Vol. 80 Friday, 

No. 176 September 11, 2015 

Part IV 

Pension Benefit Guaranty Corporation 

29 CFR Parts 4000, 4001, 4043, et al. 

Reportable Events and Certain Other Notification Requirements; Final Rule 


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1The old regulation provided a waiver in some 

circumstances generally based on 80 percent 

funding on a premium basis. However, in PBGC’s 

experience, that test was inadequate, as it was 

passed by many plans that underwent distress or 

involuntary terminations. See Well-Funded Plan 

Safe Harbor below. A safe harbor based on paying 

no VRP, in contrast, is consistent with a 

Congressional determination of the level of 

underfunding that presents risk to the pension 

insurance system. 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4000, 4001, 4043, 4204, 

4206, and 4231 

RIN 1212–AB06 

Reportable Events and Certain Other 

Notification Requirements 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule. 

SUMMARY: In 2013, PBGC proposed to 

establish risk-based safe harbors that 

would exempt most companies and 

plans from many of its reportable events 

requirements and target reporting 

toward the minority of plan sponsors 

and plans presenting the most 

substantial risk of involuntary or 

distress termination. After holding a 

hearing on the proposal, and carefully 

considering the public’s written and 

oral comments, PBGC is publishing this 

final rule to make the requirements of 

the sponsor risk-based safe harbor more 

flexible, make the funding level for 

satisfying the well-funded plan safe 

harbor lower and tied to the variablerate premium, and add public company 

waivers for five events. The waiver 

structure under the final rule will 

further reduce unnecessary reporting 

requirements, while at the same time 

better targeting PBGC’s resources to 

plans that pose the greatest risks to the 

pension insurance system. PBGC 

anticipates the final rule will exempt 

about 94 percent of plans and sponsors 

from many reporting requirements and 

result in a net reduction in reporting to 

PBGC. This rulemaking is a result of 

PBGC’s regulatory review under 

Executive Order 13563. 

DATES: Effective October 13, 2015. See 

Applicability in SUPPLEMENTARY

INFORMATION. 

FOR FURTHER INFORMATION CONTACT: 

Daniel S. Liebman, Attorney 

(Liebman.Daniel@PBGC.gov), 

Regulatory Affairs Group, Office of the 

General Counsel, Pension Benefit 

Guaranty Corporation, 1200 K Street 

NW., Washington, DC 20005–4026; 202– 

326–4024. (TTY/TDD users may call the 

Federal relay service toll-free at 1–800– 

877–8339 and ask to be connected to 

202–326–4024.) 

SUPPLEMENTARY INFORMATION: 

Executive Summary—Purpose of the 

Regulatory Action 

This rule is needed to make reporting 

more efficient and effective, to avoid 

unnecessary reporting requirements, 

and to conform PBGC’s reportable 

events regulation to changes in the law. 

A better-targeted and more efficient 

reporting system helps preserve 

retirement plans. 

PBGC’s legal authorities for this 

action are section 4002(b)(3) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), which authorizes 

PBGC to issue regulations to carry out 

the purposes of title IV of ERISA, and 

section 4043 of ERISA, which gives 

PBGC authority to define reportable 

events and waive reporting. 

Executive Summary—Major Provisions 

of the Regulatory Action 

Changing the Waiver Structure 

Under the regulation’s long-standing 

waiver structure for reportable events, 

which primarily focused on the funded 

status of a plan, PBGC often did not get 

reports it needed; at the same time, it 

received many reports that were 

unnecessary. This mismatch occurred 

because the old waiver structure was 

not well tied to the actual risks and 

causes of plan terminations, particularly 

the risk that a plan sponsor will default 

on its financial obligations, ultimately 

leading to an underfunded termination 

of its pension plan. 

The final rule provides a new 

reportable events waiver structure that 

is more closely focused on risk of 

default than was the old waiver 

structure. Some reporting requirements 

that poorly identify risky situations— 

like those based on a supposedly 

modest level of plan underfunding— 

have been eliminated; at the same time, 

a new low-default-risk ‘‘safe harbor’’— 

based on company financial metrics—is 

established that better measures risk to 

the pension insurance system. This 

sponsor safe harbor is voluntary and 

based on existing, readily-available 

financial information that companies 

already use for many business purposes. 

With the low-default-risk safe harbor, 

PBGC is establishing a risk tolerance 

level for certain events faced by plans 

and plan sponsors that trigger reporting 

requirements so that PBGC can monitor 

and address situations that are most 

likely to pose problems to the pension 

insurance system. This reporting system 

is analogous to that used by an 

unsecured creditor in loan arrangements 

with a borrower so as to be alerted to 

important issues facing the borrower 

impacting its ability to meet its loan 

obligations. 

The final rule also provides a safe 

harbor based on a plan’s owing no 

variable-rate premium (VRP) (referred to 

as the well-funded plan safe harbor).1

Other waivers, such as public company, 

small plan, de minimis segment, and 

foreign entity waivers, have been 

retained in the final rule, and in many 

cases expanded, to provide additional 

relief to plan sponsors where the risk of 

an event to plans and the pension 

insurance system is low. With the 

expansion in the number of waivers 

available in the final rule, PBGC 

estimates that 94 percent of plans 

covered by the pension insurance 

system will qualify for at least one 

waiver of reporting for events dealing 

with active participant reductions, 

controlled group changes, extraordinary 

dividends, benefit liability transfers, 

and substantial owner distributions. 

Revised Definitions of Reportable Events 

The rule simplifies the descriptions of 

several reportable events and makes 

some event descriptions (e.g., active 

participant reduction) narrower so that 

compliance is easier and less 

burdensome. One event is broadened in 

scope (loan defaults), and clarification 

of another event has a similar result 

(controlled group changes). These 

changes, like the waiver changes, are 

aimed at tying reporting burden to risk. 

Conforming to Changes in the Law 

The Pension Protection Act of 2006 

(PPA) made changes in the law that 

affect the test for whether advance 

reporting of certain reportable events is 

required. This rule conforms the 

advance reporting test to the new legal 

requirements. 

Mandatory E-Filing 

The rule makes electronic filing of 

reportable events notices mandatory. 

This furthers PBGC’s ongoing 

implementation of the Government 

Paperwork Elimination Act. E-filing is 

more efficient for both filers and PBGC 

and has become the norm for PBGC’s 

regulated community. 

Background 

The Pension Benefit Guaranty 

Corporation (PBGC) administers the 

pension plan termination insurance 

program under Title IV of the Employee 

Retirement Income Security Act of 1974 

(ERISA). Section 4043 of ERISA requires 

that PBGC be notified of the occurrence 

of certain ‘‘reportable events.’’ The 

statute provides for both post-event and 


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2Except as otherwise noted, this preamble 

discusses post-event reporting only. 

3For example, alerts from recent reportable 

events notices of missed contribution events have 

allowed PBGC to timely intervene to protect plan 

assets and participant benefits. In one such case, 

PBGC’s involvement ensured that there was no 

interruption in benefits when PBGC ultimately 

terminated the plan. In a second case, PBGC’s 

monitoring of the plan as a result of the reportable 

event filing ensured that there were sufficient funds 

from the sale of a business to complete a standard 

termination. In a third case, PBGC’s early 

intervention provided an opportunity to examine 

options with the plan sponsor to continue the plan. 

As another example, a reportable event notice of an 

active participant reduction event led to a 

negotiated settlement with the plan sponsor that 

resulted in an additional $400,000 contribution to 

the plan. When the sponsor later filed for 

bankruptcy, PBGC took over the plan with a smaller 

amount of unfunded liabilities than if the 

contribution from the settlement had not been 

made. 

4For ease of reference, the preamble refers to the 

regulation as it exists before this final rule becomes 

applicable as the ‘‘old regulation’’ and refers to the 

regulation as amended by this final rule as the ‘‘new 

regulation.’’ See Applicability below. 

5Category 1 events include Extraordinary 

Dividend or Stock Redemption, Active Participant 

Reduction, Change in Contributing Sponsor or 

Controlled Group, Distributions to a Substantial 

Owner, and Transfer of Benefit Liabilities events. 

As discussed below, these are events for which the 

low-default risk and well-funded plan safe harbors 

will apply under the final regulation. 

6See footnote 3 above. 

advance reporting.2 PBGC’s regulation 

on Reportable Events and Certain Other 

Notification Requirements (29 CFR part 

4043) implements section 4043. 

Reportable events include such plan 

events as missed contributions, 

insufficient funds, and large pay-outs, 

and such sponsor events as loan 

defaults and controlled group changes— 

events that may present a risk to a 

sponsor’s ability to continue a plan. 

When PBGC has timely information 

about a reportable event, it can take 

steps to encourage plan continuation— 

for example, by exploring alternative 

funding options with the plan sponsor— 

or, if plan termination is called for, to 

maximize recovery of the shortfall from 

all possible sources.3 Without timely 

information about a reportable event, 

PBGC typically learns that a plan is in 

danger only when most opportunities 

for protecting participants and the 

pension insurance system have been 

lost. The regulation does however, 

include a system of waivers and 

extensions to ease reporting burdens 

where the circumstances surrounding 

some events may make reporting 

unnecessary or where the PBGC has 

other ways to obtain needed 

information. The regulation (both the 

old regulation and the new regulation 4) 

also provides that PBGC may grant 

waivers and extensions on a case-bycase basis. 

Reportable events are rare and 

reporting is often waived. As a result, 

each year, on average only 4 percent of 

plans experience an event and are 

required to report it; even fewer are 

required to report Category 1 events.5

Although the impact of the reportable 

events regulation on any company or 

plan or on the pension community as a 

whole is very small, a reportable events 

notice is potentially very important to 

PBGC, the pension insurance system, 

and participants of affected plans.6

2009 Proposed Rule 

On November 23, 2009 (at 74 FR 

61248), PBGC published in the Federal 

Register for notice and comment a 

proposed rule (the 2009 proposal) that 

eliminated most automatic waivers. The 

proposal reflected PBGC’s concern that 

it was not receiving reports of 

significant events because the existing 

automatic waivers were too broadly 

applicable. 

PBGC received comments from 

actuaries, pension consultants, and 

organizations representing employers 

and pension professionals. The public 

comments on the 2009 proposal 

uniformly opposed the proposed 

elimination of most waivers. 

Commenters said that without the 

waivers, reporting would be required for 

events that posed little risk to PBGC and 

said that the increase in the public’s 

burden of compliance would outweigh 

the benefit to the pension insurance 

system of the additional reporting. They 

also expressed concern that the 

proposed changes to the rule would 

discourage employers from continuing 

to maintain pension plans covered by 

Title IV. Several commenters urged 

PBGC to rethink and repropose the rule 

to address issues raised by the 

comments. 


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7PBGC’s Plan for Regulatory Review can be found 

at http://www.pbgc.gov/documents/plan-forregulatory-review.pdf (August 23, 2011). 

8The 2013 proposal also received comments from 

one plan sponsor. 

9See Summary Chart, below, for an overview of 

waivers and safe harbors under the old regulation 

and this final rule. 

10For this purpose, large plans means those plans 

that have more than 100 participants. The charts 

included in this preamble do not reflect waivers for 

de minimis segments or foreign entities. 

Executive Order 13563 

On January 18, 2011, the President 

issued Executive Order 13563 on 

Improving Regulation and Regulatory 

Review (76 FR 3821, January 21, 2011). 

Executive Order 13563 encourages 

identification and use of innovative 

tools to achieve regulatory ends, calls 

for streamlining existing regulations, 

and reemphasizes the goal of balancing 

regulatory benefits with burdens on the 

public. Executive Order 13563 also 

requires agencies to develop a plan to 

review existing regulations to identify 

any that can be made more effective or 

less burdensome in achieving regulatory 

objectives.7

2013 Proposal 

PBGC reconsidered the reportable 

events regulation in the spirit of 

Executive Order 13563 and in light of 

the comments to the 2009 proposal. On 

April 3, 2013 (at 78 FR 20039), PBGC 

published a new proposed rule (the 

2013 proposal). The 2013 proposal took 

a very different approach to waivers 

from the 2009 proposal. Whereas the 

2009 proposal simply eliminated most 

automatic waivers, the 2013 proposal 

substituted a new system of waivers 

(safe harbors) to reduce burden where 

possible without depriving PBGC of the 

information it needs to protect the 

pension insurance system. 

One of the waivers in the 2013 

proposal was for employers that met a 

safe harbor based on what the proposal 

described as sponsor financial 

soundness (i.e., an employer’s capacity 

to meet its financial commitments in 

full and on time) as determined through 

credit report scores and the satisfaction 

of related criteria. A second safe harbor 

that was more stringent than the 

existing funding-based waivers was 

available for plans that were either fully 

funded on a termination basis or 120 

percent funded on a premium basis. The 

2013 proposal also preserved or 

extended some waivers under the old 

regulation (including small-plan 

waivers) that the 2009 proposal would 

have eliminated. 

PBGC received 13 comment letters on 

the 2013 proposal, mainly from the 

same sources as the comments on the 

2009 proposal.8 PBGC also held its firstever regulatory public hearing, at which 

eight of the commenters discussed their 

comments. 

Most of the commenters on the 2013 

proposal expressed appreciation for 

PBGC’s re-proposing the rule and for the 

opportunity for further public input. 

Several commenters complimented 

PBGC on its general overall effort or said 

the 2013 proposal was an improvement 

on the 2009 proposal. One commenter 

approved PBGC’s efforts to balance its 

need for information with the public’s 

burden of providing it and to streamline 

the reporting process. Another 

commenter applauded PBGC on its 

common sense, risk-based approach to 

reporting, and yet another commended 

PBGC for the proposed rule’s significant 

relief for small plans, as well as the 

general focus on tying reporting to risk. 

Nonetheless, all of the commenters 

took issue with aspects of the proposal, 

particularly with the safe harbors, 

which four commenters suggested could 

cause more sponsors to leave the 

defined benefit system. Other concerns 

dealt with the difficulty of monitoring 

events in controlled groups and with 

proposed changes to the events dealing 

with active participant reductions and 

missed contributions. Some plan 

sponsor groups expressed general 

concern that by creating a plan sponsor 

financial soundness safe harbor, PBGC, 

on behalf of the Federal government, 

inevitably would become an entity that 

makes formal pronouncements on the 

financial prospects of American 

businesses. Two commenters urged that 

the proposal be withdrawn. The 

comments on the 2013 proposal and 

PBGC’s responses are discussed below 

with the topics to which they relate. 

Final Rule Waivers 

In response to the comments, PBGC is 

issuing a final rule with safe harbors 

that are simpler, more flexible, and 

easier to comply with and that clearly 

target risk to the pension insurance 

system.9 Under the final rule, all small 

plans (about two-thirds of all plans) will 

be waived from reporting Category 1 

events (other than substantial owner 

distributions). Further, if a reportable 

event occurs, 82 percent of large plans 

qualify for at least one waiver for these 

events: 10


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As a result, if a reportable event 

occurs, 94 percent of all plans will 

qualify for at least one waiver under the 

final regulation (an increase from 89 

percent under the old regulation): 


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11 In 2013, 66 percent of reportable events reports 

from filers that were below investment grade 

resulted in the opening of investigations. For this 

purpose, ‘‘investment grade’’ means a credit rating 

of Baa3 or higher by Moody’s or BBB- or higher by 

Standard and Poor’s. 

12See e.g., Department of Agriculture biorefinery 

assistance program (7 CFR 4279.202(d)); 

Department of Education requirements for 

institutions to participate in Federal student 

Low-Default-Risk Safe Harbor for Plan 

Sponsors 

To address the issue of risk, the 2013 

proposal provided a risk-based safe 

harbor tied to the risk of default on 

financial obligations of a plan sponsor. 

PBGC developed the proposed safe 

harbor based on its experience that the 

default risk of a plan sponsor generally 

correlates with the risk of an 

underfunded termination of the 

sponsor’s pension plan. One major 

component of the risk of underfunded 

termination is the likelihood that the 

plan sponsor will, within the near 

future, fall into one of the ‘‘distress’’ 

categories in section 4041(c)(2)(B) of 

ERISA (liquidation, reorganization, or 

inability to pay debts when due and to 

continue in business). Another is that 

the sponsor will go out of business, 

abandoning the plan and forcing PBGC 

to terminate it under section 4042 of 

ERISA. Thus, the 2013 proposal 

recognized that the risk of underfunded 

termination of a plan within the near 

future depends most significantly on the 

plan sponsor’s financial strength.11

The 2013 proposal provided a waiver 

from reporting for each of five events 

(active participant reductions, 

substantial owner distributions, 

controlled group changes, extraordinary 

dividends, and benefit liabilities 

transfers) if, as of the date an event 

occurred, each contributing sponsor (or 

highest US member of its controlled 

group) was what the proposal termed 

‘‘financially sound,’’ that is, had 

adequate capacity to meet its obligations 

in full and on time as evidenced by its 

satisfaction of five criteria: 

1. The entity had a qualifying 

commercial credit report score. 

2. The entity had no secured debt 

(with certain exceptions). 

3. The entity had positive net income 

for the most recent two fiscal years. 

4. The entity did not experience any 

loan default event in the previous two 

years (regardless of whether reporting 

was waived). 

5. The entity did not experience a 

missed contribution event in the 

previous two years (unless reporting 

was waived). 

To focus public input on this issue, 

the 2013 proposal asked specific 

questions about the financial soundness 

standard and sought suggestions for 

alternative approaches to determining 

financial soundness based on widely 

available and accepted financial 

standards. 

One commenter found the sponsor 

financial soundness safe harbor to be a 

reasonable attempt to accomplish the 

goal of providing broad waivers in 

situations where there is no significant 

risk to PBGC. But most commenters 

opposed the safe harbor as a concept, 

arguing that it would not be businessfriendly or helpful in protecting the 

pension insurance system. Some 

commenters characterized the financial 

soundness test as a pronouncement by 

PBGC on the financial status of 

American businesses, which they 

believed to be inappropriate for a 

government agency. 

However, many federal agencies have 

rules that include standards for 

measuring aspects of financial health or 

ability to meet certain financial 

obligations for a wide variety of 

purposes, including eligibility to use 

certain forms, qualification for funding, 

or participation in certain activities. 

These regulations govern not only the 

financial services industry, but such 

wide-ranging activities as agriculture, 

education, energy, and the 

environment.12 The provisions of the 


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Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 54985 

assistance programs (34 CFR 668.15); Department of 

Energy loan guarantees for projects that employ 

innovative technologies (10 CFR part 609); and 

Environmental Protection Agency rules on owners 

and operators of underground carbon dioxide 

storage wells (40 CFR 146.85). 

13Section 939A of the Dodd-Frank Act proscribes 

federal regulations that require the use of credit 

ratings, but Section 939 also requires agencies to 

replace references to credit ratings in regulations 

with alternative standards of creditworthiness. 

Section 939A is premised on the fact that federal 

agencies can and do use standards of financial 

capacity for various purposes. 

14For example, recent rules promulgated by 

Federal banking agencies use similar language that 

PBGC reviewed in developing its own standard for 

its regulation on reportable events. The 2013 

proposal states: For purposes of this part, an entity 

that is a plan sponsor or member of a plan sponsor’s 

controlled group is ‘‘financially sound’’ . . . if . . . 

it has adequate capacity to meet its obligations in 

full and on time as evidenced by its satisfaction of 

all of the five criteria described in paragraphs (b)(1) 

through (b)(5) of this section’’). This language is 

similar to an FDIC rule (‘‘an insured savings 

association . . . , shall not acquire or retain a 

corporate debt security unless the savings 

association . . . determines that the issuer of the 

security has adequate capacity to meet all financial 

commitments under the security for the projected 

life of the security’’) and an Office of the 

Comptroller of the Currency (OCC) rule 

(‘‘Investment grade means the issuer of a security 

has an adequate capacity to meet financial 

commitments under the security for the projected 

life of the asset or exposure. An issuer has an 

adequate capacity to meet financial commitments if 

the risk of default by the obligor is low and the full 

and timely repayment of principal and interest is 

expected’’). See FDIC rule (77 FR 43151, Jul. 24, 

2102) at http://www.gpo.gov/fdsys/pkg/FR-2012-07- 

24/pdf/2012-17860.pdf and OCC rule (77 FR 35253, 

June 13, 2012) at http://www.gpo.gov/fdsys/pkg/FR2012-06-13/pdf/2012-14169.pdf. 

15Earnings before interest, taxes, depreciation, 

and amortization. 

