This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

20039 

Vol. 78, No. 64 

Wednesday, April 3, 2013 

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: Proposed rule. 

SUMMARY: Under ERISA, pension plans 

and the companies that sponsor them 

are required to report to PBGC a range 

of corporate and plan events. In 2009, 

PBGC proposed to increase reporting 

requirements by eliminating most 

reporting waivers. Plan sponsors and 

pension practitioners objected, saying 

that PBGC would have required reports 

where the actual risk to plans and PBGC 

is minimal. On reflection, PBGC agrees. 

This new proposal exempts most 

companies and plans from many 

reports, and targets requirements to the 

minority of companies and plans that 

are at substantial risk of default. 

PBGC developed a revised proposal 

under the auspices of Presidential 

Executive Order 13563, which directs 

agencies to review and revise existing 

regulations. Under the new proposal, 

reporting would be waived for most 

events currently covered by fundingbased waivers if a plan or its sponsor 

comes within a financial soundness safe 

harbor based on widely available 

measures already used in business. 

Waivers for small plans would be 

expanded and some other existing 

waiver provisions would be retained 

with modifications; other waivers 

would be eliminated. 

In this way, PBGC can reduce 

unnecessary reporting requirements, 

while at the same time target its 

resources to plans that are at risk. The 

revised proposal will exempt more than 

90 percent of plans and sponsors from 

many reporting requirements. Reporting 

requirements would also be made 

simpler and more uniform. 

PBGC will also provide for more open 

and extensive public comment on the 

proposed rule. 

DATES: Comments must be submitted on 

or before June 3, 2013. A public hearing 

will be held on June 18, 2013. Outlines 

of topics to be discussed at the hearing 

must be submitted on or before June 4, 

2013. See Public Participation below for 

more information on the hearing. 

ADDRESSES: Comments, identified by 

Regulation Identifier Number (RIN) 

1212–AB06, may be submitted by any of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the Web 

site instructions for submitting 

comments. 

• Email: reg.comments@pbgc.gov. 

• Fax: 202–326–4224. 

• Mail or Hand Delivery: Regulatory 

Affairs Group, Office of the General 

Counsel, Pension Benefit Guaranty 

Corporation, 1200 K Street NW., 

Washington, DC 20005–4026. 

All submissions must include the 

Regulation Identifier Number for this 

rulemaking (RIN 1212–AB06). 

Comments received, including personal 

information provided, will be posted to 

www.pbgc.gov. Copies of comments may 

also be obtained by writing to 

Disclosure Division, Office of the 

General Counsel, Pension Benefit 

Guaranty Corporation, 1200 K Street 

NW., Washington DC 20005–4026, or 

calling 202–326–4040 during normal 

business hours. (TTY and TDD users 

may call the Federal relay service tollfree at 1–800–877–8339 and ask to be 

connected to 202–326–4040.) 

Outlines of topics to be discussed at 

the public hearing on this rule must be 

submitted by email to 

regs.comments@pbgc.gov or by mail or 

courier to Regulatory Affairs Group, 

Office of the General Counsel, Pension 

Benefit Guaranty Corporation, 1200 K 

Street NW., Washington, DC 20005– 

4026. See Public Participation below for 

more information on the hearing. 

FOR FURTHER INFORMATION CONTACT: 

Catherine B. Klion, Assistant General 

Counsel (Klion.Catherine@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 conform 

PBGC’s reportable events regulation to 

changes in the law, to avoid 

unnecessary reporting requirements, to 

make reporting more efficient and 

effective, and as a result help preserve 

retirement plans. It does these things by 

amending the regulation to track new 

legal rules, to change the scope of some 

reportable events, and to replace the 

existing waiver structure with a new 

structure including ‘‘safe harbors’’ that 

relieves reporting burdens on 

companies and plans where there is 

little risk to pensions. 

