31/02) if the plan were using the general rule. 

QUESTION 11 

Standard Terminations — Electronic Missing Participant Data Submissions 

When a terminating plan has a large number of missing participants, must a separate Attachment 

B to Schedule MP be completed for each missing participant? 

RESPONSE: 

No. The PBGC will accept the missing participant information as an electronic word processing 

or spreadsheet document downloaded to a diskette. The document should contain the same 

information for each missing participant that an Attachment B would contain. 
QUESTION 12 

Standard Terminations — Missing Participants; 20 Percent Tax Withholding 

Assume that a plan administrator sends a check for a lump sum cashout — less 20 percent tax 

withholding — to a terminated vested participant and pays the withheld amount of taxes to the 

Internal Revenue Service. The check is then returned to the plan administrator as undeliverable. 

The plan later terminates in a standard termination, and the plan administrator determines that 

the participant is a “missing participant” under ERISA section 4050 and the PBGC’s Missing 

Participants regulation (29 CFR Part 4050). 

(a) If the plan administrator pays the missing participant’s designated benefit to the PBGC, may 

the plan administrator deduct from the designated benefit the 20 percent tax amount previously 

withheld? 

(b) If the plan administrator purchases an annuity for the missing participant, may the annuity 

reflect a reduction for the 20 percent tax amount previously withheld? 

(c) Can the plan administrator obtain a refund of the amount previously withheld and paid to the 

IRS and, if so, how? 

RESPONSE: 

(a) Whenever a plan administrator pays a missing participant’s designated benefit — whether or 

not the plan administrator previously paid to the IRS taxes withheld with respect to that benefit 

— the amount must reflect the total value of the missing participant’s designated benefit without 

any reduction for tax withholding. The PBGC will withhold taxes, as appropriate, when the 

missing participant is found and paid. 

(b) Whenever a plan administrator purchases an annuity for a missing participant — whether or 

not the plan administrator previously paid to the IRS taxes withheld with respect to that benefit 

— the annuity must be based on the missing participant’s total benefit without any reduction for 

tax withholding. The insurer will be required to withhold taxes, as appropriate, when the 

missing participant is found and paid. 

(c) The Internal Revenue Service has advised the PBGC that a plan administrator may obtain a 

refund of an amount erroneously withheld for a missing participant by filing Form 843, Claim 

for Refund and Request for Abatement, and Form 941c, Supporting Statement to Correct 

Information. Generally, the plan administrator must act within 3 years of the withholding return 

due date or the date the return was filed, whichever is later. For this purpose, the due date of 

Form 945, Annual Return of Withheld Federal Income Tax, is April 15 of the year after the close 

of the tax year. 
QUESTION 13 

Guaranteed Benefits — Phase-In For Newly Covered Plans 

If a plan was adopted and effective more than five years ago, but did not become covered by 

Title IV of ERISA until the current year, is the PBGC’s guarantee of plan benefits phased in 

under ERISA section 4022(b)(7)? If so, when does the phase-in period start? 

RESPONSE: 

In the case of a plan that was not a covered plan on September 3, 1974 (the day after ERISA 

became effective), the PBGC’s guarantee of plan benefits is phased in. The phase-in period 

begins on the date when the plan becomes a covered plan. ERISA section 4022(b)(1) states that, 

— 

except to the extent [phased in under section 4022(b)(7),] . . . no benefits provided by a 

plan which has been in effect for less than 60 months at the time the plan terminates shall 

be guaranteed . . . , 

and section 4022 (b)(2) states that — 

[f]or purposes of determining what benefits are guaranteed . . . in the case of a plan to 

which § 4021 does not apply on [September 3, 1974], the 60-month period referred to in 

[ERISA section 4022(b)(1)] shall be computed beginning on the first date on which 

[section 4021] does apply to the plan. 

For example, under ERISA section 4021(b)(3), a church plan (as defined in Internal Revenue 

Code section 414(e)) is not covered by Title IV of ERISA unless the plan makes an election 

under Internal Revenue Code section 410(d) and notifies the PBGC that it wishes to be a covered 

plan. If a church plan that was adopted and effective more than five years ago opts for Title IV 

coverage in this manner, benefits under the plan are subject to phase-in under section 4022(b)(7), 

and the phase-in period begins on the latest of (1) the date the PBGC receives the notice 

described in ERISA §4021(b)(3), (2) the date the section 410(d) election is made, and (3) the 

date the section 410(d) election is effective. 