16http://www.pbgc.gov/Documents/4062(e)- 

enforcement-of-guidelines.pdf. See PBGC’s Web site 

for 4062(e) Developments, http://www.pbgc.gov/

prac/reporting-and-disclosure/section-4062(e)- 

developments.html. 

17See e.g., Moody’s Investors Service Corporate 

and Recovery Default Rates, 1920–2010 (Feb. 28, 

2011) http://efinance.org.cn/cn/FEben/Corporate

%20Default%20and%20Recovery%20Rates,1920- 

2010.pdf; Standard & Poor’s 2010 Annual U.S. 

Corporate Default Study And Rating Transitions 

(March 30, 2011) http://www.standardandpoors.

com/ratings/articles/en/us/?articleType=HTML&

assetID=1245302234800; and Standard & Poor’s 

2011 Annual U.S. Corporate Default Study And 

Rating Transitions (March 23, 2012) http://www.

standardandpoors.com/spf/upload/Ratings_EMEA/

2012-03-23_2011AnnualUSCorpDefaultStudy.pdf. 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Pub. L. 111– 

203) (the Dodd-Frank Act) clearly 

contemplate the use of some types of 

creditworthiness standards in federal 

regulations.13 And there is precedent in 

federal regulations for using the 

‘‘adequate capacity’’ standard in 

determining financial soundness.14

PBGC understands that the proposed 

‘‘financial soundness’’ terminology 

caused concern for some commenters, 

who perceived that the provisions of the 

safe harbor tests could be seen as 

measuring the overall financial 

prospects of a company. However, the 

safe harbor tests were never meant for 

that purpose. Rather, they were 

intended to measure the likelihood that 

a company would be able to continue to 

sponsor a plan and thus not present a 

risk to the pension insurance system. To 

clarify this point, the final regulation 

more precisely characterizes this safe 

harbor as the company low-default-risk 

safe harbor rather than the sponsor 

financial soundness safe harbor, and 

refers to a safe harbor for plans 

(described below) as the well-funded 

plan safe harbor rather than the plan 

financial soundness safe harbor. 

PBGC’s company low-default-risk safe 

harbor is entirely voluntary and relies 

mainly on private-sector financial 

metrics derived from a company’s own 

financial information; one component of 

the safe harbor, which is not required to 

be used to satisfy the low-default-risk 

standard, is based on widely available 

financial information that most plan 

sponsors (and their U.S. parents) 

already have, and that represents wellknown, objective, non-governmental 

assessments of default risk used in a 

wide variety of business contexts. Use of 

the safe harbor is not conditioned on an 

evaluation by PBGC of plan sponsor 

financial soundness. Nor does it involve 

sponsors’ reporting to PBGC (or anyone) 

any financial metrics, such as company 

financial information, credit scores or 

other evidence of creditworthiness. 

PBGC remains convinced that adding 

a company low-default-risk safe harbor 

to the reportable events regulation 

furthers PBGC’s goals of tying reporting 

to risk and avoiding unnecessary 

reports. Thus, the final rule contains a 

risk-based safe harbor with 

modifications to mitigate commenters’ 

concerns, particularly by providing 

more flexibility in applying the safe 

harbor and clarifying when and how the 

satisfaction of the low-default-risk 

standard is determined. 

Adequate Capacity Standard 

The final rule provides that an entity 

(a ‘‘company’’) that is a contributing 

sponsor of a plan or the highest level 

U.S. parent of a contributing sponsor 

satisfies the low-default-risk standard if 

the company has adequate capacity to 

meet its obligations in full and on time 

as evidenced by satisfying either (A) the 

first two, or (B) any four, of the 

following seven criteria: 

1. The probability that the company 

will default on its financial obligations 

is not more than 4 percent over the next 

five years or not more than 0.4 percent 

over the next year, in either case 

determined on the basis of widely 

available financial information on the 

company’s credit quality. 

2. The company’s secured debt (with 

some exceptions) does not exceed 10 

percent of its total asset value. 

3. The company’s ratio of total-debtto-EBITDA 15 is 3.0 or less. 

4. The company’s ratio of retainedearnings-to-total-assets is 0.25 or more. 

5. The company has positive net 

income for the two most recent 

completed fiscal years. 

6. The company has not experienced 

any loan default event in the past two 

years regardless of whether reporting 

was waived. 

7. The sponsor has not experienced a 

missed contribution event in the past 

two years unless reporting was waived. 

For reporting to be waived for an 

event to which the safe harbor applies, 

both the contributing sponsor and the 

highest level U.S. parent of the 

contributing sponsor must satisfy the 

company low-default-risk safe harbor. 

(The 2013 proposal required only that, 

for each contributing sponsor of the 

plan, either the sponsor or the highest 

level U.S. parent of the contributing 

sponsor satisfy the safe harbor 

requirements.) Requiring that both 

entities satisfy the safe harbor 

requirements addresses the issue of 

intercompany transactions between or 

among members of a controlled group 

that may disperse assets and liabilities 

within the controlled group. 

Although the low-default-risk safe 

harbor has some similarities with 

standards PBGC described in its 2013 

guidelines concerning enforcement of 

ERISA section 4062(e),16 differences 

exist because of the different purposes 

of the statute. The 4062(e) guidelines 

were intended to inform PBGC’s 

exercise of its discretion in enforcing 

monetary liability for certain business 

cessations, whereas the reportable 

events regulation provides rules for the 

public on compliance with ERISA 

section 4043’s reporting requirements. 

The final rule revises two criteria 

(probability of default in the first 

criterion and secured debt level in the 

second criterion) from the 2013 

proposal and adds two new criteria 

(based on a ratio of total-debt-toEBITDA described in the third criterion 

listed above and a ratio of retainedearnings-to-total-assets described in the 

fourth criterion listed above). PBGC 

selected these four criteria based on 

historical data on rates of company 

defaults on financial obligations from 

widely published financial 

information.17 These criteria represent 


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18Thirteen months allows for some variation from 

year to year on the date that annual financials are 

reported. 

19See § 4010.9. 

20See e.g., Public Company Accounting Oversight 

Board, AU Section 508 Reports on Audited 

Financial Statements http://pcaobus.org/standards/ 

auditing/pages/au508.aspx#ps-pcaob_e65bc2e0- 

ad78-42d7-a99b-8c59d98b3fd3; American Institute 

of CPAs (AICPA), AU–C Section 705 Modifications 

to the Opinion in the Independent Auditor’s Report 

http://www.aicpa.org/Research/Standards/

AuditAttest/DownloadableDocuments/AU-C00705.pdf; and AICPA, AR Section 90 Review of 

Financial Statements http://www.aicpa.org/

Research/Standards/CompilationReview/

DownloadableDocuments/AR-00090.pdf. 

21PBGC compared company one-year default 

rates from information PBGC reviewed that is 

referred to in footnote 17 above with CCRC score 

financial metrics that are easily 

identified from existing sources of 

information and are used regularly by 

creditors as indicators of a company’s 

ability to meet its financial obligations 

in full and on time. Lenders take into 

account such rates of default when 

extending credit to borrowers on terms 

showing the borrowers have adequate 

capacity to meet financial obligations. 

The revised criteria take into account 

one commenter’s suggestion that PBGC 

consider incorporating into the safe 

harbor alternative risk measures such as 

debt-to-EBITDA and debt-to-total-capital 

ratios that are used in common debt 

covenants and routinely tracked by 

companies that issue debt or borrow 

from banks. The changes to the lowdefault-risk standard are described in 

more detail below. 

Determination Date 

To make the safe harbor user-friendly, 

the final rule provides that a company 

determine whether it qualifies for the 

low-default-risk safe harbor once during 

an annual financial reporting cycle (on 

a ‘‘financial information date’’). If it 

qualifies on that financial information 

date, its qualification remains in place 

throughout a ‘‘safe harbor period’’ that 

ends 13 months later or on the next 

financial information date (if earlier).18

If it does not qualify, its non-qualified 

status remains in place until the next 

financial information date. 

The description of financial 

information used to determine whether 

the safe harbor is available is similar to 

that used in PBGC’s regulation on 

Annual Financial and Actuarial 

Information Reporting.19 PBGC used 

this description so that the pension plan 

community would be familiar with the 

provisions and to maintain consistency 

across PBGC regulations, to the extent 

possible. The financial information date 

for a company is the date annual 

financial statements (including balance 

sheets, income statements, cash flow 

statements, and notes to the financial 

statements) are filed with the Securities 

and Exchange Commission (SEC) on 

Form 10–K (if the company is a public 

company) or the closing date of the 

company’s annual accounting period (if 

the company is not a public company). 

For a company that does not have 

annual financial statements, the 

financial information date is the date 

the company files with the Internal 

Revenue Service (IRS) its annual federal 

income tax return or IRS Form 990. 

The final regulation refers to the 

annual financial statements or 

applicable IRS return or Form 990 

associated with a financial information 

date as ‘‘supporting financial 

information.’’ The supporting financial 

information associated with a financial 

information date will also be used to 

evaluate whether the secured debt, 

EBITDA-to-total-debt, and/or retainedearnings-to-total-assets criteria are met. 

To evaluate whether the positive net 

income criterion is met, supporting 

financial information associated with 

the two most recent consecutive fiscal 

years must be used. 

If an accountant’s audit or review 

report expresses a material adverse view 

or qualification, the company will not 

satisfy the low-default-risk standard for 

the safe harbor. Common adverse 

qualifiers used in the accounting 

profession that will render supporting 

financial information unsatisfactory for 

purposes of the safe harbor include such 

language as ‘‘awareness of one or more 

material modifications that should have 

been made in order for the financial 

statements to be in conformity with 

[applicable accounting standards]’’; ‘‘the 

financial statements do not present 

fairly, in all material respects, the 

company’s financial condition and 

results of operations in conformity with 

[applicable accounting standards]’’; or 

‘‘substantial doubt about the company’s 

ability to continue as a going concern 

for a reasonable period of time.’’ 20

Commercial Measures Criterion 

To satisfy the criterion for the 

company financial soundness safe 

harbor under the 2013 proposal, a 

company needed to have a credit score, 

reported by a commercial credit 

reporting company (CCRC) commonly 

used in the business community, that 

indicated a low likelihood that the 

company would default on its 

obligations over the next twelve months. 

Examples of such scores were to be 

listed in PBGC’s reportable events forms 

and instructions. 

Seven commenters were critical of the 

commercial credit score criterion. Most 

of these commenters opposed the use of 

the score as a criterion altogether, while 

some indicated that the use of credit 

scores or similar information would be 

acceptable in limited circumstances if it 

were voluntary. Some concerns raised 

by commenters centered on the extent to 

which companies pay attention or have 

access to CCRC scores. Large public 

companies typically are more familiar 

with their credit ratings from nationally 

recognized statistical rating 

organizations (NRSROs) registered with 

the SEC, and some small companies 

may not have CCRC scores. Other 

concerns included costs associated with 

obtaining or monitoring scores, 

inaccurate score data, and a lack of 

specificity as to how and when PBGC 

would update its forms and instructions 

with valid CCRC score examples. 

The final regulation addresses these 

concerns. Under the final rule’s 

company low-default-risk safe harbor 

provision, the criterion that corresponds 

to the proposed CCRC score criterion is 

optional. In addition, CCRC scores are 

not the exclusive benchmark for 

satisfying that new criterion. Instead, 

companies are not limited to using 

particular reports or tools and are 

afforded broad flexibility to use widely 

available business metrics that measure 

default probability. This approach 

avoids the need to list and update 

examples of scores in PBGC’s forms and 

instructions. 

Under the final rule, the first criterion 

(referred to as the ‘‘commercial 

measures’’ criterion) will be met for a 

company if the probability that the 

company will default on its financial 

obligations is not more than 4 percent 

over the next five years or not more than 

0.4 percent over the next year, in either 

case determined on the basis of widely 

available financial information on the 

company’s credit quality—not limited to 

CCRC scores. PBGC’s intent is to 

provide flexibility to companies in 

meeting the standard and allow a 

company to determine whether it 

satisfies the new criterion by referring to 

third party information that the 

company considers reliable and already 

uses with confidence for other business 

purposes. Thus, the final rule does not 

require the use of a CCRC score to 

satisfy the commercial measures 

criterion (although a company may still 

choose to obtain a CCRC score if it does 

not have one, as contemplated in the 

2013 proposal). 

The commercial measures standard 

replicates the underlying probability of 

default risk reflected in the CCRC score 

standard under the 2013 proposal 21 and 


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data; see e.g., https://www.dnb.com/product/FSS/

FAQsv7.1.pdf. 

22See e.g., tying adequate capacity to meet 

financial obligations to the lowest tier of investment 

grade rating in Table 3 in http://

www.standardandpoors.com/spf/general/

RatingsDirect_Commentary_979212_06_22_2012_

12_42_54.pdf. 

23This company was suggested by one of the 

commenters on the 2013 proposal. According to 

CreditRiskMonitor’s Web site, the company 

provides comprehensive commercial credit reports 

for more than 40,000 public companies world-wide. 

24The distributions to substantial owner event 

does not have a small plan waiver. 

25See Department of Treasury Final Rule: 

Modification of Treasury Regulations Pursuant to 

Section 939A of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act. (78 FR 54758, 

September 6, 2013) (http://www.gpo.gov/fdsys/pkg/ 

FR-2013-09-06/pdf/2013-21752.pdf). The relevant 

regulatory text states: 

‘‘Sec. 1.249–1 Limitation on deduction of bond 

premium on repurchase: (e)(2)(ii) In determining 

the amount under paragraph (e)(2)(i) of this section, 

appropriate consideration shall be given to all 

factors affecting the selling price or yields of 

comparable nonconvertible obligations. Such 

factors include general changes in prevailing yields 

of comparable obligations between the dates the 

convertible obligation was issued and repurchased 

and the amount (if any) by which the selling price 

of the convertible obligation was affected by reason 

of any change in the issuing corporation’s credit 

quality or the credit quality of the obligation during 

such period (determined on the basis of widely 

published financial information or on the basis of 

other relevant facts and circumstances which reflect 

the relative credit quality of the corporation or the 

comparable obligation). (Emphasis added.) 

26See e.g., SEC Final Rule: Removal of Certain 

References to Credit Ratings Under the Investment 

Company Act (79 FR 1321, January 8, 2014) (http:// 

www.gpo.gov/fdsys/pkg/FR-2014-01-08/pdf/2013- 

31425.pdf): ‘‘We believe, however, that credit 

ratings can serve as a useful data point for 

evaluating credit quality, and as noted above, a 

fund’s board (or its delegate) may not rely solely on 

the credit ratings of an NRSRO without performing 

additional due diligence’’; and Department of 

Labor, Employee Benefits Security Administration 

Proposed Amendments to Class Prohibited 

Transaction Exemptions To Remove Credit Ratings 

Pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (78 FR 37578–9, June 21, 

2013) (http://www.gpo.gov/fdsys/pkg/FR-2013-06- 

21/pdf/2013-14790.pdf): ‘‘In making these 

determinations, a fiduciary would not be precluded 

from considering credit quality reports prepared by 

outside sources, including credit ratings prepared 

by credit rating agencies, that they conclude are 

credible and reliable for this purpose’’ and ‘‘For 

purposes of this amendment, the Department 

believes that a fiduciary’s determination of the 

credit quality of commercial paper according the 

proposed standard, should, as a matter of prudence, 

include the reports or advice of independent third 

parties, including, where appropriate, such 

commercial paper’s credit rating.’’ 

27This figure is based on review of financial 

statement data for companies in PBGC databases 

that could meet the commercial measures criterion. 

represents a threshold below which 

PBGC believes there is legitimate 

concern as to a company’s long-term 

ability to continue a pension plan.22 The 

one- and five-year time periods for 

measuring default rate are typical 

periods over which third parties analyze 

the risk of default. 

PBGC believes that almost every 

sponsor and its highest level U.S. parent 

will be able to obtain widely available 

financial information that indicates 

their probability of default over either a 

one- or five-year period. Typical metrics 

(from 2013) that would meet the 

probability-of-default standard include a 

D&B score of 1477, risk class of 3, or 

percentile of 46–55; a 

CreditRiskMonitor 23 score of 9, and 

may include other financial metrics 

reflecting a level of investment grade 

rating. PBGC believes that 70 percent of 

plan sponsors will be able to meet the 

probability-of-default criterion based on 

widely available financial information 

on their credit quality. Sponsors of 

small plans, which are more likely to 

have difficulty obtaining credit quality 

information, will generally qualify for 

the small-plan waiver for four of the five 

events 24 covered by the company lowdefault-risk safe harbor. 

In crafting the revised commercial 

measures criterion, PBGC reviewed 

language used in a recent final rule 

designed to bring a Department of 

Treasury regulation into compliance 

with the Dodd-Frank Act.25 PBGC also 

took into account other agency 

rulemakings where credit ratings were 

used in compliance with Section 939A 

of the Dodd-Frank Act. Explaining the 

usefulness of outside sources of credit 

quality information, including credit 

ratings, these agencies suggested in 

preambles to their rules that the 

voluntary use of credit ratings from 

NRSROs is permissible where they are 

one but not the sole source of 

information used to determine credit 

quality.26

One of the commenters requested that 

PBGC provide relief from information 

penalties if a company relies on a CCRC 

score that turns out to be inaccurate or 

stale. PBGC believes such relief is 

unnecessary under the final rule 

because a company may choose a 

measure that the company knows is 

accurate, or the company may choose to 

satisfy the low-default-risk safe harbor 

in other ways. 

Secured Debt Criterion 

Under the 2013 proposal, one of the 

criteria required to satisfy the sponsor 

financial soundness standard was that 

the entity had no secured debt, 

disregarding leases or debt incurred to 

acquire or improve property and 

secured only by that property (e.g., 

mortgages and equipment financing, 

including capital leases). In the 

preamble to the 2013 proposal, PBGC 

said it was aware that there may be 

other circumstances in which a 

company capable of borrowing without 

security might nonetheless choose to 

offer security to a lender—for example, 

if doing so would significantly reduce 

the cost of a loan. PBGC sought public 

comment on the extent to which the 

proposed no-secured-debt test might be 

failed by plan sponsors that had a low 

risk of default and on how to make the 

test correspond better with commercial 

reality (e.g., by disregarding more types 

of secured debt). 

Two commenters stated that a plan 

sponsor’s use of secured debt is not 

appropriate as a measure of the plan 

sponsor’s financial health because, as 

PBGC acknowledged in the 2013 

proposal, a financially healthy company 

may obtain secured debt for a variety of 

business reasons that do not relate to the 

credit risk of the company, such as to 

obtain favorable interest rates or because 

the company has assumed the debt from 

an entity it acquires. 

These comments gave PBGC a better 

appreciation for how widespread a 

practice it is for creditworthy companies 

to obtain secured debt. Under the final 

rule, the criterion will be satisfied if a 

company’s secured debt (disregarding 

leases or debt incurred to acquire or 

improve property and secured only by 

that property) does not exceed 10 

percent of the company’s total assets. 

PBGC was reluctant to try to predict 

the types of secured debt that low-risk 

borrowers would be more likely to have 

than higher-risk borrowers. The 10 

percent threshold included in the 

criterion serves to make a simple 

allowance for secured debt that good 

credit quality businesses may have. In 

addition, PBGC’s experience is that 

approximately 90 percent of companies 

that would meet the commercial 

measures criterion of the safe harbor do 

not have a ratio of secured-debt-to-totalassets above 10 percent.27 PBGC 

believes this correlation between the 

ability to meet financial obligations and 

the level of secured debt supports the 

use of 10 percent as an appropriate 

threshold for this safe harbor criterion. 

Net-Income Criterion 

Another criterion for the sponsor 

financial soundness safe harbor in the 

2013 proposal was that the company 

had positive net income for the past two 

years. (For non-profit entities, ‘‘net 

income’’ was to be measured as the 

excess of total revenue over total 

expenses as required to be reported on 

Internal Revenue Service Form 990.) 

Four commenters raised issues 

regarding the positive net income 

criterion. Two commenters stated that 

the requirement did not necessarily 


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54988 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

reflect the financial risk profile of a 

company because, for example, 

accounting losses, such as non-cash 

adjustments, could create negative net 

income for purposes of financial 

statements but not reflect the health of 

business operations. One of these 

commenters suggested that if the 

positive net income criterion were 

retained, PBGC should consider 

adjustments to reflect these unusual 

charges. 