PBGC’s legal authority for this action 

comes from 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 current waiver structure for 

reportable events, PBGC often doesn’t 

get reports it needs; at the same time, it 

gets many reports it doesn’t need— 

reports that are unnecessary. This 

mismatch occurs because the current 

waiver structure isn’t well-tied to the 

actual risks and causes of plan 

terminations. 

When a reporting waiver keeps PBGC 

from learning of a reportable event that 

presents a high level of risk to a plan, 

its participants, and the pension 

insurance system, PBGC loses the 

opportunity to take protective action. 

That action might include steps such as 

involuntary plan termination or 

negotiation with the plan sponsor to 

improve plan funding. 

But when there is no waiver for a lowrisk event, the reporting burden of the 

plan or sponsor involved outweighs the 

usefulness of the report to PBGC. 

In both these cases, the result is to 

reduce retirement security. In the former 

case, PBGC is unable to step in to 

support plan benefits in a timely way, 

either because a plan may have been 

terminated that could otherwise have 

been preserved, or because an 

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20040 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

1Among the many comments received on this 

point: ‘‘* * *in many situations in which reporting 

would be required—the reportable event would not 

create any meaningful risk that the employer would 

be unable to meet its plan funding obligations.’’ 

ERISA Industry Committee comment letter, 

accessible on PBGC’s Web site (www.PBGC.gov). 

2Most reporting requirements under the 

reportable events regulation call for post-event 

reports, but in some cases advance reporting is 

required. The new proposal would conform the 

advance reporting threshold test to changes in the 

law and eliminate certain extensions of the time to 

file (see Advance-Notice Extensions below), but 

would make other changes to advance-notice 

provisions only where they refer to post-event 

notice provisions that would be changed. Except as 

otherwise noted, this preamble discusses post-event 

reporting only. 

3The current regulation provides a waiver in 

some circumstances based on 80 percent funding on 

a premium basis. However, in PBGC’s experience, 

that test is inadequate, in that many plans that have 

undergone distress or involuntary termination 

nonetheless have been 80 percent funded on a 

premium basis. See Financial Soundness Safe 

Harbor for Plans below. 

involuntary termination occurred after 

exposure had increased unreasonably. 

In the latter case, the unnecessary 

reporting burden may lead some firms 

to reconsider their decision to sponsor 

defined-benefit pension plans. 

The most significant provision of this 

rule is to propose a blueprint for a new 

reportable events waiver structure that 

is more closely focused on risk than the 

current waiver structure. Some waivers 

that poorly identify risky situations— 

like those based on an apparently 

modest level of plan underfunding— 

would be eliminated; at the same time, 

new ‘‘safe harbors’’ would be 

established—based on financial 

soundness—that are better measures of 

low plan risk. 

Conforming to Changes in the Law 

The Pension Protection Act of 2006 

(PPA 2006) made changes in the law 

that affect the test for whether advance 

reporting of certain reportable events is 

required. The test is based on the 

variable-rate premium rules, which PPA 

2006 changed. This rule would conform 

the advance reporting test to the new 

legal requirements. 

Revision of Definitions of Reportable 

Events 

The rule would simplify the 

descriptions of several reportable events 

and make some event descriptions 

narrower so that compliance is easier 

and less burdensome. One event would 

be broadened in scope, and clarification 

of another event would have a similar 

result. These changes, like the waiver 

changes, are aimed at tying reporting 

burden to risk. 

Mandatory E-Filing 

The rule would make electronic filing 

of reportable events notices mandatory. 

This would further 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. 

Introduction 

On January 18, 2011, the President 

issued Executive Order 13563 on 

Improving Regulation and Regulatory 

Review, directing agencies to review 

and improve their regulatory processes. 

In the spirit of Executive Order 13563 

and in light of the comments received 

on its 2009 proposal, PBGC reexamined 

the reportable events regulation and the 

proposed amendment with several 

factors in mind: 

• Commenters said that under the 

2009 proposal, many companies would 

have been required to report to PBGC on 

non-pension-focused activities in 

circumstances where those activities 

were unlikely to affect their pension 

plans.1 To avoid such a result, PBGC 

has sought ways to establish safe 

harbors that waive reporting 

requirements in such circumstances. 