The same principles apply to any pre-existing plan that first becomes covered by Title IV of 

ERISA after September 3, 1974, such as a professional services plan that has been excluded 

from Title IV coverage under ERISA section 4021(b)(13) because it has never had more than 25 

active participants and then acquires a 26th active participant. 
QUESTION 14 

Valuations — XRA for Ages Outside the Table Range 

How does the PBGC determine an Expected Retirement Age (XRA) using Tables II-A, II-B, and 

II-C from Appendix D to the PBGC’s regulation on Allocation of Assets in Single-Employer 

Plans (29 CFR Part 4044) when either or both of the ages needed to enter the tables (the 

unreduced retirement age and the earliest retirement age) are outside the range of ages shown in 

the table? 

RESPONSE: 

The PBGC uses an extended version of the tables. The extended version of the tables is 

available on the PBGC’s web site (www.pbgc.gov). 

The PBGC would consider the use of these extended tables by plan administrators to be a 

reasonable way to determine XRAs in cases where ages fall outside the range of the tables in 

Appendix D to the regulation. The PBGC would not consider it reasonable to simply use the age 

in the Appendix D table that is at the end of the range nearest the actual age for any age that is 

outside the range in the Appendix D table. 
QUESTION 15 

Participant Notices — Multiple-Employer Plan; DRC Exception Test 

In the responses to question 5 in the 2000 Bluebook and to questions 20 and 21 in the 2002 

Bluebook, the PBGC indicated that a multiple-employer plan is treated like any other singleemployer plan — that is, on an aggregate basis — for purposes of variable rate premiums under 

ERISA section 4006 and employer reporting under ERISA section 4010, notwithstanding the 

applicability of Internal Revenue Code section 413(c) (which provides for certain funding 

determinations to be done on an employer-by-employer basis). Does this aggregate treatment 

also apply to the Deficit Reduction Contribution (“DRC”) Exception Test under the Participant 

Notice rules of ERISA section 4011 and the PBGC’s regulation on Disclosure to Participants (29 

CFR Part 4011)? That is, must a plan determine whether the DRC Exception Test is met for the 

current or prior plan year on an aggregate basis in order to determine whether all plan 

participants must be notified of the plan’s funded status? 

RESPONSE: 

Yes. Section 4011(b) of ERISA provides an exception to the Participant Notice requirement for 

“any plan” that meets the DRC Exception Test for the current year. Section 4011.3(a) of the 

regulation similarly refers to “a plan” meeting the test (and broadens the exemption to cover 

plans that meet the test for the prior year). Furthermore, since all assets under a multipleemployer plan are available to pay the benefits of all participants, regardless of which 

contributing sponsor they are employed by, plan underfunding presents a risk to every 

participant, regardless of whether a particular participant’s employer is exempt from the deficit 

reduction contribution requirement under ERISA section 302(d) and Internal Revenue Code 

section 412(l). Accordingly, the PBGC reads ERISA section 4011 and its Participant Notice 

regulation as applying to a multiple-employer plan as a whole, even if IRC section 413(c) 

applies the deficit reduction contribution requirements on an employer-by-employer basis. 
QUESTION 16 

Participant Notices — Effect of JCWAA Changes to Interest Rates 

In general, a plan is subject to the Participant Notice requirement for a plan year under section 

4011 of ERISA if a variable rate premium is payable for the plan for the plan year and the plan 

does not pass the Deficit Reduction Contribution (“DRC”) Exception Test described in the 

PBGC’s regulation on Disclosure to Participants (29 CFR Part 4011). Section 405 of the Job 

Creation and Worker Assistance Act of 2002 (JCWAA) provides for a temporary increase, for 

2002 and 2003 plan years, in the interest rate used to calculate unfunded vested benefits for 

purposes of the PBGC’s variable rate premium (from 85% to 100% of the annual yield on 30-

year Treasury securities), and in the maximum interest rate that may be used to calculate current 

liability for purposes of the DRC (from 105% to 120% of the 4-year weighted average of the 

annual yield on 30-year Treasury securities). When determining whether a plan is subject to the 

Participant Notice requirement for a plan year under section 4011 of ERISA and 29 CFR Part 

4011: 

(a) May the temporary JCWAA 100% rate be used to determine whether a variable rate 

premium was payable for the 2002 or 2003 plan year for purposes of determining whether a 

Participant Notice may be required for that plan year? 

(b) May the temporary JCWAA 120% rate be used to determine: (1) whether the plan meets the 

DRC Exception Test for the 2002 or 2003 plan year and therefore is exempt from the Participant 

Notice requirement for the 2002, 2003, or 2004 plan year; (2) whether the plan qualifies for the 

full-funding limit exemption from the variable rate premium for the 2003 or 2004 plan year and 

therefore is not subject to the Participant Notice requirement for that plan year; and (3) the 

“notice funding percentage” for the 2002 or 2003 plan year that may be disclosed in a Participant 

Notice for the 2002, 2003, or 2004 plan year? 