PBGC did not revise this criterion in 

the final rule in response to the 

commenters’ concerns about non-cash 

accounting losses. Net income measures 

the economic value a company creates 

over the measurement period, and a lack 

of net income is one indication of risk 

that a company may lack the resources 

to fulfill its obligations. Because noncash losses (as well as non-cash gains) 

are components of such economic value, 

PBGC considers it appropriate not to 

exclude non-cash charges from the netincome criterion. 

The description of the net-income 

criterion in the 2013 proposal indicated 

that net income was to be measured 

under generally accepted accounting 

principles (GAAP) or International 

Financial Reporting Standards (IFRS) 

standards. PBGC included GAAP and 

IFRS in the 2013 proposal to provide 

rigorous and widely-used accounting 

standards for determining net income 

and because some companies may need 

to comply with IFRS as a result of the 

international scope of their operations. 

One commenter stated that because 

GAAP and IFRS are not compatible 

standards, two similarly situated 

companies might have different 

reporting requirements. PBGC has 

addressed this concern by eliminating 

the references to GAAP and IFRS in the 

final rule. 

Another commenter said that a 

company might not know net income 

for the prior fiscal year when an event 

occurs, making it impossible to 

determine whether the safe harbor was 

available. The final rule addresses this 

concern by providing that the lowdefault-risk safe harbor is satisfied on a 

financial information date (discussed 

above) rather than on a date an event 

occurs. 

One commenter said that the netincome criterion was unfair because it 

could not be satisfied by financially 

healthy companies in cyclical industries 

or companies that experience rare and 

significantly adverse events, such as a 

natural disaster. As also explained in 

Active Participant Reduction below, 

PBGC is not making special exceptions 

from the reporting obligations due to a 

natural disaster or other unusual event 

because such an occurrence can cause 

significant financial challenges to a 

company and raise concerns about its 

ability to meet future pension and other 

financial obligations. Similarly, PBGC 

believes that it would be inappropriate 

to provide an exclusion for companies 

in cyclical industries because a 

company at a low point in its income 

cycle may for just that reason be 

vulnerable to an event that would cause 

concern about meeting its pension 

obligations. Alerting PBGC to the 

possibility that a company may not be 

able to meet such obligations is exactly 

what the reportable events regulation is 

intended to do, regardless of what 

caused the default risk to rise. In any 

event, such a company might still be 

able to avail itself of the safe harbor by 

choosing another way of meeting the 

low-default-risk standard. 

One commenter objected to the 

application of the criterion to nonprofits as inconsistent with the nature of 

non-profit organizations. PBGC 

disagrees. A non-profit may have 

positive net income that does not 

jeopardize its non-profit status, so long 

as the income is related to the nonprofit’s purpose and is not distributed to 

the non-profit’s officers, directors, or 

others connected to the non-profit. In 

fact, many large non-profits with 

defined benefit plans, such as certain 

hospital systems, have substantial net 

income. Thus, PBGC does not view this 

criterion to be inconsistent with nonprofit operating realities. 

Criteria Related to Loan Defaults and 

Missed Contributions 

The 2013 proposal contained two 

other financial soundness safe harbor 

criteria, which were intended to 

supplement and confirm the general 

picture of financial soundness painted 

by the satisfaction of the credit report 

test. These criteria were: 

• For the past two years, the company 

had no missed contribution events, 

unless reporting was waived. 

• For the past two years, the company 

had no loan default events, whether or 

not reporting was waived. 

Two commenters urged PBGC to 

disregard for purposes of the missed 

contribution criterion a missed 

contribution that occurred because of a 

missed or untimely funding balance 

election or because of a mandatory 

reduction of a funding standard 

carryover balance or prefunding 

balance. The latter can retroactively 

create a late quarterly contribution that 

may not be known of by the reporting 

deadline. 

As discussed in the Missed 

Contributions section below, the final 

rule includes a modification of the 

missed contribution event (which is the 

basis for the operation of this criterion) 

to excuse a missed timely funding 

balance election. PBGC did not make a 

similar change with respect to a 

mandatory reduction of a funding 

standard carryover balance or 

prefunding balance. The commenter 

who raised this issue acknowledged that 

such a situation should be a reportable 

event but expressed concern that a 

company should not be deprived of 

qualifying for the safe harbor for this 

reason alone. With the changes in the 

final rule that allow for more flexibility 

in meeting the low-default-risk safe 

harbor, a company that experiences a 

mandatory reduction in its funding 

balance can still qualify for the safe 

harbor by meeting another criterion. 

One of these commenters also 

requested that PBGC clarify that late 

contribution reporting under section 

303(k) (for amounts over $1 million) 

would not be considered when making 

the determination of whether the 

criterion was met. PBGC declined to 

make this change. Having unpaid 

contributions exceeding $1 million is 

too serious a deficit to ignore and in 

PBGC’s view, not consistent with 

adequate capacity to meet one’s 

obligations. 

One commenter asked that PBGC 

make an exception to the no-loandefault criterion to excuse ‘‘meaningless 

technical defaults’’ that are not 

indicative of any financial challenges. 

As explained in detail in the Loan 

Default section, the final rule 

distinguishes between events of default 

(which can lead to substantial 

contractual remedies for a lender to 

protect its investment) and other 

circumstances (which may be violations 

of an agreement but do not trigger such 

remedies). 

New Criteria—Ratios of Total-Debt-toEBITDA and Retained-Earnings-toTotal-Assets 

In addition to giving companies the 

ability to satisfy the low-default-risk 

safe harbor by various combinations of 

criteria, the final rule includes two 

additional criteria available for 

companies to use. Both of these new 

criteria are financial metrics that are 

easily derived from standard financial 

information. 

One of these criteria is based on the 

ratio of total-debt-to-EBITDA. This ratio 

is commonly referred to as a leverage 

ratio and is used to assess a company’s 

ability to meet its debt obligations. 

Companies with a ratio of total-debt-toEBITDA of 3.0 or less correspond fairly 

closely with those that would satisfy the 


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28See e.g., Table 3 in http://www.standardand

poors.com/ratings/articles/en/us/?articleType=

HTML&assetID=1245329097686. 

29To underscore this point, PBGC is required 

under accounting rules to identify contingent 

liabilities on PBGC’s financial statements in this 

manner. 

30This safe harbor essentially restores a similar 

waiver under the old regulation, which waived 

notice for six events if no VRP was required to be 

paid for the plan for the event year. 

commercial measures criterion.28 Thus, 

for the debt-to-EBITDA criterion to be 

satisfied, a company must have a ratio 

of total-debt-to-EBITDA of 3.0 or less. 

The other new criterion is based on 

the ratio of retained-earnings-to-totalassets. To satisfy this criterion, a 

company must have a ratio of retainedearnings-to-total-assets of 0.25 (one-tofour) or more. PBGC included this safe 

harbor criterion because it shows how 

much of a company’s assets have been 

financed with the company’s profits. In 

PBGC’s experience, companies with 

high retained earnings tend to have 

higher profitability and/or a longer 

operating history that enables the 

accumulation of retained earnings— 

qualities that indicate the ability to meet 

financial obligations. Analysis of 

information available to PBGC suggests 

that companies that would meet the 

commercial measures criterion have an 

average ratio of retained-earnings-tototal-assets of at least 0.25. 

Well-Funded Plan Safe Harbor 

The old regulation had waivers based 

on several different measures of funded 

status, sometimes combined with other 

factors such as public company status. 

The 2013 proposal also used plan 

funding as a basis for relief from filing 

requirements, but with two different 

measures, both of which were to apply 

to the same five events as the company 

risk-based safe harbor (active participant 

reductions, substantial owner 

distributions, controlled group changes, 

extraordinary dividends, and benefit 

liabilities transfers). Reporting was to be 

waived if the plan was either fully 

funded on a termination basis or 120 

percent funded on a premium basis 

(determined, in either case, using prioryear data). 

In the preamble to the 2013 proposal, 

PBGC explained that from its 

perspective, it is more appropriate to 

measure plan funding levels using 

termination-basis assumptions than 

ongoing-plan assumptions because 

termination liability is a better measure 

of the financial impact of plan 

termination on PBGC and 

participants.29 However, PBGC was 

aware that for plans, measuring funding 

on an ongoing-plan basis is more 

common because variable-rate 

premiums, required contributions, 

benefit restrictions, and annual funding 

notices are all based on ongoing-plan 

calculations. Thus, PBGC proposed both 

ways of meeting the safe harbor. To 

compensate for the different 

assumptions and timing that generally 

make termination liability higher than 

on-going plan liability, the 2013 

proposal included a 20-percent cushion 

to make those two measures more nearly 

equivalent. 

Nine commenters on the 2013 

proposal criticized the plan financial 

soundness safe harbor because the 

required funding ratios were 

unrealistically high. The commenters 

also generally opposed basing a safe 

harbor on termination-basis liability 

since few plans ordinarily make that 

determination. Three commenters also 

said that funding at 100 percent of 

termination liability could create a risk 

of excise tax liability. 

After consideration of the comments, 

PBGC is persuaded that a well-funded 

plan safe harbor based on terminationbasis liability would be unnecessarily 

burdensome for most plans—especially 

if the threshold remained at 100 

percent—and would give reporting 

relief to few plans. Thus, the final rule 

eliminates the test for the well-funded 

plan safe harbor based on terminationbasis liability. 

PBGC is also persuaded that a wellfunded plan safe harbor based on 120 

percent funding on a premium basis is 

not helpful to most plans since plans are 

not likely to fund that high, despite 

PBGC’s belief that such a level of 

funding would better reflect the risk to 

the pension insurance system. After 

considering various levels of funding as 

suggested by commenters, PBGC 

concluded that 100 percent funding— 

meaning a plan would pay no variablerate-premium (VRP)—is a realistic and 

reasonable goal and strikes an 

appropriate balance between the burden 

of reporting and PBGC’s need for 

information to protect the pension 

insurance system. Thus, the wellfunded plan safe harbor in the final rule 

applies if the plan owed no VRP for the 

plan year preceding the event year.30

Plans exempt from the VRP (e.g., certain 

new plans) will qualify for the safe 

harbor regardless of their funding 

percentage. 

This safe harbor is less protective of 

the pension insurance system because, 

among other reasons, liabilities 

measured on an on-going basis are 

generally lower than liabilities 

measured on a termination basis, and 

for premium purposes, only vested 

liabilities are counted. Thus, PBGC 

anticipates that it will not receive some 

potentially useful reports. However, 

PBGC accepts this trade-off in the 

interest of addressing sponsor and plan 

concerns. 

The 2013 proposal looked to the VRP 

data for the year before the event year 

to determine whether a plan qualified 

for the safe harbor. One commenter 

suggested that PBGC allow plans that 

did not meet the test with prior year 

premium information to meet the test 

based on current year premium 

information, if available by the date an 

event occurs. Under this approach, a 

calendar-year plan with a reportable 

event in November 2014 could 

determine its eligibility for the waiver 

based on its 2014 VRP filing, instead of 

its 2013 VRP filing. 

After consideration of the comment, 

PBGC is not accepting this suggestion. 

PBGC does not want to lose reports from 

plans when funding improves without 

gaining reports from plans whose 

funding deteriorates. Yet PBGC does not 

want to require all plans to reassess 

qualification for the safe harbor when 

VRP data become available. Basing the 

safe harbor on prior year premium 

information keeps the safe harbor 

simple and predictable; plans will know 

for certain prior to year-end whether 

they will qualify for the safe harbor for 

the entire next plan year. 

The 2013 proposal gave small plans a 

filing extension—for events to which 

this plan financial soundness safe 

harbor applied—until one month after 

the prior year’s premium filing due date 

(i.e., five months after the end of the 

prior year). PBGC’s recent final rule on 

premiums (see 79 FR 13547, March 11, 

2014), which advances the small-plan 

premium due date 61⁄2 months, makes 

this extension unnecessary, and thus it 

is not included in the final reportable 

events regulation. 

Small-Plan Waivers 

The 2013 proposal included smallplan waivers for five events, as 

compared to two events under the old 

regulation. One commenter specifically 

commended PBGC for expanding the 

availability of small plan waivers. The 

final rule changes the small-plan 

category from fewer than 100 

participants to 100 participants or fewer 

for consistency with PBGC’s recent 

premium final rule. Otherwise, the 

small-plan waiver is unchanged from 

the 2013 proposal. 

Public Company Waiver 

The old regulation contained a 

limited public company waiver for 

reporting controlled group change and 


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54990 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

31See http://www.sec.gov/about/forms/form8- 

k.pdf. 

32The exceptions for results of operations and 

financial statements fall under SEC Form 8–K Item 

2.02 (Results of Operations and Financial 

Condition) and Item 9.01 (Financial Statements and 

Exhibits). The final rule’s public company waiver 

includes these exceptions because disclosure of a 

reportable event under these items may be 

incidental to the event that requires SEC disclosure. 

For example, the release of results of operations 

may include a reference to a reportable event in the 

context of the overall business activities during a 

fiscal quarter. In such a case, PBGC believes the 

SEC disclosure often may be a passing reference 

with little information about the reportable event 

and likely made long after the event may have 

occurred. 

33 Information about these events is often filed on 

SEC Form 8–K under either Item 7.01 Regulation 

FD Disclosure or Item 8.01 (Other Events) rather 

than under one of the specified disclosure items on 

SEC Form 8–K. Publicly-traded companies may also 

be subject to additional requirements to disclose 

events such as dividend transactions that are 

fulfilled through filing an 8–K report. For example, 

the New York Stock Exchange states that ‘‘a listed 

company is expected to release quickly to the 

public any news or information which might 

reasonably be expected to materially affect the 

market for its securities’’ and includes dividend 

announcements as an example of a news item that 

should be handled on an immediate release basis 

through SEC regulation FD disclosure. See Sections 

202.05 and 06 of the NYSE Listed Company 

Manual. http://nysemanual.nyse.com/lcm/. PBGC 

anticipates that not all controlled group changes 

will be reported on SEC Form 8–K. See e.g., Item 

2.01 (Completion of Acquisition or Disposition of 

Assets). The requirement is only to disclose the 

completion of an acquisition or disposition of a 

significant amount of assets. 

34Although such events may be disclosed in 

quarterly or annual SEC reports in financial 

statements, the disclosure would not be timely or 

provide adequate information for PBGC purposes. 

35For instance, in one case, a company did not 

report the shutdown of one of its facilities in a 

March 2008 SEC filing. PBGC discovered the 

shutdown through a Form 10 filing and negotiated 

a settlement under ERISA section 4062(e) that 

resulted in a $400,000 contribution into the plan 

before the company filed bankruptcy and 

terminated the pension plan. 

36SEC Form 8–K’s Item 2.04 (Triggering Events 

That Accelerate or Increase a Direct Financial 

Obligation or an Obligation under an Off-Balance 

Sheet Arrangement) requirement is only triggered if 

the consequences of the event are material to the 

registrant. 

37Both types of waiver apply to controlled group 

change, liquidation, and extraordinary dividend; 

the foreign entity waiver also applies to loan default 

and bankruptcy. The foreign entity waiver is 

limited to entities that are not direct or indirect 

parents of contributing sponsors; discussion of the 

foreign-entity waiver in this preamble should be 

understood to incorporate this limitation. 

38The waiver would use the ten percent standard 

for de minimis segments. For liquidation, loan 

default, and insolvency, the de minimis waiver is 

available only if the entity involved in the event 

was not a contributing sponsor. 

liquidation events. Reporting of these 

events was waived if the plan’s 

contributing sponsor before the effective 

date of the transaction was a public 

company and the fair market value of 

the plan’s assets was at least 80 percent 

of the plan’s vested benefits amount. In 

the case of a liquidation event, the 

waiver applied only if each plan 

maintained by the liquidating member 

was maintained by another member of 

the plan’s controlled group after the 

liquidation. The old regulation also 

contained an extension for public 

companies to report controlled group 

change, liquidation, and extraordinary 

dividend events until 30 days after the 

earlier of the first Form 10–Q filing 

deadline that occurred after the 

transaction or the date when a press 

release with respect to the transaction 

was issued. 

The 2013 proposal did not include a 

reporting waiver for public companies. 

One commenter urged PBGC to exempt 

public company sponsors from 

reportable events requirements entirely. 

This commenter asserted that because 

publicly-traded companies already 

report significant events on their SEC 

filings, there is no reason for them to 

provide duplicative filings to PBGC. 

In evaluating the commenter’s 

suggestion, PBGC reviewed SEC 

reporting requirements and reportable 

event notices to determine the extent to 

which PBGC could get timely and 

relevant information from SEC filings 

that could substitute for reportable 

events filings.31 Based on this review, 

the final rule waives reporting where 

any contributing sponsor of the affected 

plan is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event, except 

where such disclosure is under a SEC 

Form 8–K item relating primarily to 

results of operations or financial 

statements.32 This waiver applies to the 

same five events as the low-default-risk 

and well-funded plan safe harbors. 

PBGC found that SEC filings provide 

adequate and timely information to 

PBGC with respect to these events 

because they are either required to be 

reported under a specific Form 8–K item 

or because they are material information 

for investors.33

The public company waiver does not 

apply to other events because PBGC 

found that for those events SEC filings 

would not necessarily provide adequate 

and timely information. For instance, 

SEC rules do not require specific 

reporting of ERISA events, such as an 

inability to pay benefits when due or a 

missed contribution, on SEC Form 8–K 

unless the events would be considered 

material to investor decisions,34 which 

often may not be the case for small 

plans sponsored by large companies. 

Yet these events may still pose a risk to 

the plan and the pension insurance 

system.35

Similarly, corporate events such as 

loan default and liquidation events may 

not be disclosed in SEC filings because 

the information is not considered 

material to investors (and thus not 

required to be reported under SEC 

rules).36 Further, even if an event is 

disclosed in an SEC filing, the filing will 

likely not contain actuarial or other 

important information that would be 

included in a reportable events notice. 

These kinds of events present a high 

risk to the pension insurance system by 

their very nature and thus, timely and 

complete information on them is 

particularly important. 

There is no need for a public 

company waiver for the insolvency 

event in the final regulation 

(Bankruptcy or Similar Settlements 

under the old regulation), since the new 

event description excludes Bankruptcy 

Code filings, and public company 

insolvencies are handled through 

proceedings under the Bankruptcy 

Code. 

The public company waiver’s 

requirement of actual disclosure (and 

not mere public company status) is 

consistent with the requirement of 

actual disclosure for public company 

extensions under the old regulation. 

Such extensions are no longer necessary 

because all public companies will be 

waived from reporting these events so 

long as the event is actually disclosed. 

Foreign Entity and De Minimis Waivers 

The old regulation provided reporting 

waivers for several events where the 

entity or entities involved in the event 

were foreign entities or represented a de 

minimis percentage of a controlled 

group.37 The 2013 proposal expanded 

the availability of those waivers to five 

events (extraordinary dividends, 

controlled group changes, insolvencies, 

liquidations, and loan defaults).38 The 

final rule’s treatment of de minimis and 

foreign-entity waivers is unchanged 

from the 2013 proposal. 

With respect to de minimis waivers, 

one commenter requested that PBGC 

clarify whether an investment in a 

subsidiary is included in tangible or 

intangible assets, particularly in the case 

of shell companies whose only asset is 

the stock of a subsidiary, for purposes 

of determining whether the entity is de 

minimis. PBGC believes that treatment 

of stock in a subsidiary should be 

consistent with the regulatory and 

accounting requirements sponsors 

follow to prepare financial statements. 

Controlled Group Situations 

One commenter raised concerns about 

the difficulty in monitoring members of 

complex controlled groups for 

reportable events, particularly for the 


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39See 78 FR 20047–8. 

40This commenter suggested that the preamble to 

the 2013 proposal downplayed the significance of 

reportable events on loan covenants and loan 

defaults. The commenter estimates that five to ten 

percent of its time is spent monitoring and revising 

corporate events to avoid reporting. 

41This commenter also stated at the hearing that 

one of its members would have faced bankruptcy 

proceedings unless it was able to renegotiate its 

credit agreement to include a material adverse effect 

clause to a provision that required the absence of 

a reportable events filing. The commenter indicated 

that the sponsor was successful in this effort. 

five reportable events that involve 

reporting at the controlled group level 

rather than the plan level: Controlled 

group changes, liquidation, loan 

defaults, extraordinary dividends, and 

insolvency events. The commenter 

stated that complicated controlled group 

situations require significant 

coordination across plan sponsors and 

controlled group members to gather 

information and test the various 

reporting waivers. Some commenters 

suggested that the proposal was unclear 

about whether the sponsor safe harbor 

tests had to be met by all controlled 

group members. 