• Since the reportable events program 

was legislated almost four decades ago, 

a vast quantity of business and financial 

information has become available 

through the internet and other means. 

As a result, PBGC can require less direct 

reporting from its insured plans and 

their sponsors. 

• When reporting to PBGC is 

necessary, to the extent practicable 

PBGC can and should rely on 

procedures, documents, and 

performance standards that are already 

established and accepted. In short, 

PBGC is trying not to ‘‘reinvent the 

wheel,’’ nor does PBGC want to require 

insured plans and the companies that 

sponsor them to do so. 

Establishing Financial Soundness Safe 

Harbors 

PBGC proposes to establish safe 

harbors to enable financially sound 

businesses and plans to avoid having to 

report many events, particularly those 

events that seem to have little chance of 

threatening pension plans. 

• Establishing Financial Soundness 

for Companies. A business would be in 

the safe harbor if it has adequate 

capacity to meet its obligations in full 

and on time, as evidenced by meeting 

five criteria, including passing a ‘‘credit 

report’’ test and four other criteria 

designed to measure various aspects of 

financial soundness. The credit report 

test would require that the business 

have a credit report score from a 

commercial credit reporting company 

that is commonly used in the business 

community and that the score indicate 

a low likelihood that the company 

would default on its obligations. (The 

vast majority of plan sponsors already 

have credit report scores.) The other 

criteria would be that the business have: 

(a) Positive net income, (b) no secured 

debt (with some exceptions, such as 

purchase-money mortgages and leases), 

(c) no loan defaults or similar issues, 

and (d) no missed pension plan 

contributions (again, with some 

exceptions). For those in the safe harbor, 

no post-event reporting would be 

required for most events to which 

funding-based waivers currently apply.2

• Establishing Financial Soundness 

via Plans. A plan would be in the safe 

harbor if it were either fully funded on 

a termination basis or 120 percent 

funded on a premium basis.3

The proposal would also generally 

provide more small-plan waivers and 

preserve foreign-entity and de minimis 

waivers but eliminate most other 

waivers. 

In addition, PBGC proposes to 

simplify reporting rules, to make them 

more uniform, and where possible to 

permit submission of information 

already prepared by plans and 

companies for other purposes. 

Impact of Proposal 

Overall, PBGC expects the proposal to 

exempt or waive more than 90 percent 

of plans and sponsors from many 

reporting requirements. The proposal 

will reduce the burden on the vast 

majority of companies (estimated at 

approximately three-fourths) that are 

financially sound. This reduction may 

make them less likely to eliminate their 

defined benefit plans and thereby have 

a beneficial effect on retirement security 

generally. In addition, the expansion of 

small plan waivers could help retention 

of small plans (which represent about 

two-thirds of all plans). 

Burden on plan sponsors with de 

minimis components in their controlled 

groups will be reduced because the 

inclusion of additional de minimis 

waivers for certain events will reduce 

both reporting and the need to monitor 

for reportable events to which waivers 

apply. 

Some reportable events present little 

or no risk to the pension insurance 

system—where, for example, the plan 

sponsor is financially sound and the 

risk of plan termination low. Reports of 

such events are unnecessary in the 

sense that PBGC typically reviews but 

takes no action on them. Based on an 

analysis of 2011 data, PBGC found that 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20041 

4To 5 percent under the proposal compared to 42 

percent under the present regulation. 

5On November 28, 2007, PBGC issued Technical 

Update 07–2, providing transitional guidance on 

the applicability of the changes made by PPA 2006, 

and the corresponding changes proposed for PBGC 

premium regulations, to the determination of 

funding-related amounts for purposes of the 

reportable events regulation. On March 24, 2008, 

PBGC issued Technical Update 08–2, providing a 

waiver for reporting of missed quarterly 

contributions by certain small employers in 2008. 