RESPONSE: 

(a) JCWAA does not allow use of the temporary 100% rate (rather than the 85% rate) to 

determine whether a variable rate premium was payable for the 2002 or 2003 plan year for 

purposes of determining whether a Participant Notice may be required for that plan year. The 

PBGC does not have authority to waive the Participant Notice requirement. Therefore, a plan 

for which a variable rate premium is not payable for the 2002 or 2003 plan year may nonetheless 

be required to issue a Participant Notice for that plan year. 

(b) Under JCWAA, the temporary JCWAA 120% rate is used to make each of the 

determinations described in the question. 

For additional details, see PBGC Technical Update 02-1, “PBGC Reporting Relief Relating to 

Use of 100% of 30-Year Treasury Yield” (5/01/02) and PBGC Technical Update 02-2, “2002 

Model Participant Notice” (8/29/02). 
QUESTION 17 

Participant Notices — No Additional Funding Charge 

Is a plan that is otherwise required to provide a Participant Notice for the current plan year under 

ERISA section 4011 and 29 CFR Part 4011 exempt from that requirement based on the fact that, 

for the current plan year or for the prior plan year, there is no additional funding charge under 

ERISA section 302(d)(1) (Internal Revenue Code section 412(l)(1))? 

RESPONSE: 

No. Except in the case of certain new and newly covered plans (29 CFR § 4011.5) and plans 

involved in certain merger, consolidation, or spinoff transactions (29 CFR § 4011.6), a 

Participant Notice is required for a plan for the current plan year if (1) a variable rate premium is 

payable for the plan for the current plan year (the response to the previous question notes special 

rules applying to the 2002 and 2003 plan years), and (2) the plan does not, for the current plan 

year or for the prior plan year, meet the DRC Exception Test (29 CFR § 4011.3(b)). 

A plan meets the DRC Exception Test “if [the plan] is exempt from the requirements of section 

302(d) of ERISA . . . by reason of [ERISA] section 302(d)(9), without regard to the small plan 

exemption in [ERISA] section 302(d)(6)(A).” (Section 4011.4(b) provides special rules that 

allow small plans to determine whether the DRC Exception Test is met.) In contrast, the DRC 

Exception Test is not met merely because there is no additional funding charge under ERISA 

section 302(d)(1). (There may be no such additional funding charge because (1) the application 

of the formula in ERISA section 302(d)(1) does not result in an additional funding charge, or (2) 

the plan meets the small plan exemption from the additional funding charge under ERISA 

section 302(d)(6)(A) (taking into account the aggregation rules in ERISA section 302(d)(6)(C)).) 
QUESTION 18 

Employer Reporting — Information Year; Short Plan Year 

A controlled group’s information year under § 4010.5 of the PBGC’s regulation on Annual 

Financial and Actuarial Information Reporting (29 CFR Part 4010) is the calendar year. One 

plan maintained by a controlled group member is amended to change its plan year from a year 

ending 6/30 to a calendar year. The last full year under the old cycle ends 6/30/03, and the short 

year ends 12/31/03. In determining whether the aggregate unfunded vested benefits (“UVBs”) 

of plans maintained by controlled group members exceeds $50 million, should the plan’s UVBs 

be determined for the plan year ending 6/30/03 or 12/31/03? 

RESPONSE: 

The later plan year (ending 12/31/03) would be used. The reason for looking to the plan year 

“ending within . . . the information year” is to get the most up-to-date information. Commonly, 

the plan year coincides with the information year; when it does not, the plan year that ends 

within and nearest the end of the information year would be used. 
QUESTION 19 

Employer Reporting — Who Should File? 

A controlled group includes a “U.S. parent” (a U.S. corporation that is the parent for all U.S. 

members of the group) and an “international parent” (a foreign corporation that is the parent of 

the U.S. parent and of group members in other countries). The U.S. parent files Forms 5500 for 

all U.S. plans of the controlled group. Is it the U.S. parent or the international parent that is 

required to make the filing with the PBGC under ERISA section 4010? 

RESPONSE: 

If the controlled group meets one of the three tests for being required to file under ERISA 

section 4010, each controlled group member (except “exempt entities”), regardless of whether 

U.S. or foreign, is a “filer” and has a filing obligation. Any one controlled group member — 

which need not be either the international parent or the U.S. parent — can file for all members of 

the group, but if no filing is made, each filer in the group is in violation of the filing requirement, 

and penalties for failure to timely file may be assessed against each filer.