Similar issues existed under the old 

regulation. Nonetheless, the final rule 

makes changes from the proposal to 

addresses these concerns and minimizes 

burden for plans that experience events 

involving controlled groups in a number 

of ways. The final rule: 

• Includes public company waivers 

for five events. 

• Clarifies that the company lowdefault-risk safe harbor (which also 

applies to controlled group changes and 

extraordinary dividends) requires 

satisfaction by a contributing sponsor 

and the highest level U.S. parent of the 

contributing sponsor, not by the whole 

controlled group or by the contributing 

sponsor or highest level U.S. parent 

alone. 

• Provides that satisfaction of the 

low-default-risk safe harbor is based on 

a single point in time during an annual 

financial cycle rather than 

determination after each of one or more 

events during a year. 

Besides those changes in the final 

rule, the exclusion of proceedings under 

the Bankruptcy Code from the 

insolvency event description in the final 

rule (as in the 2013 proposal) will 

obviate most reporting of insolvency 

cases that involve controlled groups, 

since most such companies will go 

through federal bankruptcy proceedings 

in the event of insolvency. 

The final regulation (like the 

proposal) provides relief from 

monitoring smaller controlled group 

members (through the de minimis 10- 

percent segment waivers) and all foreign 

controlled group members that are not 

parent entities. The inclusion of a smallplan waiver for the controlled group 

change event also provides relief in this 

regard. PBGC believes these exceptions 

will alleviate the need to monitor the 

controlled group members that are 

potentially the most difficult to track. In 

addition, PBGC expects that many 

smaller controlled group members 

typically will not undergo loan default 

events because their debt levels will not 

meet the $10 million reporting 

threshold. Thus, PBGC determined that 

no further changes in the final 

regulation were necessary to address 

concerns about controlled group 

monitoring. 

Effect of Proposal on Loan Agreements 

As discussed in the 2013 proposal, 

PBGC reviewed loan agreements to 

better understand the concerns of 

commenters on the 2009 proposal about 

the effect of the proposal on loan 

agreements.39 Based on this review, 

PBGC concluded that the elimination of 

reporting waivers would not adversely 

affect most plan sponsors with loan 

agreements. Further, PBGC was not 

aware of any instance where filing 

notice of a reportable event caused a 

lender to declare a default. PBGC 

believes that if a lender were to declare 

a default it would be because the 

underlying event indicated a 

deterioration in the debtor’s financial 

situation. 

PBGC sought further feedback from 

the public on this issue in the 2013 

proposal and asked that commenters 

provide copies of relevant loan 

agreements and information about the 

number and circumstances of plan 

sponsors that have experienced default 

or suffered other adverse consequences 

related to loan agreements as a result of 

a reportable event. No such 

documentation was received. 

One commenter on the 2013 proposal 

said that since the 2009 proposal, many 

companies already have renegotiated 

agreements to provide that the 

occurrence of a reportable event that is 

not automatically waived is an event of 

default only if the event could result in 

a certain amount of financial liability or 

could have a material adverse effect on 

the borrower. But the commenter went 

on to say that a material adverse effect 

clause does not provide clarity as to 

when the clause actually has been or 

could be triggered. A second 

commenter, while agreeing with PBGC 

that in most cases, a non-waived 

reportable event will not result in an 

automatic default, said it is the creditor 

who determines whether the event 

results in material adverse effect.40 Both 

commenters suggested that lenders may 

try to renegotiate agreements under the 

pretext that a reportable event had 

resulted in (or could have) a material 

adverse effect on the borrower, which 

would be time consuming and costly 

and could force the borrower to accept 

unfavorable terms. 

Two commenters urged PBGC to 

retain the old reportable events 

regulation because companies have 

taken the regulation’s provisions into 

account in contracting with not only 

lenders but also with employee benefit 

plan investors (who invest in swaps and 

futures agreements).41 However, the old 

regulation has been unchanged since 

1997, when the economy, defined 

benefit pension plans and the pension 

insurance program looked very different 

than they do today. Based on more than 

15 years of experience with the old 

regulation, PBGC has found that the 

regulation is not effective in providing 

timely reports for plans that pose the 

most risk to the pension insurance 

system. 

Moreover, reportable events notices 

are designed to give PBGC notices of 

events that could impair the payment of 

a debt (i.e., a pension obligation). If a 

lender invokes a material adverse effect 

clause as a result of a reportable event, 

it is because the lender has concerns 

that the event will impair the company’s 

ability to pay on the loan, not because 

the event is reported to PBGC. In other 

words, a company’s lender’s concerns in 

this regard and PBGC’s concerns are 

likely to be congruent. 

Although PBGC’s understanding of 

the impact of the regulation on loan 

agreements has not changed, PBGC 

believes that the changes made in this 

final rule should assuage commenters’ 

concerns in this area. The final rule 

provides more waivers than under the 

2013 proposal. PBGC anticipates that 

about 94 percent of plans covered by 

PBGC will qualify for at least one waiver 

under the active participant reduction, 

controlled group change, extraordinary 

dividend, benefit liability transfer, and 

substantial owner distribution event 

provisions. Along with missed 

contribution events (which PBGC does 

not expect to be reported in greater 

numbers under the final rule), these five 

events accounted for over 90% of filings 

between 2012 and 2014. Thus, with 

more waivers covering the most 

common events, sponsors will be better 

off under the new regulation than under 

the old regulation, and PBGC expects an 

overall net reduction in reporting under 

the final rule (see discussion in 

Executive Orders 12866 and 13563 and 

Paperwork Reduction Act), and an 


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42When credit and investment agreements are 

renegotiated, borrowers might be able to address 

uncertainty raised by having material adverse effect 

clauses by negotiating a dollar figure threshold that 

would trigger an event of default. 

43See PBGC guidance on disaster relief at http:// 

www.pbgc.gov/res/other-guidance/dr.html. 

44Such required contributions include quarterly 

contributions under ERISA section 303(j)(3) and 

Code section 430(j)(3), liquidity shortfall 

contributions under ERISA section 303(j)(4) and 

increase in the reporting of events that 

are a true concern to the pension 

insurance system. In addition, the 

deferral of the applicability date for the 

final regulation should give plan 

sponsors time to consult with loan 

providers about appropriate 

amendments to loan agreements, which, 

as mentioned by the commenter referred 

to above, companies appear already to 

be doing.42

Descriptions of Events Under the Final 

Rule 

The next sections of the preamble 

address specific event descriptions, 

which can impact reporting 

requirements in much the same way as 

waivers. The final rule follows the 2013 

proposal that reporting of an insolvency 

event is required only when a member 

of a plan’s controlled group is involved 

in insolvency proceedings that are not 

under the federal Bankruptcy Code) and 

makes no changes in event descriptions 

that were not addressed in the 2013 

proposal. 

Active Participant Reduction 

Under ERISA section 4043(c)(3), in 

general, a reportable active participant 

reduction occurs when the number of 

active participants is reduced below 80 

percent of the number at the beginning 

of the year or below 75 percent of the 

number at the beginning of the prior 

year. 

Creeping losses of active participants 

may cross the two percentage thresholds 

at different times in one year. The 2009 

proposal added a reporting waiver to 

limit reporting to once a year on the 

premise that PBGC would monitor for at 

least a year any plan that reported an 

active participant reduction. 

The 2013 proposal introduced a new 

approach to reporting active participant 

reductions. It distinguished between 

rapid reductions—which would have to 

be reported immediately—and slower 

reductions attributable to attrition— 

which would have to be tested for and 

reported only once a year. This 

approach addressed a comment on the 

2009 proposal requesting relief from the 

need to monitor constantly for creeping 

active participant reductions that might 

exceed one of the percentage thresholds. 

Because the attrition event can occur 

only once a year, PBGC eliminated the 

2009 proposal’s waiver from reporting 

subsequent active participant reduction 

event notices after the first such event 

in the same year was reported. PBGC 

reasoned that quick drops in the number 

of active participants should be easy to 

spot without exercising unusual 

vigilance. 

Under the 2013 proposal, a ‘‘quick’’ 

active participant reduction event 

would occur when the reporting 

threshold was crossed either within a 

single 30-day period (a short-period 

event) or as a result of a single cause (a 

single-cause event), such as the 

discontinuance of an operation, a 

natural disaster, a reorganization, a mass 

layoff, or an early retirement incentive 

program. An attrition event would occur 

if the active participant count at the end 

of a plan year fell below one of the 

percentage thresholds. A 120-day 

reporting extension beyond the end of 

the year would provide time to count 

active participants. 

The final rule generally tracks the 

2013 proposal but eliminates the shortperiod event (as one commenter 

requested), lengthens the reporting 

extension for attrition events, and makes 

some minor editorial changes for 

clarification. PBGC concluded that the 

burden of monitoring for short-period 

events would outweigh the value of 

short-period event reports, since most 

short-period events would likely also be 

either single-cause events or eventually 

captured in an attrition-event filing. In 

addition, PBGC decided to extend the 

reporting deadline for attrition events 

until the premium due date for the plan 

year following the event year. 

Two commenters requested 

reinstatement of the waiver of reporting 

more than once a year from the 2009 

proposal, or clarification of when more 

frequent reporting would be required. 

As explained above, the ‘‘once-a-year’’ 

waiver is no longer necessary for 

creeping active participant losses 

because the attrition event can arise 

only once a year. And after 

consideration, PBGC has concluded that 

it cannot adequately monitor plans for 

multiple rapid active participant 

reduction events in the same year. 

Further, two or more distinct events in 

the same year could signal extreme 

financial distress that merit timely 

reporting to PBGC. Thus the ‘‘once-ayear’’ waiver is not in the final rule. 

Two commenters suggested 

exempting frozen plans from the active 

participant reduction event or waiving 

reporting unless plan liabilities 

increased (as from a triggering of shutdown benefits). PBGC has not adopted 

these suggestions. Although the active 

participant reduction event may be 

more easily triggered for a frozen plan, 

such plans can pose just as much risk 

to the pension insurance system as 

plans that are not frozen. 

One commenter asked for a waiver or 

extension of the requirement to report 

active participant reductions caused by 

natural disasters. The issue here would 

appear to apply equally to all reportable 

events, but even limiting the proposal to 

the active participant reduction event, 

PBGC is concerned that the occurrence 

of a disaster may increase, rather than 

obviate, the importance of timely 

reporting because a natural disaster may 

have a lasting negative impact on the 

ability of a business to continue 

operating. Thus, PBGC is providing no 

special rules for disasters in the final 

rule. Note, however, that in appropriate 

cases, PBGC issues disaster relief 

notices that provide temporary relief 

from reporting requirements.43 Case-bycase waivers and extensions are also 

available. 

One commenter wanted PBGC to 

waive reporting of active participant 

reductions due to spinoffs within a 

controlled group. PBGC sees no more 

reason to waive reporting where there is 

an intra-group spinoff than where there 

is no spinoff. The loss of active 

participants is of concern itself, 

regardless of cause. Further, such a 

spin-off may be a precursor to the 

transfer of benefit liabilities outside the 

controlled group. Accordingly, no such 

waiver is provided in the final rule, 

though case-by-case waivers are 

available. 

Finally, this commenter also 

questioned the utility of reports of 

active participant reduction events, 

suggesting that PBGC is unaffected by 

active participant reductions and takes 

no action on a report of such an event 

unless accompanied by some other 

event. PBGC disagrees with this 

assessment. Notices of active participant 

reductions (which often result from 

business restructurings) give PBGC a 

chance to intervene to protect plan 

assets when a restructuring fails and 

plan termination becomes a significant 

possibility. 

Missed Contributions 

Under the old regulation (§ 4043.25), 

a missed contribution event occurs 

when a plan sponsor fails to make any 

required plan contribution by its due 

date. 

The final rule (like the 2009 and 2013 

proposals) clarifies the language in 

§ 4043.25. This reportable event does 

not apply only to contributions required 

by statute,44 but also to contributions 


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Code section 430(j)(4), and contributions to 

amortize funding waivers under ERISA section 

303(e) and Code section 430(e). 

45Such ‘‘non-statutory’’ contributions are not 

taken into account under ERISA section 303(k) and 

Code section 430(k), dealing with liens that arise 

because of large missed contributions, and are 

therefore disregarded under § 4043.81, which 

implements those provisions. However, violating 

the conditions of a funding waiver typically means 

that contributions that were waived become 

retroactively due and unpaid and are counted for 

purposes of § 4043.81. 

46See similar language in SEC Form 8–K Item 

1.01 used to define a material definitive agreement. 

required as a condition of a funding 

waiver that do not fall within the 

statutory provisions on waiver 

amortization charges.45 The final rule 

(like the 2013 proposal) includes 

waivers for this event for a missed 

contribution made up within 30 days 

after its due date and for small plans 

that miss quarterly contributions. 

One commenter suggested that PBGC 

add a waiver for contributions missed 

solely because of a failure to timely 

make a funding balance election. The 

final rule adds a waiver for a missed 

contribution where the failure to timely 

make the contribution is due solely to 

the plan sponsor’s failure to timely 

make a funding balance election. 

The final rule also clarifies a technical 

point from the 2013 proposal. The 

requirement to submit a reportable 

event notice for a missed contribution is 

satisfied by submission of Form 200 for 

the same event. However, reliance on 

Form 200 to satisfy the reportable event 

filing requirement does not transform 

Form 200 into a reportable event notice. 

Thus, the final rule makes clear that a 

Form 200 filing is not protected by the 

non-disclosure provisions of ERISA 

section 4043(f). 

Inability To Pay Benefits When Due 

In general, a reportable event occurs 

when a plan fails to make a benefit 

payment timely or when a plan’s liquid 

assets fall below the level needed for 

paying benefits for six months. The old 

regulation excuses failure to pay due to 

inability to locate the payee or any other 

administrative delay of less than two 

months (or two benefit payment 

periods). In reviewing the proposed 

rule, PBGC concluded that it would be 

unfair to require a plan to report an 

inability to pay benefits when due 

simply because (despite the diligence 

called for by the fiduciary standards) a 

payee could not be located within the 

prescribed time limit. Accordingly, the 

final rule clarifies that the time limit 

does not apply to delay in paying a 

missing payee. Other administrative 

delays are excused only to the extent 

they do not exceed the prescribed time 

limit. 

Distribution to Substantial Owner 

Under the old regulation, 

distributions to substantial owners 

generally were required to be reported if 

the total distributions to an owner 

exceeded $10,000 in a year, unless the 

plan was fully funded for nonforfeitable 

benefits. The 2013 proposal limited the 

event to circumstances where the 

distributions to one substantial owner 

exceeded one percent of plan assets or 

the distributions to all substantial 

owners exceeded five percent of plan 

assets. In addition, PBGC proposed to 

limit reporting for a distribution in the 

form of an annuity to one notice, which 

would satisfy all future reporting 

requirements for the annuity so long as 

the annuity did not increase. Once 

notified that an annuity was being paid 

to a substantial owner, PBGC would 

need no further notices that the annuity 

was continuing to be paid. 

One commenter asked PBGC to 

exclude from reporting payments made 

to comply with the minimum required 

distribution rules of Code section 

401(a)(9), which might involve an 

increasing annuity if the substantial 

owner were still working and accruing 

benefits but required to take minimum 

distributions. In response, the final rule 

provides that reporting for distributions 

in the form of annuities is required only 

once, without the limitation that the 

annuity be non-increasing. 

Controlled Group Change 

Under § 4043.29 (both in the old 

regulation and the new regulation), a 

reportable event occurs for a plan when 

there is a transaction that results, or will 

result, in one or more persons’ ceasing 

to be members of a plan’s controlled 

group. For this purpose, the term 

‘‘transaction’’ includes a written or 

unwritten legally binding agreement to 

transfer ownership or an actual transfer 

or change of ownership. (A transaction 

is not reportable if it will result solely 

in a reorganization involving a mere 

change in identity, form, or place of 

organization, however effected.) 

One commenter to the 2013 proposal 

raised concerns that elimination of the 

waivers for this event under the old 

regulation (which the 2013 proposal 

replaced with other waivers) would 

require significant monitoring of every 

transaction in which any controlled 

group member engages throughout the 

year and analysis of each such 

transaction to determine whether 

reporting is required. This commenter 

further asserted that the 2013 proposal 

would add significant administrative 

burdens without a corresponding 

increase in the security of the pension 

insurance system and urged PBGC to 

restore the funding and public company 

waivers that applied under the old 

regulation. PBGC has addressed this 

concern with the final rule’s inclusion 

of the small plan and public company 

waivers, without regard to plan funding 

status. See the discussion above in the 

sections Public Company Waiver and 

Controlled Group Situations. 

The 2013 proposal deleted the 

example in § 4043.29(e)(3) of the old 

regulation that indicated that a 

reportable event occurred when a 

member of a controlled group ceased to 

exist upon being merged into another 

member in the course of a 

reorganization. However, this point was 

not made clearly by the language in 

§ 4043.29(a) describing the event. The 

final rule adds language further 

clarifying that a controlled group 

member’s ceasing to exist because of a 

merger into another member of the 

group is not a reportable event. 

Like the 2013 proposal, the final rule 

provides that whether an agreement is 

legally binding is to be determined 

without reference to any conditions in 

the agreement. For this purpose, a 

legally binding agreement means an 

agreement that provides for obligations 

that are material to and enforceable by 

and against the parties to the agreement, 

regardless of whether any conditions of 

the agreement have been met or satisfied 

(in other words, an agreement does not 

fail to be legally binding solely because 

it is subject to conditions that have not 

been performed).46 Example 2 in the 

regulatory text has been modified to 

make clear when the filing is triggered. 

The provisions on controlled group 

change events are otherwise unchanged 

from the 2013 proposal. 

Extraordinary Dividends 

Under the old regulation, an 

extraordinary dividend or stock 

redemption occurred when a member of 

a plan’s controlled group declared a 

distribution (a dividend or stock 

redemption) that alone or in 

combination with previous distributions 

exceeded a level specified in the 

regulation. The 2013 proposal 

eliminated much of the computational 

detail that the old regulation prescribed 

for determining whether a reportable 

event had occurred by providing that 

the computations be done in accordance 

with generally accepted accounting 

principles. 

Although PBGC did not receive 

comments on the 2013 proposal for this 

event, PBGC decided to include in the 


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47Under Code section 414(l), transfers of 

liabilities must be covered by assets. In most cases 

of liabilities transfers, assets from the transferor 

plan also will be transferred to the transferee plan, 

which would reduce the amount of assets in the 

transferor plan and may affect its funded 

percentage. 

48PBGC is requiring reporting of risk transfers on 

premium forms, starting with filings for plan years 

beginning in 2015. See http://www.pbgc.gov/

Documents/2015-Premium-PaymentInstructions.pdf. 

final rule a waiver for public companies 

from reporting extraordinary dividends 

and stock redemptions, as discussed 

above under Public Company Waiver. 

Transfer of Benefit Liabilities 

The reportable events regulation 

requires reporting to PBGC when, in any 

12-month period, three percent or more 

of a plan’s benefit liabilities are 

transferred to a person outside the 

transferor plan’s controlled group or to 

a plan or plans maintained by a person 

or persons outside the transferor plan’s 

controlled group. Transfers of benefit 

liabilities are of concern to PBGC 

because they may reduce the transferor 

plan’s funded percentage 47 and because 

the transferee may be a higher default 

risk than the transferor. 

Both the 2009 and 2013 proposals 

clarified that satisfaction of a plan’s 

benefit liabilities through the payment 

of a lump sum or the purchase of an 

irrevocable commitment to provide an 

annuity would not constitute a transfer 

of benefit liabilities that must be 

reported under the regulation. In the 

preamble to the 2013 proposal (78 FR at 

20050), PBGC stated it had concluded 

that such transfers need not be reported 

because the provisions in section 436 of 

the Code and section 206(g) of ERISA 

(as added by the Pension Protection Act 

of 2006 (PPA)) prohibit or limit cashouts 

and annuitizations by significantly 

underfunded plans. In addition, since 

cashouts and annuitizations do not 

involve benefit liabilities transferring to 

another plan, PBGC reasoned there 

would be no concern about a transferee 

plan’s financial health. 

One commenter on the 2013 proposal 

opposed the exclusion of lump sums 

and annuity purchases from the 

reporting requirement. This commenter 

suggested that cash-outs or 

annuitizations on a large scale, 

sometimes referred to as de-risking or 

risk transfers, presage the decline of the 

defined benefit pension plan system. 