On January 9, 2009, PBGC issued Technical Update 

09–1, providing interim guidance on compliance 

with reportable events requirements for plan years 

beginning in 2009. On April 30, 2009, PBGC issued 

Technical Update 09–3, providing a waiver or 

alternative compliance method (depending on plan 

size) for reporting of missed quarterly contributions 

by certain small employers in 2009. On November 

23, 2009, PBGC issued Technical Update 09–4, 

extending the guidance in Technical Updates 09– 

1 and 09–3 for 2010. On December 3, 2010, PBGC 

issued Technical Update 10–4, extending the 

guidance in Technical Update 09–4 for 2011. On 

December 7, 2011, PBGC issued Technical Update 

11–1, extending the guidance in Technical Update 

10–4 for 2012. Technical Updates are available on 

PBGC’s Web site, www.pbgc.gov. 

the proportion of such unnecessary 

filings would be cut by 88 percent under 

the proposed regulation.4 The total 

number of filings under the proposed 

rule would be comparable to those 

under the present regulation, but they 

would be much reduced compared to 

the 2009 proposal, and the proportion of 

unnecessary reports, and the regulatory 

burden on financially sound sponsors 

and plans, would be dramatically 

reduced. 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. 

If PBGC gets a reportable event notice, 

it can intervene earlier in the process. 

Using data from 2011, PBGC has 

estimated the benefit of better targeted 

reporting under the new proposal 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 

$3.8 million. 

The methodology of these studies is 

discussed in more detail under 

Executive Order 12866 ‘‘Regulatory 

Planning and Review’’ and Executive 

Order 13563 ‘‘Improving Regulation and 

Regulatory Review’’ at the end of this 

preamble. 

The new proposal is described in 

more detail below. 

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). Under section 4007 of ERISA, 

pension plans covered by Title IV must 

pay premiums to PBGC. Section 4006 of 

ERISA establishes the premium rates 

and includes provisions for determining 

the variable-rate premium (VRP), which 

is based on plan funding rules. PBGC’s 

regulations on Premium Rates (29 CFR 

part 4006) and Payment of Premiums 

(29 CFR part 4007) implement the 

premium rules. A number of other 

provisions of ERISA, and of PBGC’s 

other regulations, refer to funding and 

premium rules. Thus, any change in the 

funding and premium rules may require 

corresponding changes in other PBGC 

regulations. 

Reportable Events 

One such regulation is PBGC’s 

regulation on Reportable Events and 

Certain Other Notification Requirements 

(29 CFR part 4043), implementing 

section 4043 of ERISA, which requires 

that PBGC be notified of the occurrence 

of certain ‘‘reportable events.’’ 

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. 

Like section 4043, the reportable events 

regulation generally requires post-event 

reporting, but also calls for advance 

reporting for non-public companies 

where plan underfunding is large. The 

threshold test for advance reporting 

measures underfunding by reference to 

VRP quantities (in particular, the values 

of assets and vested benefits as 

determined for VRP purposes). 

The Pension Protection Act of 2006 

(PPA 2006) changed the plan funding 

rules in Title I of ERISA and in the 

Internal Revenue Code of 1986 (Code) 

and amended the VRP provisions of 

section 4006 of ERISA to conform to the 

changes in the funding rules. PBGC 

amended its premium rates regulation 

and its premium payment regulation 

accordingly, effective for plan years 

beginning after 2007. Since 

underfunding for purposes of reportable 

events was measured by reference to the 

VRP, the thresholds for reportable 

events also had to be modified. Pending 

the adoption of conforming 

amendments to the reportable events 

regulation, PBGC has issued a series of 

Technical Updates providing 

transitional guidance on how the PPA 

2006 changes affect compliance with the 

reportable events requirements.5

2009 Proposed Rule 

On November 23, 2009 (at 74 FR 

61248), PBGC published in the Federal 

Register for notice and comment a 

proposed rule providing for amendment 

of PBGC’s reportable events regulation 

to make the advance reporting threshold 

test consistent with the PPA 2006 

funding rules and PBGC’s new variablerate premium rules. The rule also 

proposed to eliminate most automatic 

waivers and filing extensions, create 

two new reportable events based on 

provisions in PPA 2006, and make other 

changes to the reportable events 

regulation. It also provided for 

amendment of five other PBGC 

regulations to revise statutory crossreferences and otherwise accommodate 

the statutory and regulatory changes in 

the premium rules. 