This commenter stated PBGC could 

gather information that might lead to 

regulatory or statutory protection for 

participants impacted by these types of 

transactions. During the hearing on the 

2013 proposal, however, all of the copanelists of this commenter expressed 

opposite views. 

PBGC shares concerns about the 

potential impact of cashouts and 

annuitizations on a large scale on 

retirement security, including concerns 

that some of these transactions may 

leave a plan underfunded or effectively 

be part of a standard termination 

without meeting the applicable statutory 

and regulatory requirements (including 

reporting to PBGC and disclosure to 

participants). PBGC also recognizes that 

such transactions may create burdens on 

individuals whose options to obtain 

lifetime income in retirement are 

limited or who may not have the 

resources or experience to manage lump 

sum distributions in a way that 

replicates the professional investment 

management (with the associated 

fiduciary responsibilities) of defined 

benefit plan assets. PBGC notes, 

however, that few companies would be 

subject to advance reporting of such 

transactions, thus severely limiting the 

utility of such reporting, as compared to 

its burden. Therefore, PBGC is not 

adopting the commenter’s suggestion in 

this final rule. Accordingly, the final 

rule retains the treatment of lump sum 

distributions and annuity purchases 

from the proposals. 

Nevertheless, PBGC believes there are 

ways to address the commenter’s 

concerns. PBGC believes it has useful 

tools to monitor and analyze trends 

(e.g., Form 5500 and premium filings) as 

well as tools to provide education and 

outreach to participants, and is carefully 

considering how best to do so.48

Loan Default 

Under the old regulation, a loan 

default reportable event occurred, with 

respect to a loan with an outstanding 

balance of $10 million or more to any 

member of a plan’s controlled group, 

when a loan payment was more than 30 

days late (10 days in the case of advance 

reporting), when the lender accelerated 

the loan, or when there was a written 

notice of default based on a drop in cash 

reserves, an unusual or catastrophic 

event, or the debtor’s persistent failure 

to meet agreed-on performance levels. 

PBGC believes that the significance of 

both potential and actual loan defaults 

on such large loans is so great that 

reporting should not be restricted to the 

current list of reporting triggers. Rather, 

PBGC believes that not only any default 

on a loan of $10 million or more—even 

a default on a loan within a controlled 

group—but waivers and amendments of 

loan covenants that are made to avoid 

a default (to keep the loan arrangement 

functioning) may reflect financial 

difficulty and pose serious challenges 

for the pension insurance system. 

Accordingly, in the 2013 proposal PBGC 

expanded the definition of the loan 

default event. Under the 2013 proposal, 

a reportable event would occur if a 

member of a plan’s controlled group had 

an outstanding loan balance of $10 

million or more and— 

• There was an acceleration of 

payment or a default under the loan 

agreement, or 

• The lender waived or agreed to an 

amendment of any covenant in the loan 

agreement for the purpose of avoiding a 

default. 

These changes were to apply for both 

post-event notices and advance notices. 

In the preamble to the 2013 proposal, 

PBGC stated its belief that the reporting 

requirement for loan defaults under the 

proposed rule would be comparable to 

what a typical creditor would require of 

a borrower to monitor the ability of the 

borrower to meet its obligations under 

the loan agreement. PBGC sought the 

views of the public on specific issues 

dealing with loan defaults, including 

how PBGC might better replicate 

reporting of information to creditors and 

whether there is a category of 

‘‘technical’’ defaults that should not be 

reportable events. 

One commenter was concerned that 

the proposal would require PBGC to 

determine a plan sponsor’s intent 

behind a waiver or amendment and was 

not sure how such intent could be 

determined. To address this comment, 

the final rule replaces words ‘‘for the 

purpose of avoiding a default’’ in the 

2013 proposal with the words ‘‘the 

effect of which is to cure or avoid a 

breach that would trigger a default.’’ 

This commenter also said that the 

scope of the proposed expansion of the 

event definition was too broad, 

especially for public companies that 

might face SEC disclosure issues. The 

commenter urged PBGC to modify the 

proposal to require the reporting of an 

amendment or waiver only to ‘‘material 

financial covenants,’’ and not all 

covenants (e.g., non-financial covenants 

such as compliance with ERISA and 

similar laws). Another commenter, in 

responding to the proposed loan default 

criterion of the sponsor financial 

soundness safe harbor, was also 

concerned that the proposed rule’s 

description of the loan default event 

was too broad because so-called 

meaningless ‘‘technical defaults’’ that 

are waived by a lender and are not 

indicative of financial stress would be 

reported. Other than these comments, 

PBGC did not receive feedback on loan 

default concerns. 

After reviewing the comments and 

further analysis of typical loan 


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Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 54995 

49Several other PBGC regulations also refer to 

plan funding concepts using citations outmoded by 

PPA: The regulations on Filing, Issuance, 

Computation of Time, and Record Retention (29 

CFR part 4000); Terminology (29 CFR part 4001); 

Variances for Sale of Assets (29 CFR part 4204); 

Adjustment of Liability for a Withdrawal 

Subsequent to a Partial Withdrawal (29 CFR part 

4206); and Mergers and Transfers Between 

Multiemployer Plans (29 CFR part 4231). Thus, 

these regulations must also be revised to be 

consistent with ERISA and the Code as amended by 

PPA and with the revised premium regulations. The 

final rule makes the necessary conforming 

revisions, as proposed. 

50See 79 FR 13547 (March 11, 2014). 

51Although changes to the paperwork would not 

have to go through notice and comment rulemaking, 

they would still have to be reviewed by OMB under 

the Paperwork Reduction Act, which typically 

requires two public notices and a total of 90 days 

for submission of public comments. 

agreement provisions, PBGC has 

decided to not make further changes to 

the event description in response to 

comments. Covenants that are tied to 

event-of-default triggers are put into 

loan agreements because lenders believe 

that failure to comply with such 

covenants is significant and serves as an 

early indicator that a company may be 

experiencing financial difficulties 

resulting in its inability to pay its debts 

on time and in full. Distinctions should 

be made between a breach of any 

covenant in a loan agreement and a 

breach of a particular covenant that 

gives rise to a possible event-of-default 

trigger. The former may cover the kinds 

of minor loan agreement violations of 

the kind the commenter who asked that 

‘‘technical defaults’’ of loan agreements 

be excluded from reporting under the 

regulation. The latter are those types of 

breaches (e.g., non-payment, failure to 

meet a financial ratio, or failure to 

provide some important information) 

that the parties to the loan agreement 

have agreed are serious enough to 

undermine the loan agreement 

arrangement. Under the final regulation, 

PBGC will act as any another creditor 

would by requiring reporting of all 

incidents within the expanded scope of 

the loan default event. If a sponsor 

believes that an event triggering the loan 

default reporting requirement does not 

reflect financial difficulty or the ability 

of the sponsor to meet its pension 

obligations, PBGC will consider a 

request for a case-by-case waiver. 

The final rule makes one other change 

to this event from the 2013 proposal. 

The final rule deletes a paragraph from 

the old regulation on the notice date for 

payment acceleration or loan default 

that referred to ‘‘other conditions’’ for 

such occurrences to be reportable. 

Because the provisions concerning 

‘‘other conditions’’ are eliminated 

(following the 2013 proposal), this 

paragraph is no longer necessary. 

Form 200 Reporting 

One commenter suggested that PBGC 

allow for simplified reporting for Form 

200 filings in limited situations, such as 

when the missed contribution has been 

made up by the filing due date and the 

plan has not missed any other 

contributions within a certain period of 

time. PBGC thought this was a good 

suggestion. Accordingly, under the final 

rule, if a plan sponsor makes up a 

missed contribution by the Form 200 

notice due date, and the sponsor has not 

missed any other required contributions 

during the two-year period ending on 

the Form 200 notice due date, the plan 

may file the Form 200 notice without 

any of the attachments (e.g., controlled 

group listing and company financial 

statements) otherwise required by the 

Form 200 and instructions. 

Other Topics Under the Final Rule 

Advance Reporting 

In general, reportable events must be 

reported to PBGC within 30 days after 

they occur. But section 4043(b) of 

ERISA requires advance reporting by a 

contributing sponsor for certain 

reportable events if a ‘‘threshold test’’ is 

met, unless the contributing sponsor or 

controlled group member to which an 

event relates is a public company. The 

advance reporting threshold test is 

based on the aggregate funding level of 

plans maintained by the contributing 

sponsor and members of the 

contributing sponsor’s controlled group. 

The funding level criteria are expressed 

by reference to calculated values that 

are used to determine VRPs under 

section 4006 of ERISA. 

PPA changed the plan funding rules 

in Title I of ERISA and in the Code and 

amended the VRP provisions of section 

4006 of ERISA to conform to the 

changes in the funding rules. The final 

rule, like the prior proposals, conforms 

the regulation to the changes made 

under PPA.49

The regulatory language under the 

final rule is slightly modified to 

conform to changes made in a recent 

final rule on PBGC premiums under 

which small plans generally calculate 

the VRP using data from the plan year 

preceding the premium payment year, a 

requirement referred to as the ‘‘lookback rule.’’ 50 Thus, the reportable 

events final rule clarifies that the VRP 

data used for this advance reporting test 

are not the data for the prior year, but 

the data used to determine the VRP for 

the prior year. 

There is no change in the final rule 

from the 2013 proposal that eliminated 

advance-notice extensions for loan 

default and voluntary insolvency 

events. (The notice date of an event 

where insolvency proceedings are filed 

against a debtor by someone outside the 

plan’s controlled group is extended to 

10 days after proceedings begin). Thus, 

under the final rule, the due date for 

these events is the same as for other 

reportable events subject to the advancenotice requirements (i.e., 30 days prior 

to the event). 

Forms and Instructions 

PBGC issues three reporting forms for 

use under the reportable events 

regulation. Form 10 is for post-event 

reporting under subpart B of the 

regulation; Form 10-Advance is for 

advance reporting under subpart C of 

the regulation; and Form 200 is for 

reporting under subpart D of the 

regulation. Failure to report is subject to 

penalties under section 4071 of ERISA. 

The final rule eliminates some of the 

documentation that was required to be 

submitted with notices of two reportable 

events under the old regulation, but also 

requires that filers submit with notices 

of most events some information that is 

typically requested by PBGC after 

notices are reviewed. The final rule also 

requires the use of prescribed reportable 

events forms and moves from the 

regulation to the forms and instructions 

the lists of information items that must 

be reported. 

Three commenters expressed concern 

about moving the information 

requirements from the regulation to the 

forms and instructions because public 

input on any changes might be limited; 

one of these commenters said that 

Paperwork Reduction Act (PRA) notices 

are easy to miss. 

PBGC does not agree. PBGC posts all 

pending PRA submissions on its Web 

site at http://www.pbgc.gov/res/lawsand-regulations/informationcollections-under-omb-review.html. 

Interested persons can sign up for 

notifications of new postings through 

PBGC’s Web site at http://

www.pbgc.gov/res/res/stayinformed.html. PBGC observes that the 

public was provided an opportunity to 

comment on the forms and instructions 

in connection with the 2013 proposal 

and PBGC received only one substantive 

comment (noted below). Moving the 

information requirements to the forms 

and instructions will allow PBGC to be 

more flexible in responding to future 

developments, such as changes in 

information technology.51

One commenter felt that the 2013 

proposal dramatically increased the 

information required to be initially 

reported. As explained in the 2013 


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54996 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

52See 78 FR 20052–3. 

proposal (78 FR 20051), PBGC 

acknowledges that initial information 

requirements generally will increase. 

However, the total amount of 

information submitted to PBGC 

(including both initial reports and 

follow-up information requested by 

PBGC) generally will not increase, and 

providing information all at one time is 

more efficient than doing so in multiple 

installments. Further, by requiring more 

information with the initial filing, the 

new requirements will allow PBGC to 

intervene to protect plans and 

participants more quickly in appropriate 

circumstances. 

Mandatory Electronic Filing 

The final rule, like the 2009 and 2013 

proposals, requires electronic filing of 

reportable events notices. This 

requirement is part of PBGC’s ongoing 

implementation of the Government 

Paperwork Elimination Act. 

Filers are permitted to email filings 

with attachments using any one or more 

of a variety of electronic formats that 

PBGC is capable of reading as provided 

in the instructions on PBGC’s Web site. 

(PBGC accepts imaged signatures for 

filings.) 

PBGC may consider other E-filing 

enhancements, such as a Web-based 

filing application for reportable events 

similar to the applications for PBGC’s 

section 4010 and premium filings, as 

internet capabilities and standards 

change. Such developments would be 

reflected in PBGC’s reportable events efiling instructions. 

PBGC sought public comment on its 

proposal to require electronic filing. 

One commenter favored electronic 

reporting while two others requested a 

paper filing option. In view of the fact 

that all plans subject to the reportable 

events regulation must file Form 5500 

and PBGC premiums electronically, a 

paper option within the regulation for 

the occasional reportable event notice 

seems unnecessary. However, PBGC 

may grant case-by-case waivers of the 

electronic filing requirement. 

Other Changes 

The final rule makes a change to 

§ 4043.20 that was not included in the 

2013 proposal to clarify that the 

responsibility for a failure to file a 

reportable event notice if there is a 

change in plan sponsor or plan 

administrator lies with the person who 

is the plan administrator or contributing 

sponsor of the plan on the due date. 

Without this change, if there were a 

change in plan administrator or sponsor 

after a notice had been filed but before 

the due date, the new plan 

administrator or sponsor would be 

required to file another notice. A similar 

change is made to § 4043.61(a) with 

respect to a change in a contributing 

sponsor and the responsibility to file 

advance-notice reports. 

The final rule also makes applicable 

to the regulation generally a provision— 

limited to one event in the old 

regulation—waiving reporting for 

statutory reportable events outside the 

scope of the reportable events described 

in the regulation. This provision has 

been reworded and moved from 

§ 4043.31(c)(1) (dealing with 

extraordinary dividends) to § 4043.4(e) 

(dealing with waivers generally). 

The 2013 proposal made other 

technical changes that are retained in 

the final rule.52

Summary Chart 

The following tables summarize 

waiver and safe harbor provisions for 

reportable events for which post-event 

reporting is required. The first table 

shows waivers and safe harbors 

available under this final rule, and the 

second table shows a comparison of 

such provisions between the old 

regulation and this final rule. As 

explained in detail above, the final rule 

also provides reporting relief—like the 

relief provided by waivers—through 

changes to the definitions of certain 

reportable events, including substantial 

owner distributions and active 

participant reductions and through the 

requirement for filing only once a plan 

year for active participant reductions 

that occur by attrition. 


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ER11SE15.005</GPH>asabaliauskas on DSK5VPTVN1PROD with RULES

Event 

Extraordinary Dividend or Stock Redemption 

Change in Contributing Sponsor or Controlled Group 

Active Participant Reduction 

Transfer of Benefit Liabilities 

Distribution to Substantial Owner 

Insolvency" 

Liquidation 

Loan Default 

Failure to Make Required Contribution 

Application for Funding Waiver 

Inability to Pay Benefits When Due 

a. Events under Bankruptcy Code waived in all cases. 

b. Only waived if missed contribution is a quarterly installment 

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Event 

Extraordinary Dividend or Stock 

Redemption 

Change in Contributing 

Sponsor or 

Controlled Group 

Active Participant 

Reduction 

Transfer of Benefit 

Liabilities 

Distribution to 

Substantial Owner 

Events with risk-based safe harbors (company low-default-risk or well-funded plan) 53 or other facto

Waivers under old regulation 

Member distributing is de minimis (5%); 54 

Member distributing is non-parent foreign entity (regardless of size); 

Member distributing is foreign parent, and distribution is made solely 

to other controlled group members; 

At least 80% funded; 

No VRP; or 

Less than $1 M in premium underfunding 

Member leaving is de minimis (10%); 

Member leaving is non-parent foreign entity (regardless of size); 

At least 80% funded & public company; 

No VRP; or 

Less than $1 M in premium underfunding 

Small plan (fewer than 100 participants) 

At least 80% funded if not a facility closing; 

No VRP; or 

Less than $1 M premium underfunding 

IRC 414(1) safe harbor is used for asset transfer; 

Plan whose liabilities are all transferred; 

Both plans fully funded after transfer using 414(1) assumptions; or 

Amount transferred is less than 3% of assets 

At least 80% funded; 

No VRP; 

Distributions less than IRC 415 limit; or Distributions less than 1% of assets55 

Final rule- if any of these safe harbors applies, no reporting is requir

Company Low- Well-Funded Other Safe Harbors 

default-risk Plan 

Safe Harbor 

Company is 

low-default-risk 

Safe Harbor 

Plan has no 

VRP 

I 

Member involved is de minimis (10%

Member involved is non-parent forei

(regardless of size); or 

Small plan (fewer than 100 participan

Public company disclosure 

1 

Small plan (fewer than 100 participan

Public company disclosure 

Note: filing extension for reductions due t

attrition 

Small plan (fewer than 100 participan

Public company disclosure 

Public company disclosure 

53 Company means the plan sponsor or the U.S. parent company. The risk-based tests are set forth in§ 4043.9 of the fmal rule and described in the preamble nnder Company Low-default-risk Safe 54 De minimis is defined in § 4043.2 of both the old regulation and the new regulation. 

55 The final rule, like the 2013 proposal, added to the description ofthis event a provision limiting the event to circumstances where the distributions to one substantial owner exceed one percent o

substantial owners exceed five percent of plan assets. The one-percent threshold echoes the waiver for this event nnder the old regulation but that was eliminate in the fmal rule. 

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Events with limited or no safe harbors 

Event Waivers under old regulation Safe Harbors unde

Bankruptcy/ • Member in bankruptcy is non-parent foreign entity (regardless of size) • Event revised to exclude Bankrup

Insolvency • Member causing event is-

- Not a contributing sponsor a

- Non-parent foreign entity (re

Liquidation • Member liquidating is de minimis (10%) and plan survives; I • Member liquidating is non-parent foreign entity (regardless of size); • At least 80% funded & public company and plan survives; or 

• No VRP or less than $1 M in premium underfunding and plan survives • Member causing event isLoan Default Default cured or waived by lender within 30 days or by end of cure - Not a contributing sponsor a• 

period; 

- Non-parent foreign entity (re

• Member defaulting is non-parent foreign entity (regardless of size); l • At least 80% funded; or • No VRP or less than $1 M in premium underfunding 

Failure to Make • Missed quarterlies • Missed quarterlies of small plans (f

Required - Plans with fewer than 25 participants if missed quarterly was not • Any missed contribution, if made w

Contribution due to financial inability; simplified reporting for plans with 25- • Late funding balance election 

99 participants if missed quarterly was not due to financial 

inability (relief provided in Technical Update) 

- Any sized plan, if made within 30 days of due date 

• Any other missed contribution, if made within 30 days of due date 

Application for • None • None 

Funding Waiver 

Inability to Pay • Plan with more than 100 participants (subject to liquidity shortfall • Plan with more than 100 participan

Benefits When rules) shortfall rules) Due 
55000 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

56Filings that involved section 4062(e) events 

always resulted in the opening of cases and were 

excluded from the analysis. 

57See, e.g., ERISA section 104(a)(2), which 

permits the Secretary of Labor to prescribe 

simplified annual reports for pension plans that 

cover fewer than 100 participants. 

58See, e.g., Code section 430(g)(2)(B), which 

permits plans with 100 or fewer participants to use 

valuation dates other than the first day of the plan 

year. 

59See, e.g., DOL’s final rule on Prohibited 

Transaction Exemption Procedures, 76 FR 66,637, 

66,644 (Oct. 27, 2011). 

60See PBGC 2014 pension insurance data table S– 

31 http://www.pbgc.gov/documents/2013-DATABOOK-FINAL.pdf. 

Applicability 

The changes to Part 4043 made by this 

final rule are applicable to post-event 

reports for reportable events occurring 

on or after January 1, 2016, and to 

advance reports due on or after that 

date. 

Regulatory Procedures 

Executive Orders 12866 and 13563 

PBGC has determined that this rule is 

a ‘‘significant regulatory action’’ under 

Executive Order 12866. The Office of 

Management and Budget has therefore 

reviewed this rule under Executive 

Order 12866. 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. Executive 

Orders 12866 and 13563 require that a 

comprehensive regulatory impact 

analysis be performed for any 

economically significant regulatory 

action, defined as an action that would 

result in an annual effect of $100 

million or more on the national 

economy or that have other substantial 

impacts. In accordance with OMB 

Circular A–4, PBGC has examined the 

economic and policy implications of 

this rule and has concluded that the 

action’s benefits justify its costs. 

As discussed above, some reportable 

events present little or no risk to the 

pension insurance system—where, for 

example, the plan sponsor presents a 

low risk of default and the risk of plan 

termination is correspondingly low. 

Reports of such events are unnecessary 

in the sense that PBGC typically reviews 

but takes no action on them. PBGC 

analyzed 2013 records to determine how 

many such reports it received for events 

to which the proposed sponsor safe 

harbor would apply, then reanalyzed 

the data to see how many unnecessary 

reports would have been received if the 

plan sponsor safe harbor in the 

proposed rule had been in effect (that is, 

excluding reports that would have been 

waived under the plan sponsor safe 

harbor test).56 It found that the 

proportion of unnecessary filings would 

be much lower under the final 

regulation than under the old 

regulation—9 percent (19 filings) 

compared to 50 percent (215 filings). 

Such improved efficiency will be 

reflected in dramatically reduced 

regulatory burden on sponsors and 

plans that satisfy the risk-based safe 

harbors. Further, PBGC estimates that 

the number of total filings will be 

reduced under the final regulation. 

Fewer unnecessary reports means a 

more efficient reporting system and a 

greater proportion of filings that present 

the opportunity for increased plan 

protection through monitoring and 

possible intervention in transactions 

based on risk, leading to better 

protection for the pension insurance 

system and retirement security 

generally. 

Using data from 2013, PBGC has 

estimated the benefit of better-targeted 

reporting under the new regulation in 

terms of the value of early intervention 

as a creditor where a reportable event 

may foreshadow sponsor default. Early 

intervention as a creditor leads to higher 

recoveries of plan underfunding. PBGC 

estimates that the value of early 

intervention would exceed the dollar 

equivalent of the increased burden 

associated with the higher rate of 

targeted reporting by approximately 

$4.3 million. 

Under Section 3(f)(1) of Executive 

Order 12866, a regulatory action is 

economically significant if ‘‘it is likely 

to result in a rule that may . . . [h]ave 

an annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or tribal 

governments or communities.’’ PBGC 

has determined that this final rule does 

not cross the $100 million threshold for 

economic significance and is not 

otherwise economically significant. 

This action is associated with 

retrospective review and analysis in 

PBGC’s Plan for Regulatory Review 

issued in accordance with Executive 

Order 13563 on ‘‘Improving Regulation 

and Regulatory Review.’’ 

Regulatory Flexibility Act 

The Regulatory Flexibility Act 

imposes certain requirements with 

respect to rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act and that are likely to 

have a significant economic impact on 

a substantial number of small entities. 

Unless an agency determines that a rule 

is not likely to have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

the Regulatory Flexibility Act requires 

that the agency present an initial 

regulatory flexibility analysis at the time 

of the publication of the proposed rule 

describing the impact of the rule on 

small entities and seeking public 

comment on such impact. Small entities 

include small businesses, organizations 

and governmental jurisdictions. 

For purposes of the Regulatory 

Flexibility Act requirements with 

respect to the proposed amendments to 

the reportable events regulation, PBGC 

considers a small entity to be a plan 

with fewer than 100 participants. This 

is the same criterion used to determine 

the availability of the ‘‘small plan’’ 

waiver, and is consistent with certain 

requirements in Title I of ERISA 57 and 

the Code,58 as well as the definition of 

a small entity that the Department of 

Labor (DOL) has used for purposes of 

the Regulatory Flexibility Act.59 Using 

this definition, about 64 percent (14,349 

of 22,344) of plans covered by Title IV 

of ERISA in 2014 were small plans.60

Further, while some large employers 

may have small plans, in general most 

small plans are maintained by small 

employers. Thus, PBGC believes that 

assessing the impact of the final rule on 

small plans is an appropriate substitute 

for evaluating the effect on small 

entities. The definition of small entity 

considered appropriate for this purpose 

differs, however, from a definition of 

small business based on size standards 

promulgated by the Small Business 

Administration (13 CFR 121.201) 

pursuant to the Small Business Act. 

PBGC requested comments on the 

appropriateness of the size standard 

used in evaluating the impact on small 

entities of the proposed amendments to 

the reportable events regulation. PBGC 

received no comments in response to 

this request. 

On the basis of its definition of small 

entity, PBGC certifies under section 

605(b) of the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.) that the 

amendments in this rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Accordingly, as provided in section 605 


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Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 55001 

of the Regulatory Flexibility Act (5 

U.S.C. 601 et seq.), sections 603 and 604 

do not apply. This certification is based 

on the fact that the reportable events 

regulation requires only the filing of 

one-time notices on the occurrence of 

unusual events that affect only certain 

plans and that the economic impact of 

filing is not significant. The average 

burden of submitting a notice—based on 

the estimates discussed under 

Paperwork Reduction Act, below—is 

less than 51⁄2 hours and $745 (virtually 

the same as under the old regulation). 

Paperwork Reduction Act 

PBGC is submitting the information 

collection requirements under this rule 

to the Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act. There are two information 

collections under part 4043, approved 

under OMB control number 1212–0013 

(covering subparts B and C), which 

expires May 31, 2018, and OMB control 

number 1212–0041 (covering subpart 

D), which expires June 30, 2018. 

PBGC is making the following 

changes to these information 

requirements that were approved by 

OMB: 

• PBGC’s experience is that in order 

to assess the significance of virtually 

every post-event filing for a missed 

contribution, inability to pay benefits, 

loan default, liquidation, or insolvency, 

it must obtain from the filer certain 

actuarial, financial and controlled group 

information. Filers were previously 

required to submit some of this 

information for some events, but PBGC 

has made its information collection for 

all these events more uniform. 

Accordingly, in connection with the 

final rule, PBGC now requires that every 

post-event filing for one of these events 

include the following financial and 

controlled group information (actuarial 

information was already required): 

1. The financial information required 

will be copies of audited financial 

statements for the most recent fiscal 

year. (If audited statements were not 

immediately available, copies of 

unaudited financial statements (if 

available) or tax returns would be 

required, to be followed up with 

required financial statements when 

available.) 

2. The controlled group information 

required will be tailored to the event 

being reported and will generally 

include identifying information for each 

plan maintained by any member of the 

controlled group and a description of 

the controlled group with members’ 

names. 

• Similarly, PBGC has found that it 

needs the same financial and controlled 

group information for advance-notice 

filings (in addition to actuarial 

information already required). For 

notices of applications for funding 

waiver requests, the information can 

typically be gleaned from the copy of 

the application that accompanies the 

reportable event notice. With this 

exception, PBGC is requiring that every 

advance notice filing include these 

items (unless the information is publicly 

available). 

• Controlled group changes and 

benefit liability transfers involve both 

an ‘‘old’’ controlled group and a ‘‘new’’ 

controlled group. PBGC had already 

required submission of controlled group 

information with notices of controlled 

group changes under the old regulation 

and is now also requiring the same for 

benefit liability transfers. 

• Because extraordinary distributions 

raise questions about controlled group 

finances, PBGC now requires 

submission of financial information 

with notices of events of this type. 

• PBGC now requires that notices of 

substantial owner distributions give the 

reason for the distribution to help PBGC 

analyze its significance. 

• Inability to pay benefits raises the 

specter of imminent sponsor shutdown 

and plan termination. Accordingly, for 

notice of this event, PBGC now requires 

submission of copies of the most recent 

plan documents and IRS qualification 

letter. 

• PBGC is adding to the Form 200 

information submission requirements a 

requirement to provide information 

about all controlled group real property, 

and identity of controlled group 

principal executive offices. 

• Simplified reporting for Form 200 

filings is now available where the filer 

has not missed any required 

contribution (other than the missed 

contribution that triggered the Form 200 

filing requirement during the two-year 

period ending on the notice due date for 

the Form 200) and has made up the 

missed contribution by the notice due 

date; under the simplified reporting 

provision, none of the attachments that 

are otherwise required to be included in 

the filing (e.g., controlled group listing 

and company financial statements) need 

to be provided. 

• In missed contribution cases, there 

is sometimes a credit balance that is 

available for application to a 

contribution that is due. PBGC needs to 

be able to determine whether all or a 

portion of the credit balance has been 

properly applied toward payment of the 

contribution. Accordingly, PBGC is 

requiring Form 200 filers to indicate 

how much (if any) of the carryover 

balance or prefunding balance was used 

for partial payment of the missed 

contribution and submit copies of 

election letters relating to the 

application of the carryover balance and 

prefunding balance to the contribution. 

• PBGC is requiring a description of 

each controlled group member’s 

operational status (in Chapter 7 

proceedings, liquidating outside of 

bankruptcy, on-going, etc.) in Form 200 

filings. 

PBGC needs the information in 

reportable events filings under subparts 

B and C of part 4043 (Forms 10 and 10- 

Advance) to determine whether it 

should terminate plans that experience 

events that indicate plan or sponsor 

financial problems. PBGC estimates that 

it will receive such filings from about 

816 respondents each year and that the 

total annual burden of the collection of 

information will be about 4,496 hours 

and $607,570. This represents a 

decreased burden compared to that 

under the old regulation, as the 

following table shows: 

Annual burden: Under old regulation: Under new regulation: 

Number of responses ........................................ 867 .................................................................... 816. 

Hour burden ....................................................... 4,487 hours ...................................................... 4,496 hours. 

Dollar burden ..................................................... $660,853 ........................................................... $607,570. 

As discussed above, the final rule is 

designed to reduce burden dramatically 

on well-funded plans and low-defaultrisk sponsors; thus, burden under the 

final rule is substantially associated 

with higher-risk events, which are much 

more likely to deserve PBGC’s attention. 

PBGC separately estimated the average 

burden changes for low-default-risk and 

non-low-default-risk entities. The 

burden for low-default-risk sponsors is 

down from 443 hours and $118,025 to 

zero. The burden for non-low-defaultrisk sponsors is up by 402 hours and 

$64,742. 


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55002 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

Low-default-risk Volume Hours Cost 

Current ......................................................................................................................................... 128 443 $118,025 

Final ............................................................................................................................................. 0 0 0 

Change ........................................................................................................................................ (128) (443) (118,025) 

Non low-default-risk Volume Hours Cost 

Current ......................................................................................................................................... 739 4,094 $542,828 

Final ............................................................................................................................................. 816 4,496 607,570 

Change ........................................................................................................................................ 77 402 64,742 

PBGC needs the information in 

missed contribution filings under 

subpart D of part 4043 (Form 200) to 

determine the amounts of statutory liens 

arising under ERISA section 303(k) and 

Code section 430(k) and to evaluate the 

funding status of plans with respect to 

which such liens arise and the financial 

condition of the persons responsible for 

their funding. PBGC estimates that it 

will receive such filings from about 165 

respondents each year and that the total 

annual burden of the collection of 

information will be about 990 hours and 

$146,406. 

List of Subjects 

29 CFR Part 4000 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

29 CFR Part 4001 

Employee benefit plans, Pension 

insurance. 

29 CFR Part 4043 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

29 CFR Part 4204 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

29 CFR Part 4206 

Employee benefit plans, Pension 

insurance. 

29 CFR Part 4231 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

For the reasons given above, PBGC is 

amending 29 CFR parts 4000, 4001, 

4043, 4204, 4206, and 4231 as follows. 

PART 4000—FILING, ISSUANCE, 

COMPUTATION OF TIME, AND 

RECORD RETENTION 

■ The authority citation for part 4000 is 

revised to read as follows: 

Authority: 29 U.S.C. 1083(k), 1302(b)(3). 

■ 2. In § 4000.3, paragraph (b)(3) is 

added to read as follows: 

§ 4000.3 What methods of filing may I use? 

* * * * * 

(b) * * * 

(3) You must file notices under part 

4043 of this chapter electronically in 

accordance with the instructions on 

PBGC’s Web site, http://www.pbgc.gov, 

except as otherwise provided by PBGC. 

* * * * * 

§ 4000.53 [Amended] 

■ 3. In § 4000.53, paragraphs (c) and (d) 

are amended by removing the words 

‘‘section 302(f)(4), section 307(e), or’’ 

where they occur in each paragraph and 

adding in their place the words ‘‘section 

101(f), section 303(k)(4), or’’. 

PART 4001—TERMINOLOGY 

■ 4. The authority citation for part 4001 

continues to read as follows: 

Authority: 29 U.S.C. 1301, 1302(b)(3). 

§ 4001.2 [Amended] 

■ 5. In § 4001.2: 

■ a. The definition of ‘‘controlled 

group’’ is amended by removing the 

words ‘‘section 412(c)(11)(B) of the Code 

or section 302(c)(11)(B) of ERISA’’ and 

adding in their place the words ‘‘section 

412(b)(2) of the Code or section 

302(b)(2) of ERISA’’. 

■ b. The definition of ‘‘funding standard 

account’’ is amended by removing the 

words ‘‘section 302(b) of ERISA or 

section 412(b) of the Code’’ and adding 

in their place the words ‘‘section 304(b) 

of ERISA or section 431(b) of the Code’’. 

■ c. The definition of ‘‘substantial 

owner’’ is amended by removing the 

words ‘‘section 4022(b)(5)(A)’’ and 

adding in their place the words ‘‘section 

4021(d)’’. 

■ 6. Part 4043 is revised to read as 

follows: 

PART 4043—REPORTABLE EVENTS 

AND CERTAIN OTHER NOTIFICATION 

REQUIREMENTS 

Subpart A—General Provisions 

Sec. 

4043.1 Purpose and scope. 

4043.2 Definitions. 

4043.3 Requirement of notice. 

4043.4 Waivers and extensions. 

4043.5 How and where to file. 

4043.6 Date of filing. 

4043.7 Computation of time. 

4043.8 Confidentiality. 

4043.9 Company low-default-risk safe 

harbor. 

4043.10 Well-funded plan safe harbor. 

Subpart B—Post-Event Notice of 

Reportable Events 

4043.20 Post-event filing obligation. 

4043.21 Tax disqualification and Title I 

noncompliance. 

4043.22 Amendment decreasing benefits 

payable. 

4043.23 Active participant reduction. 

4043.24 Termination or partial termination. 

4043.25 Failure to make required minimum 

funding payment. 

4043.26 Inability to pay benefits when due. 

4043.27 Distribution to a substantial owner. 

4043.28 Plan merger, consolidation, or 

transfer. 

4043.29 Change in contributing sponsor or 

controlled group. 

4043.30 Liquidation. 

4043.31 Extraordinary dividend or stock 

redemption. 

4043.32 Transfer of benefit liabilities. 

4043.33 Application for minimum funding 

waiver. 

4043.34 Loan default. 

4043.35 Insolvency or similar settlement. 

Subpart C—Advance Notice of Reportable 

Events 

4043.61 Advance reporting filing 

obligation. 

4043.62 Change in contributing sponsor or 

controlled group. 

4043.63 Liquidation. 

4043.64 Extraordinary dividend or stock 

redemption. 

4043.65 Transfer of benefit liabilities. 

4043.66 Application for minimum funding 

waiver. 

4043.67 Loan default. 

4043.68 Insolvency or similar settlement. 

Subpart D—Notice of Failure to Make 

Required Contributions 

4043.81 PBGC Form 200, notice of failure to 

make required contributions; 

supplementary information. 

Authority: 29 U.S.C. 1083(k), 1302(b)(3), 

1343. 


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Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 55003 

Subpart A—General Provisions 

§ 4043.1 Purpose and scope. 

This part prescribes the requirements 

for notifying PBGC of a reportable event 

under section 4043 of ERISA or of a 

failure to make certain required 

contributions under section 303(k)(4) of 

ERISA or section 430(k)(4) of the Code. 

Subpart A contains definitions and 

general rules. Subpart B contains rules 

for post-event notice of a reportable 

event. Subpart C contains rules for 

advance notice of a reportable event. 

Subpart D contains rules for notifying 

PBGC of a failure to make certain 

required contributions. 

§ 4043.2 Definitions. 

The following terms are defined in 

§ 4001.2 of this chapter: benefit 

liabilities, Code, contributing sponsor, 

controlled group, ERISA, fair market 

value, irrevocable commitment, 

multiemployer plan, PBGC, person, 

plan, plan administrator, plan year, 

single-employer plan, and substantial 

owner. 

In addition, for purposes of this part: 

De minimis 10-percent segment 

means, in connection with a plan’s 

controlled group, one or more entities 

that in the aggregate have for a fiscal 

year— 

(1) Revenue not exceeding 10 percent 

of the controlled group’s revenue; 

(2) Annual operating income not 

exceeding the greater of— 

(i) 10 percent of the controlled group’s 

annual operating income; or 

(ii) $5 million; and 

(3) Net tangible assets at the end of 

the fiscal year(s) not exceeding the 

greater of— 

(i) 10 percent of the controlled group’s 

net tangible assets at the end of the 

fiscal year(s); or 

(ii) $5 million. 

De minimis 5-percent segment has the 

same meaning as de minimis 10-percent 

segment, except that ‘‘5 percent’’ is 

substituted for ‘‘10 percent’’ each time 

it appears. 

Event year means the plan year in 

which a reportable event occurs. 

Foreign entity means a member of a 

controlled group that— 

(1) Is not a contributing sponsor of a 

plan; 

(2) Is not organized under the laws of 

(or, if an individual, is not a domiciliary 

of) any state (as defined in section 3(10) 

of ERISA); and 

(3) For the fiscal year that includes 

the date the reportable event occurs, 

meets one of the following tests— 

(i) Is not required to file any United 

States federal income tax form; 

(ii) Has no income reportable on any 

United States federal income tax form 

other than passive income not 

exceeding $1,000; or 

(iii) Does not own substantial assets in 

the United States (disregarding stock of 

a member of the plan’s controlled 

group) and is not required to file any 

quarterly United States tax returns for 

employee withholding. 

Foreign parent means a foreign entity 

that is a direct or indirect parent of a 

person that is a contributing sponsor of 

a plan. 

Low-default-risk has the meaning 

described in § 4043.9. 

Notice due date means the deadline 

(including extensions) for filing notice 

of a reportable event with PBGC. 

Participant means a participant as 

defined in § 4006.2 of this chapter. 

Public company means a person 

subject to the reporting requirements of 

section 13 or 15(d) of the Securities 

Exchange Act of 1934 or a subsidiary (as 

defined for purposes of the Securities 

Exchange Act of 1934) of a person 

subject to such reporting requirements. 

U.S. entity means an entity subject to 

the personal jurisdiction of the U.S. 

district court. 

Well-funded plan safe harbor has the 

meaning described in § 4043.10. 

§ 4043.3 Requirement of notice. 

(a) Obligation to file—(1) In general. 

Each person that is required to file a 

notice under this part, or a duly 

authorized representative, must submit 

the information required under this part 

by the time specified in § 4043.20 (for 

post-event notices), § 4043.61 (for 

advance notices), or § 4043.81 (for Form 

200 filings). Any information filed with 

PBGC in connection with another matter 

may be incorporated by reference. If an 

event is subject to both post-event and 

advance notice requirements, the notice 

filed first satisfies both filing 

requirements. 

(2) Multiple plans. If a reportable 

event occurs for more than one plan, the 

filing obligation with respect to each 

plan is independent of the filing 

obligation with respect to any other 

plan. 

(3) Optional consolidated filing. A 

filing of a notice with respect to a 

reportable event by any person required 

to file will be deemed to be a filing by 

all persons required to give PBGC notice 

of the event under this part. If notices 

are required for two or more events, the 

notices may be combined in one filing. 

(b) Contents of reportable event 

notice. A person required to file a 

reportable event notice under subpart B 

or C of this part must file, by the notice 

date, the form specified by PBGC for 

that purpose, with the information 

specified in PBGC’s reportable events 

instructions. 

(c) Reportable event forms and 

instructions. PBGC will issue reportable 

events forms and instructions and make 

them available on its Web site (http://

www.pbgc.gov). 

(d) Requests for additional 

information. PBGC may, in any case, 

require the submission of additional 

relevant information not specified in its 

forms and instructions. Any such 

information must be submitted for 

subpart B of this part within 30 days, 

and for subpart C or D of this part 

within 7 days, after the date of a written 

request by PBGC, or within a different 

time period specified therein. PBGC 

may in its discretion shorten the time 

period where it determines that the 

interests of PBGC or participants may be 

prejudiced by a delay in receipt of the 

information. 

(e) Effect of failure to file. If a notice 

(or any other information required 

under this part) is not provided within 

the specified time limit, PBGC may 

pursue any equitable or legal remedies 

available to it under the law, including 

assessing against each person required 

to provide the notice a separate penalty 

under section 4071 of ERISA. 

§ 4043.4 Waivers and extensions. 

(a) Waivers and extensions—in 

general. PBGC may extend any deadline 

or waive any other requirement under 

this part where it finds convincing 

evidence that the waiver or extension is 

appropriate under the circumstances. 

Any waiver or extension may be subject 

to conditions. A request for a waiver or 

extension must be filed with PBGC in 

writing (which may be in electronic 

form) and must state the facts and 

circumstances on which the request is 

based. 

(b) Waivers and extensions—specific 

events. For some reportable events, 

automatic waivers from reporting and 

extensions of time are provided in 

subparts B and C of this part. If an 

occurrence constitutes two or more 

reportable events, reporting 

requirements for each event are 

determined independently. For 

example, reporting is automatically 

waived for an occurrence that 

constitutes a reportable event under 

more than one section only if the 

requirements for an automatic waiver 

under each section are satisfied. 

(c) Multiemployer plans. The 

requirements of section 4043 of ERISA 

are waived with respect to 

multiemployer plans. 

(d) Terminating plans. No notice is 

required from the plan administrator or 

contributing sponsor of a plan if the 


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55004 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

notice date is on or after the date on 

which— 

(1) All of the plan’s assets (other than 

any excess assets) are distributed 

pursuant to a termination under part 

4041 of this chapter; or 

(2) A trustee is appointed for the plan 

under section 4042 of ERISA. 

(e) Events not described in this part. 

Notice of a reportable event described in 

section 4043(c) of ERISA is waived 

except to the extent that reporting is 

required under this part. 

§ 4043.5 How and where to file. 

Reportable event notices required 

under this part must be filed 

electronically in accordance with the 

instructions posted on PBGC’s Web site, 

http://www.pbgc.gov. Filing guidance is 

provided by the instructions and by 

subpart A of part 4000 of this chapter. 

§ 4043.6 Date of filing. 

(a) Post-event notice filings. PBGC 

applies the rules in subpart C of part 

4000 of this chapter to determine the 

date that a submission under subpart B 

of this part was filed with PBGC. 

(b) Advance notice and Form 200 

filings. Information filed under subpart 

C or D of this part is treated as filed on 

the date it is received by PBGC. Subpart 

C of part 4000 of this chapter provides 

rules for determining when PBGC 

receives a submission. 

§ 4043.7 Computation of time. 

PBGC applies the rules in subpart D 

of part 4000 of this chapter to compute 

any time period under this part. 

§ 4043.8 Confidentiality. 

In accordance with section 4043(f) of 

ERISA and § 4901.21(a)(3) of this 

chapter, any information or 

documentary material that is not 

publicly available and is submitted to 

PBGC pursuant to subpart B or C of this 

part will not be made public, except as 

may be relevant to any administrative or 

judicial action or proceeding or for 

disclosures to either body of Congress or 

to any duly authorized committee or 

subcommittee of the Congress. This 

provision does not apply to information 

or material submitted to PBGC pursuant 

to subpart D of this part, even where the 

submission serves as an alternative 

method of compliance with § 4043.25. 

§ 4043.9 Company low-default-risk safe 

harbor. 

(a) Low-default-risk. An entity (a 

‘‘company’’) that is a contributing 

sponsor of a plan or the highest level 

U.S. parent of a contributing sponsor is 

‘‘low-default-risk’’ on the date of an 

event if that date falls within a safe 

harbor period of the company as 

described in paragraph (b) of this 

section. 

(b) Safe harbor period. A safe harbor 

period for a company means a period 

that— 

(1) Begins on a financial information 

date (as described in paragraph (c) of 

this section) on which the company 

satisfies the low-default-risk standard in 

paragraph (e) of this section, and 

(2) Ends 13 months later or (if earlier) 

on the company’s next financial 

information date. 

(c) Financial information date. A 

financial information date for a 

company means— 

(1) A date on which the company files 

on Form 10–K with the Securities and 

Exchange Commission (‘‘SEC’’) audited 

annual financial statements (including 

balance sheets, income statements, cash 

flow statements, and notes to the 

financial statements) for the company’s 

most recent completed fiscal year 

preceding the date of such filing; 

(2) The date (the ‘‘closing date’’) on 

which the company closes the annual 

accounting period that results in the 

production of audited or unaudited 

annual financial statements for the 

company’s most recent completed fiscal 

year preceding the closing date, if 

audited annual financial statements are 

not required to be filed with the SEC; or 

(3) A date on which the company files 

with IRS an annual federal income tax 

return or IRS Form 990 (in either case, 

a ‘‘return’’) for the company’s most 

recent completed fiscal year preceding 

the date of such filing, if at the time the 

return is filed there are no annual 

financial statements for the year of the 

return. 

(d) Supporting financial information. 

For purposes of this section, the 

‘‘supporting financial information’’ is 

the annual financial statements or 

return associated with the establishment 

of the financial information date. 

(e) Low-default-risk standard—(1) 

Adequate capacity. For purposes of this 

part, except as provided in paragraph 

(e)(4) of this section, a company meets 

the low-default-risk standard as of a 

financial information date (the 

‘‘qualifying date’’) if the company has 

adequate capacity to meet its obligations 

in full and on time on the qualifying 

date as evidenced by satisfying either: 

(i) Both of the criteria described in 

paragraphs (e)(2)(i) and (ii) of this 

section, or 

(ii) Any four of the seven criteria 

described in paragraphs (e)(2)(i) through 

(vii) of this section. 

(2) Criteria evidencing adequate 

capacity. The criteria referred to in 

paragraph (e)(1) of this section are: 

(i) The probability that the company 

will default on its financial obligations 

is not more than four percent over the 

next five years or not more than 0.4 

percent over the next year, in either case 

determined on the basis of widely 

available financial information on the 

company’s credit quality. 

(ii) The company’s secured debt 

(disregarding leases and debt incurred 

to acquire or improve property and 

secured only by that property) does not 

exceed 10 percent of the company’s 

total assets. 

(iii) The company has a ratio of 

retained-earnings-to-total-assets of 0.25 

or more. 

(iv) The company has a ratio of totaldebt-to-EBITDA (earnings before 

interest, taxes, depreciation, and 

amortization) of 3.0 or less. 

(v) The company has positive net 

income for the two most recently 

completed fiscal years preceding the 

qualifying date. 

(vi) During the two-year period 

ending on the qualifying date, the 

company has not experienced an event 

described in § 4043.34(a)(1) or (2) 

(dealing with a default on a loan with 

an outstanding balance of $10 million or 

more) with respect to any loan with an 

outstanding balance of $10 million or 

more to the company regardless of 

whether reporting was waived under 

§ 4043.34(b). 

(vii) During the two-year period 

ending on the qualifying date, there has 

not been any failure to make when due 

any contribution described in 

§ 4043.25(a)(1) or (2) (dealing with 

failure to make required minimum 

funding payments), unless reporting 

was waived under § 4043.25(c). 

(3) Using financial information to 

evaluate criteria—(i) Subject to 

paragraph (e)(3)(ii) of this section with 

respect to evaluating the criterion 

described in paragraph (e)(2)(v) of this 

section, to evaluate whether criteria 

described in paragraphs (e)(2)(ii) 

through (v) of this section are met, a 

company must use the supporting 

financial information described in 

paragraph (d) of this section associated 

with the qualifying date. 

(ii) In addition to the use of the 

supporting financial information to 

evaluate criteria as described in 

paragraph (e)(3)(i) of this section, to 

evaluate whether the criterion described 

in paragraph (e)(2)(v) of this section is 

met, the company must also use the 

supporting financial information as 

described in paragraph (d) of this 

section associated with the financial 

information date for the fiscal year 

preceding the fiscal year covered by the 


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Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 55005 

supporting financial information 

associated with the qualifying date. 

(iii) For purposes of paragraph 

(e)(2)(v) of this section, the excess of 

total revenue over total expenses as 

reported on the IRS Form 990 is 

considered to be net income. 

(4) Exception. If a company receives 

an audit or review report for supporting 

financial information described in 

paragraph (d) of this section associated 

with the qualifying date that expresses 

a material adverse view or qualification, 

the company does not satisfy the lowdefault-risk standard. 

§ 4043.10 Well-funded plan safe harbor. 

For purposes of this part, a plan is in 

the well-funded plan safe harbor for an 

event year if no variable-rate premium 

was required to be paid for the plan 

under parts 4006 and 4007 of this 

chapter for the plan year preceding the 

event year. 

Subpart B—Post-Event Notice of 

Reportable Events 

§ 4043.20 Post-event filing obligation. 

The plan administrator and each 

contributing sponsor of a plan for which 

a reportable event under this subpart 

has occurred are required to notify 

PBGC within 30 days after that person 

knows or has reason to know that the 

reportable event has occurred, unless a 

waiver or extension applies. If there is 

a change in plan administrator or 

contributing sponsor, the responsibility 

for any failure to file or defective filing 

lies with the person who is the plan 

administrator or contributing sponsor of 

the plan on the 30th day after the 

reportable event occurs. 

§ 4043.21 Tax disqualification and Title I 

noncompliance. 

(a) Reportable event. A reportable 

event occurs when the Secretary of the 

Treasury issues notice that a plan has 

ceased to be a plan described in section 

4021(a)(2) of ERISA, or when the 

Secretary of Labor determines that a 

plan is not in compliance with title I of 

ERISA. 

(b) Waiver. Notice is waived for this 

event. 

§ 4043.22 Amendment decreasing benefits 

payable. 

(a) Reportable event. A reportable 

event occurs when an amendment to a 

plan is adopted under which the 

retirement benefit payable from 

employer contributions with respect to 

any participant may be decreased. 

(b) Waiver. Notice is waived for this 

event. 

§ 4043.23 Active participant reduction. 

(a) Reportable event. A reportable 

event occurs for a plan: 

(1) Single-cause event. On the date in 

a plan year when, as a result of a single 

cause—such as a reorganization, the 

discontinuance of an operation, a 

natural disaster, a mass layoff, or an 

early retirement incentive program—the 

number of active participants is reduced 

to less than 80 percent of the number of 

active participants at the beginning of 

such plan year or less than 75 percent 

of the number of active participants at 

the beginning of the plan year preceding 

such plan year. 

(2) Attrition event. At the end of a 

plan year if the number of active 

participants covered by the plan at the 

end of such plan year is less than 80 

percent of the number of active 

participants at the beginning of such 

plan year, or less than 75 percent of the 

number of active participants at the 

beginning of the plan year preceding 

such plan year. 

(b) Determination rules—(1) 

Determination dates. The number of 

active participants at the beginning of a 

plan year may be determined by using 

the number of active participants at the 

end of the previous plan year, and the 

number of active participants at the end 

of a plan year may be determined by 

using the number of active participants 

at the beginning of the next plan year. 

(2) Active participant. ‘‘Active 

participant’’ means a participant who— 

(i) Is receiving compensation for work 

performed; 

(ii) Is on paid or unpaid leave granted 

for a reason other than a layoff; 

(iii) Is laid off from work for a period 

of time that has lasted less than 30 days; 

or 

(iv) Is absent from work due to a 

recurring reduction in employment that 

occurs at least annually. 

(3) Employment relationship. The 

employment relationship referred to in 

this paragraph (b) is between the 

participant and all members of the 

plan’s controlled group. 

(c) Reductions due to cessations and 

withdrawals. For purposes of paragraph 

(a)(1) of this section, a reduction in the 

number of active participants is to be 

disregarded to the extent that it— 

(1) Is attributable to an event 

described in ERISA section 4062(e) or 

4063(a), and 

(2) Is timely reported to PBGC under 

ERISA section 4063(a). 

(d) Waivers—(1) Small plan. Notice 

under this section is waived if the plan 

had 100 or fewer participants for whom 

flat-rate premiums were payable for the 

plan year preceding the event year. 

(2) Low-default-risk. Notice under this 

section is waived if each contributing 

sponsor of the plan and the highest level 

U.S. parent of each contributing sponsor 

are low-default-risk on the date of the 

event. 

(3) Well-funded plan. Notice under 

this section is waived if the plan is in 

the well-funded plan safe harbor for the 

event year. 

(4) Public company. Notice under this 

section is waived if any contributing 

sponsor of the plan before the 

transaction is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event under an 

item of the Form 8–K other than under 

Item 2.02 (Results of Operations and 

Financial Condition) or in financial 

statements under Item 9.01 (Financial 

Statements and Exhibits). 

(e) Extension—attrition event. For an 

event described in paragraph (a)(2) of 

this section, the notice date is extended 

until the premium due date for the plan 

year following the event year. 

§ 4043.24 Termination or partial 

termination. 

(a) Reportable event. A reportable 

event occurs when the Secretary of the 

Treasury determines that there has been 

a termination or partial termination of a 

plan within the meaning of section 

411(d)(3) of the Code. 

(b) Waiver. Notice is waived for this 

event. 

§ 4043.25 Failure to make required 

minimum funding payment. 

(a) Reportable event. A reportable 

event occurs when— 

(1) A contribution required under 

sections 302 and 303 of ERISA or 

sections 412 and 430 of the Code is not 

made by the due date for the payment 

under ERISA section 303(j) or Code 

section 430(j), or 

(2) Any other contribution required as 

a condition of a funding waiver is not 

made when due. 

(b) Alternative method of 

compliance—Form 200 filed. If, with 

respect to the same failure, a filing is 

made in accordance with § 4043.81, that 

filing (while not considered to be 

submitted to PBGC pursuant to section 

4043 of ERISA for purposes of section 

4043(f) of ERISA) satisfies the 

requirements of this section. 

(c) Waivers—(1) Small plan. Notice 

under this section is waived with 

respect to a failure to make a required 

quarterly contribution under section 

303(j)(3) of ERISA or section 430(j)(3) of 

the Code if the plan had 100 or fewer 

participants for whom flat-rate 

premiums were payable for the plan 

year preceding the event year. 


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(2) 30-day grace period. Notice under 

this section is waived if the missed 

contribution is made by the 30th day 

after its due date. 

(3) Late funding balance election. 

Notice under this section is waived if 

the failure to make a timely required 

contribution is solely because of the 

plan sponsor’s failure to timely make a 

funding balance election. 

§ 4043.26 Inability to pay benefits when 

due. 

(a) Reportable event. A reportable 

event occurs when a plan is currently 

unable or projected to be unable to pay 

benefits. 

(1) Current inability. A plan is 

currently unable to pay benefits if it 

fails to provide any participant or 

beneficiary the full benefits to which the 

person is entitled under the terms of the 

plan, at the time the benefit is due and 

in the form in which it is due. A plan 

is not treated as being currently unable 

to pay benefits if its failure to pay is 

caused solely by— 

(i) A limitation under section 436 of 

the Code and section 206(g) of ERISA 

(dealing with funding-based limits on 

benefits and benefit accruals under 

single-employer plans), 

(ii) The inability to locate a person, or 

(iii) Any other administrative delay, 

including the need to verify a person’s 

eligibility for benefits, to the extent that 

the delay is for less than the shorter of 

two months or two full benefit payment 

periods. 

(2) Projected inability. A plan is 

projected to be unable to pay benefits 

when, as of the last day of any quarter 

of a plan year, the plan’s ‘‘liquid assets’’ 

are less than two times the amount of 

the ‘‘disbursements from the plan’’ for 

such quarter. ‘‘Liquid assets’’ and 

‘‘disbursements from the plan’’ have the 

same meaning as under section 

303(j)(4)(E) of ERISA and section 

430(j)(4)(E) of the Code. 

(b) Waiver—plans subject to liquidity 

shortfall rules. Notice under this section 

is waived unless the reportable event 

occurs during a plan year for which the 

plan is exempt from the liquidity 

shortfall rules in section 303(j)(4) of 

ERISA and section 430(j)(4) of the Code 

because it is described in section 

303(g)(2)(B) of ERISA and section 

430(g)(2)(B) of the Code. 

§ 4043.27 Distribution to a substantial 

owner. 

(a) Reportable event. A reportable 

event occurs for a plan when— 

(1) There is a distribution to a 

substantial owner of a contributing 

sponsor of the plan; 

(2) The total of all distributions made 

to the substantial owner within the oneyear period ending with the date of such 

distribution exceeds $10,000; 

(3) The distribution is not made by 

reason of the substantial owner’s death; 

(4) Immediately after the distribution, 

the plan has nonforfeitable benefits (as 

provided in § 4022.5 of this chapter) 

that are not funded; and 

(5) Either— 

(i) The sum of the values of all 

distributions to any one substantial 

owner within the one-year period 

ending with the date of the distribution 

is more than one percent of the end-ofyear total amount of the plan’s assets (as 

required to be reported on Schedule H 

or Schedule I to Form 5500) for each of 

the two plan years immediately 

preceding the event year, or 

(ii) The sum of the values of all 

distributions to all substantial owners 

within the one-year period ending with 

the date of the distribution is more than 

five percent of the end-of-year total 

amount of the plan’s assets (as required 

to be reported on Schedule H or 

Schedule I to Form 5500) for each of the 

two plan years immediately preceding 

the event year. 

(b) Determination rules—(1) 

Valuation of distribution. The value of 

a distribution under this section is the 

sum of— 

(i) The cash amounts actually 

received by the substantial owner; 

(ii) The purchase price of any 

irrevocable commitment; and 

(iii) The fair market value of any other 

assets distributed, determined as of the 

date of distribution to the substantial 

owner. 

(2) Date of substantial owner 

distribution. The date of distribution to 

a substantial owner of a cash 

distribution is the date it is received by 

the substantial owner. The date of 

distribution to a substantial owner of an 

irrevocable commitment is the date on 

which the obligation to provide benefits 

passes from the plan to the insurer. The 

date of any other distribution to a 

substantial owner is the date when the 

plan relinquishes control over the assets 

transferred directly or indirectly to the 

substantial owner. 

(3) Determination date. The 

determination of whether a participant 

is (or has been in the preceding 60 

months) a substantial owner is made on 

the date when there has been a 

distribution that would be reportable 

under this section if made to a 

substantial owner. 

(c) Alternative method of 

compliance—annuity. In the case of an 

annuity for a substantial owner, a filing 

that satisfies the requirements of this 

section with respect to any payment 

under the annuity and that discloses the 

period, the amount of the payment, and 

the duration of the annuity satisfies the 

requirements of this section with 

respect to all subsequent payments 

under the annuity. 

(d) Waivers—(1) Low-default-risk. 

Notice under this section is waived if 

each contributing sponsor of the plan 

and the highest level U.S. parent of each 

contributing sponsor are low-defaultrisk on the date of the event. 

(2) Well-funded plan. Notice under 

this section is waived if the plan is in 

the well-funded plan safe harbor for the 

event year. 

(3) Public company. Notice under this 

section is waived if any contributing 

sponsor of the plan before the 

transaction is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event under an 

item of the Form 8–K other than under 

Item 2.02 (Results of Operations and 

Financial Condition) or in financial 

statements under Item 9.01 (Financial 

Statements and Exhibits). 

§ 4043.28 Plan merger, consolidation or 

transfer. 

(a) Reportable event. A reportable 

event occurs when a plan merges, 

consolidates, or transfers its assets or 

liabilities under section 208 of ERISA or 

section 414(l) of the Code. 

(b) Waiver. Notice under this section 

is waived for this event. However, 

notice may be required under § 4043.29 

(for a controlled group change) or 

§ 4043.32 (for a transfer of benefit 

liabilities). 

§ 4043.29 Change in contributing sponsor 

or controlled group. 

(a) Reportable event. A reportable 

event occurs for a plan when there is a 

transaction that results, or will result, in 

one or more persons’ ceasing to be 

members of the plan’s controlled group 

(other than by merger involving 

members of the same controlled group). 

For purposes of this section, the term 

‘‘transaction’’ includes, but is not 

limited to, a legally binding agreement, 

whether or not written, to transfer 

ownership, an actual transfer of 

ownership, and an actual change in 

ownership that occurs as a matter of law 

or through the exercise or lapse of preexisting rights. Whether an agreement is 

legally binding is to be determined 

without regard to any conditions in the 

agreement. A transaction is not 

reportable if it will result solely in a 

reorganization involving a mere change 

in identity, form, or place of 

organization, however effected. 

(b) Waivers. (1) De minimis 10- 

percent segment. Notice under this 

section is waived if the person or 


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persons that will cease to be members 

of the plan’s controlled group represent 

a de minimis 10-percent segment of the 

plan’s old controlled group for the most 

recent fiscal year(s) ending on or before 

the date the reportable event occurs. 

(2) Foreign entity. Notice under this 

section is waived if each person that 

will cease to be a member of the plan’s 

controlled group is a foreign entity other 

than a foreign parent. 

(3) Small plan. Notice under this 

section is waived if the plan had 100 or 

fewer participants for whom flat-rate 

premiums were payable for the plan 

year preceding the event year. 

(4) Low-default-risk. Notice under this 

section is waived if each post-event 

contributing sponsor of the plan and the 

highest level U.S. parent of each postevent contributing sponsor are lowdefault-risk on the date of the event. 

(5) Well-funded plan. Notice under 

this section is waived if the plan is in 

the well-funded plan safe harbor for the 

event year. 

(6) Public company. Notice under this 

section is waived if any contributing 

sponsor of the plan before the 

transaction is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event under an 

item of the Form 8–K other than under 

Item 2.02 (Results of Operations and 

Financial Condition) or in financial 

statements under Item 9.01 (Financial 

Statements and Exhibits). 

(c) Examples. The following examples 

assume that no waiver applies. 

(1) Controlled group breakup. Plan 

A’s controlled group consists of 

Company A (its contributing sponsor), 

Company B (which maintains Plan B), 

and Company C. As a result of a 

transaction, the controlled group will 

break into two separate controlled 

groups — one segment consisting of 

Company A and the other segment 

consisting of Companies B and C. Both 

Company A (Plan A’s contributing 

sponsor) and the plan administrator of 

Plan A are required to report that 

Companies B and C will leave Plan A’s 

controlled group. Company B (Plan B’s 

contributing sponsor) and the plan 

administrator of Plan B are required to 

report that Company A will leave Plan 

B’s controlled group. Company C is not 

required to report because it is not a 

contributing sponsor or a plan 

administrator. 

(2) Change in contributing sponsor. 

Plan Q is maintained by Company Q. 

Company Q enters into a binding 

contract to sell a portion of its assets 

and to transfer employees participating 

in Plan Q, along with Plan Q, to 

Company R, which is not a member of 

Company Q’s controlled group. There 

will be no change in the structure of 

Company Q’s controlled group. On the 

effective date of the sale, Company R 

will become the contributing sponsor of 

Plan Q. A reportable event occurs on the 

date of the transaction (i.e., the date the 

binding contract was executed), because 

as a result of the transaction, Company 

Q (and any other member of its 

controlled group) will cease to be a 

member of Plan Q’s controlled group. 

The event is not reported before the 

notice date. If on the notice date the 

change in the contributing sponsor has 

not yet become effective, Company Q 

has the reporting obligation. If the 

change in the contributing sponsor has 

become effective by the notice date, 

Company R has the reporting obligation. 

§ 4043.30 Liquidation. 

(a) Reportable event. A reportable 

event occurs for a plan when a member 

of the plan’s controlled group— 

(1) Is involved in any transaction to 

implement its complete liquidation 

(including liquidation into another 

controlled group member); 

(2) Institutes or has instituted against 

it a proceeding to be dissolved or is 

dissolved, whichever occurs first; or 

(3) Liquidates in a case under the 

Bankruptcy Code, or under any similar 

law. 

(b) Waivers—(1) De minimis 10- 

percent segment. Notice under this 

section is waived if the person or 

persons that liquidate do not include 

any contributing sponsor of the plan 

and represent a de minimis 10-percent 

segment of the plan’s controlled group 

for the most recent fiscal year(s) ending 

on or before the date the reportable 

event occurs. 

(2) Foreign entity. Notice under this 

section is waived if each person that 

liquidates is a foreign entity other than 

a foreign parent. 

§ 4043.31 Extraordinary dividend or stock 

redemption. 

(a) Reportable event. A reportable 

event occurs for a plan when any 

member of the plan’s controlled group 

declares a dividend or redeems its own 

stock and the amount or net value of the 

distribution, when combined with other 

such distributions during the same 

fiscal year of the person, exceeds the 

person’s net income before after-tax gain 

or loss on any sale of assets, as 

determined in accordance with 

generally accepted accounting 

principles, for the prior fiscal year. A 

distribution by a person to a member of 

its controlled group is disregarded. 

(b) Determination rules. For purposes 

of paragraph (a) of this section, the net 

value of a non-cash distribution is the 

fair market value of assets transferred by 

the person making the distribution, 

reduced by the fair market value of any 

liabilities assumed or consideration 

given by the recipient in connection 

with the distribution. Net value 

determinations should be based on 

readily available fair market value(s) or 

independent appraisal(s) performed 

within one year before the distribution 

is made. To the extent that fair market 

values are not readily available and no 

such appraisals exist, the fair market 

value of an asset transferred in 

connection with a distribution or a 

liability assumed by a recipient of a 

distribution is deemed to be equal to 

200 percent of the book value of the 

asset or liability on the books of the 

person making the distribution. Stock 

redeemed is deemed to have no value. 

(c) Waivers—(1) De minimis 10- 

percent segment. Notice under this 

section is waived if the person making 

the distribution is a de minimis 10- 

percent segment of the plan’s controlled 

group for the most recent fiscal year(s) 

ending on or before the date the 

reportable event occurs. 

(2) Foreign entity. Notice under this 

section is waived if the person making 

the distribution is a foreign entity other 

than a foreign parent. 

(3) Small plan. Notice under this 

section is waived if the plan had 100 or 

fewer participants for whom flat-rate 

premiums were payable for the plan 

year preceding the event year. 

(4) Low-default-risk. Notice under this 

section is waived if each contributing 

sponsor of the plan and the highest level 

U.S. parent of each contributing sponsor 

are low-default-risk on the date of the 

event. 

(5) Well-funded plan. Notice under 

this section is waived if the plan is in 

the well-funded plan safe harbor for the 

event year. 

(6) Public company. Notice under this 

section is waived if any contributing 

sponsor of the plan before the 

transaction is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event under an 

item of the Form 8–K other than under 

Item 2.02 (Results of Operations and 

Financial Condition) or in financial 

statements under Item 9.01 (Financial 

Statements and Exhibits). 

§ 4043.32 Transfer of benefit liabilities. 

(a) Reportable event. A reportable 

event occurs for a plan when— 

(1) The plan makes a transfer of 

benefit liabilities to a person, or to a 

plan or plans maintained by a person or 

persons, that are not members of the 

transferor plan’s controlled group; and 


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(2) The amount of benefit liabilities 

transferred, in conjunction with other 

benefit liabilities transferred during the 

12-month period ending on the date of 

the transfer, is 3 percent or more of the 

plan’s total benefit liabilities. Both the 

benefit liabilities transferred and the 

plan’s total benefit liabilities are to be 

valued as of any one date in the plan 

year in which the transfer occurs, using 

actuarial assumptions that comply with 

section 414(l) of the Code. 

(b) Determination rules—(1) Date of 

transfer. The date of transfer is to be 

determined on the basis of the facts and 

circumstances of the particular 

situation. For transfers subject to the 

requirements of section 414(l) of the 

Code, the date determined in 

accordance with 26 CFR 1.414(l)– 

1(b)(11) will be considered the date of 

transfer. 

(2) Distributions of lump sums and 

annuities. For purposes of paragraph (a) 

of this section, the payment of a lump 

sum, or purchase of an irrevocable 

commitment to provide an annuity, in 

satisfaction of benefit liabilities is not a 

transfer of benefit liabilities. 

(c) Waivers—(1) Small plan. Notice 

under this section is waived if the plan 

had 100 or fewer participants for whom 

flat-rate premiums were payable for the 

plan year preceding the event year. 

(2) Low-default-risk. Notice under this 

section is waived if each contributing 

sponsor of the plan and the highest level 

U.S. parent of each contributing sponsor 

are low-default-risk on the date of the 

event. 

(3) Well-funded plan. Notice under 

this section is waived if the plan is in 

the well-funded plan safe harbor for the 

event year. 

(4) Public company. Notice under this 

section is waived if any contributing 

sponsor of the plan before the 

transaction is a public company and the 

contributing sponsor timely files a SEC 

Form 8–K disclosing the event under an 

item of the Form 8–K other than under 

Item 2.02 (Results of Operations and 

Financial Condition) or in financial 

statements under Item 9.01 (Financial 

Statements and Exhibits). 

§ 4043.33 Application for minimum 

funding waiver. 

A reportable event for a plan occurs 

when an application for a minimum 

funding waiver for the plan is submitted 

under section 302(c) of ERISA or section 

412(c) of the Code. 

§ 4043.34 Loan default. 

(a) Reportable event. A reportable 

event occurs for a plan when, with 

respect to a loan with an outstanding 

balance of $10 million or more to a 

member of the plan’s controlled group— 

(1) There is an acceleration of 

payment or a default under the loan 

agreement, or 

(2) The lender waives or agrees to an 

amendment of any covenant in the loan 

agreement the effect of which is to cure 

or avoid a breach that would trigger a 

default. 

(b) Waivers—(1) De minimis 10- 

percent segment. Notice under this 

section is waived if the debtor is not a 

contributing sponsor of the plan and 

represents a de minimis 10-percent 

segment of the plan’s controlled group 

for the most recent fiscal year(s) ending 

on or before the date the reportable 

event occurs. 

(2) Foreign entity. Notice under this 

section is waived if the debtor is a 

foreign entity other than a foreign 

parent. 

§ 4043.35 Insolvency or similar settlement. 

(a) Reportable event. A reportable 

event occurs for a plan when any 

member of the plan’s controlled group— 

(1) Commences or has commenced 

against it any insolvency proceeding 

(including, but not limited to, the 

appointment of a receiver) other than a 

bankruptcy case under the Bankruptcy 

Code; 

(2) Commences, or has commenced 

against it, a proceeding to effect a 

composition, extension, or settlement 

with creditors; 

(3) Executes a general assignment for 

the benefit of creditors; or 

(4) Undertakes to effect any other 

nonjudicial composition, extension, or 

settlement with substantially all its 

creditors. 

(b) Waivers—(1) De minimis 10- 

percent segment. Notice under this 

section is waived if the person 

described in paragraph (a) of this 

section is not a contributing sponsor of 

the plan and represents a de minimis 

10-percent segment of the plan’s 

controlled group for the most recent 

fiscal year(s) ending on or before the 

date the reportable event occurs. 

(2) Foreign entity. Notice under this 

section is waived if the person 

described in paragraph (a) of this 

section is a foreign entity other than a 

foreign parent. 

Subpart C—Advance Notice of 

Reportable Events 

§ 4043.61 Advance reporting filing 

obligation. 

(a) In general. Unless a waiver or 

extension applies with respect to the 

plan, each contributing sponsor of a 

plan is required to notify PBGC no later 

than 30 days before the effective date of 

a reportable event described in this 

subpart C if the contributing sponsor is 

subject to advance reporting for the 

reportable event. If there is a change in 

contributing sponsor, the responsibility 

for any failure to file or defective filing 

lies with the person who is the 

contributing sponsor of the plan on the 

notice date. 

(b) Persons subject to advance 

reporting. A contributing sponsor of a 

plan is subject to the advance reporting 

requirement under paragraph (a) of this 

section for a reportable event if — 

(1) On the notice date, neither the 

contributing sponsor nor any member of 

the plan’s controlled group to which the 

event relates is a public company; and 

(2) The aggregate unfunded vested 

benefits, determined in accordance with 

paragraph (c) of this section, are more 

than $50 million; and 

(3) The aggregate value of plan assets, 

determined in accordance with 

paragraph (c) of this section, is less than 

90 percent of the aggregate premium 

funding target, determined in 

accordance with paragraph (c) of this 

section. 

(c) Funding determinations. For 

purposes of paragraph (b) of this 

section, the aggregate unfunded vested 

benefits, aggregate value of plan assets, 

and aggregate premium funding target 

are determined by aggregating the 

unfunded vested benefits, values of plan 

assets, and premium funding targets 

(respectively), as determined in 

accordance with part 4006 of this 

chapter for purposes of the variable-rate 

premium for the plan year preceding the 

effective date of the event, of plans 

maintained (on the notice date) by the 

contributing sponsor and any members 

of the contributing sponsor’s controlled 

group, disregarding plans with no 

unfunded vested benefits (as so 

determined). 

(d) Shortening of 30-day period. 

Pursuant to § 4043.3(d), PBGC may, 

upon review of an advance notice, 

shorten the notice period to allow for an 

earlier effective date. 

§ 4043.62 Change in contributing sponsor 

or controlled group. 

(a) Reportable event. Advance notice 

is required for a change in a plan’s 

contributing sponsor or controlled 

group, as described in § 4043.29(a). 

(b) Waivers—(1) Small and mid-size 

plans. Notice under this section is 

waived with respect to a change of 

contributing sponsor if the transferred 

plan has fewer than 500 participants. 

(2) De minimis 5-percent segment. 

Notice under this section is waived if 

the person or persons that will cease to 


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be members of the plan’s controlled 

group represent a de minimis 5-percent 

segment of the plan’s old controlled 

group for the most recent fiscal year(s) 

ending on or before the effective date of 

the reportable event. 

§ 4043.63 Liquidation. 

(a) Reportable event. Advance notice 

is required for a liquidation of a member 

of a plan’s controlled group, as 

described in § 4043.30. 

(b) Waiver—de minimis 5-percent 

segment and ongoing plans. Notice 

under this section is waived if the 

person that liquidates is a de minimis 5- 

percent segment of the plan’s controlled 

group for the most recent fiscal year(s) 

ending on or before the effective date of 

the reportable event, and each plan that 

was maintained by the liquidating 

member is maintained by another 

member of the plan’s controlled group. 

§ 4043.64 Extraordinary dividend or stock 

redemption. 

(a) Reportable event. Advance notice 

is required for a distribution by a 

member of a plan’s controlled group, as 

described in § 4043.31(a). 

(b) Waiver—de minimis 5-percent 

segment. Notice under this section is 

waived if the person making the 

distribution is a de minimis 5-percent 

segment of the plan’s controlled group 

for the most recent fiscal year(s) ending 

on or before the effective date of the 

reportable event. 

§ 4043.65 Transfer of benefit liabilities. 

(a) Reportable event. Advance notice 

is required for a transfer of benefit 

liabilities, as described in § 4043.32(a). 

(b) Waivers—(1) Complete plan 

transfer. Notice under this section is 

waived if the transfer is a transfer of all 

of the transferor plan’s benefit liabilities 

and assets to one other plan. 

(2) Transfer of less than 3 percent of 

assets. Notice under this section is 

waived if the value of the assets being 

transferred— 

(i) Equals the present value of the 

accrued benefits (whether or not vested) 

being transferred, using actuarial 

assumptions that comply with section 

414(l) of the Code; and 

(ii) In conjunction with other assets 

transferred during the same plan year, is 

less than 3 percent of the assets of the 

transferor plan as of at least one day in 

that year. 

(3) Section 414(l) safe harbor. Notice 

under this section is waived if the 

benefit liabilities of 500 or fewer 

participants are transferred and the 

transfer complies with section 414(l) of 

the Code using the actuarial 

assumptions prescribed for valuing 

benefits in trusteed plans under 

§§ 4044.51 through 4044.57 of this 

chapter. 

(4) Fully funded plans. Notice under 

this section is waived if the transfer 

complies with section 414(l) of the Code 

using reasonable actuarial assumptions 

and, after the transfer, the transferor and 

transferee plans are fully funded as 

determined in accordance with 

§§ 4044.51 through 4044.57 of this 

chapter and § 4010.8(d)(1)(ii) of this 

chapter. 

§ 4043.66 Application for minimum 

funding waiver. 

(a) Reportable event. Advance notice 

is required for an application for a 

minimum funding waiver, as described 

in § 4043.33. 

(b) Extension. The notice date is 

extended until 10 days after the 

reportable event has occurred. 

§ 4043.67 Loan default. 

Advance notice is required for an 

acceleration of payment, a default, a 

waiver, or an agreement to an 

amendment with respect to a loan 

agreement described in § 4043.34(a). 

§ 4043.68 Insolvency or similar settlement. 

(a) Reportable event. Advance notice 

is required for an insolvency or similar 

settlement, as described in § 4043.35. 

(b) Extension. For a case or 

proceeding under § 4043.35(a)(1) or (2) 

that is not commenced by a member of 

the plan’s controlled group, the notice 

date is extended to 10 days after the 

commencement of the case or 

proceeding. 

Subpart D—Notice of Failure To Make 

Required Contributions 

§ 4043.81 PBGC Form 200, notice of failure 

to make required contributions; 

supplementary information. 

(a) General rules. To comply with the 

notification requirement in section 

303(k)(4) of ERISA and section 430(k)(4) 

of the Code, a contributing sponsor of a 

single-employer plan that is covered 

under section 4021 of ERISA and (if that 

contributing sponsor is a member of a 

parent-subsidiary controlled group) the 

ultimate parent must complete and 

submit in accordance with this section 

a properly certified Form 200 that 

includes all required documentation 

and other information, as described in 

the related filing instructions. Notice is 

required whenever the unpaid balance 

of a contribution payment required 

under sections 302 and 303 of ERISA 

and sections 412 and 430 of the Code 

(including interest), when added to the 

aggregate unpaid balance of all 

preceding such payments for which 

payment was not made when due 

(including interest), exceeds $1 million. 

(1) Form 200 must be filed with PBGC 

no later than 10 days after the due date 

for any required payment for which 

payment was not made when due. 

(2) If a contributing sponsor or the 

ultimate parent completes and submits 

Form 200 in accordance with this 

section, PBGC will consider the 

notification requirement in section 

303(k)(4) of ERISA and section 430(k)(4) 

of the Code to be satisfied by all 

members of a controlled group of which 

the person who has filed Form 200 is a 

member. 

(b) Supplementary information. If, 

upon review of a Form 200, PBGC 

concludes that it needs additional 

information in order to make decisions 

regarding enforcement of a lien imposed 

by section 303(k) of ERISA and section 

430(k) of the Code, PBGC may require 

any member of the contributing 

sponsor’s controlled group to 

supplement the Form 200 in accordance 

with § 4043.3(d). 

(c) Ultimate parent. For purposes of 

this section, the term ‘‘ultimate parent’’ 

means the parent at the highest level in 

the chain of corporations and/or other 

organizations constituting a parentsubsidiary controlled group. 

PART 4204—VARIANCES FOR SALE 

OF ASSETS 

■ 7. The authority citation for part 4204 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1384(c). 

§ 4204.12 [Amended] 

■ 8. Section 4204.12 is amended by 

removing the figures ‘‘412(b)(3)(A)’’ and 

adding in their place the figures 

‘‘431(b)(3)(A)’’. 

PART 4206—ADJUSTMENT OF 

LIABILITY FOR WITHDRAWAL 

SUBSEQUENT TO A PARTIAL 

WITHDRAWAL 

■ 9. The authority citation for part 4206 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3) and 

1386(b). 

§ 4206.7 [Amended] 

■ 10. Section 4206.7 is amended by 

removing the figures ‘‘412(b)(4)’’ and 

adding in their place the figures 

‘‘431(b)(5)’’. 

PART 4231—MERGERS AND 

TRANSFERS BETWEEN 

MULTIEMPLOYER PLANS 

■ 11. The authority citation for part 

4231 continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1411. 


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55010 Federal Register / Vol. 80, No. 176 / Friday, September 11, 2015 / Rules and Regulations 

§ 4231.2 [Amended] 

■ 12. In § 4231.2, the definitions of 

‘‘actuarial valuation’’ and ‘‘fair market 

value of assets’’ are amended by 

removing the words ‘‘section 302 of 

ERISA and section 412 of the Code’’ 

where they appear in each definition 

and adding in their place the words 

‘‘section 304 of ERISA and section 431 

of the Code’’. 

§ 4231.6 [Amended] 

■ 13. In § 4231.6: 

■ a. Paragraph (b)(4)(ii) is amended by 

removing the figures ‘‘412(b)(4)’’ and 

adding in their place the figures 

‘‘431(b)(5)’’. 

■ b. Paragraph (c)(2) is amended by 

removing the words ‘‘section 412 of the 

Code (which requires that such 

assumptions be reasonable in the 

aggregate)’’ and adding in their place the 

words ‘‘section 431 of the Code (which 

requires that each such assumption be 

reasonable)’’. 

■ c. Paragraph (c)(5) is amended by 

removing the figures ‘‘412’’ and adding 

in their place the figures ‘‘431’’. 

Issued in Washington, DC, this 8th day of 

September, 2015. 

Alice C. Maroni, 

Acting Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2015–22941 Filed 9–10–15; 8:45 am] 

BILLING CODE 7709–02–P 


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