PBGC received comments on the 

proposed rule from eleven 

commenters—actuaries, pension 

consultants, and organizations 

representing employers and pension 

professionals. In general, the 

commenters considered the proposal 

unduly burdensome, primarily because 

of the elimination of most reportable 

event waivers. Several commenters 

urged PBGC to rethink and repropose 

the rule to address issues raised by the 

comments. 

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. On April 1, 2011 (at 76 FR 

18134), PBGC published a request for 

public comments on developing its 

preliminary review plan. The five 

responses to this comment request (all 

from commenters on the 2009 proposal) 

included comments on the 2009 

proposed rule (largely reflective of those 

submitted previously) as well as 

comments on the existing regulation. 

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20042 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

6See Summary Chart, below, for an overview of 

waivers and safe harbors under the current 

regulation, the 2009 proposal, and this proposed 

rule. 

7The proposed rule would provide extensions for 

small plans to determine whether they satisfied the 

plan financial safe harbor test based on plan 

funding on a premium basis. There would also be 

an extension to provide plans time to determine 

whether the year-end active participant count 

showed that an active participant reduction event 

had occurred by attrition at the end of the year. 

8Examples of the value of early alerts in 

mitigating distress situations can also be found in 

other PBGC programs. For example, as part of its 

Early Warning Program, PBGC negotiated 

substantial protections from Daimler AG for the 

pension plans of Daimler’s former Chrysler North 

America division, and the Chrysler plans remain 

ongoing today. In another case, PBGC negotiated 

substantial protections under ERISA section 4062(e) 

for a plan sponsored by Visteon Corporation. When 

the company filed for Chapter 11 protection in 

2009, the company initially contemplated 

terminating three of its four pension plans, and 

shifting the obligations to the PBGC’s insurance 

program, which would have caused $100 million in 

benefit reductions for the company’s 22,000 

workers and retirees and added more than $500 

million to the PBGC’s shortfall. However, due in 

part to the negotiated protections, all of the 

company’s pension plans remain ongoing today. 

New Proposal 

PBGC has reconsidered the reportable 

events regulation and the 2009 proposed 

amendment in the spirit of Executive 

Order 13563 and in light of the 

comments. In addition to conforming 

the reportable events regulation to PPA 

2006’s changes to the funding and 

premium rules, this new proposal 

includes significant changes to address 

issues under the regulation in a new 

way and to reduce burden in areas 

where that can be done without unduly 

compromising the objectives of section 

4043. 

In particular, the proposal features the 

introduction of a newly conceived ‘‘safe 

harbor’’ from reporting in response to 

comments suggesting that PBGC reduce 

reporting where risk to the pension 

insurance system is low. This safe 

harbor, applicable to five reportable 

events, would be based on employer 

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 would be available 

for plans that could meet one of two 

funding tests that would be more 

stringent than those currently provided 

for existing funding-based waivers. The 

new proposed rule would also preserve 

or extend some waivers under the 

existing regulation that the 2009 

proposal would have eliminated. 

Under this approach, PBGC would 

rely more heavily on publicly available 

sources of information, including 

information publicly reported to other 

agencies, to learn about reportable 

events. As a result, it might take longer 

for PBGC to learn of some reportable 

events, but PBGC believes the approach 

would provide a better balance between 

the agency’s need for information and 

sponsors’ interest in minimizing 

regulatory burdens on the conduct of 

their business. 

Public comments and regulatory 

changes (from both the existing 

regulation and the 2009 proposal) are 

discussed below in the context of the 

provisions they relate to. 

Reportable Events 

PBGC proposes to amend the 

reportable events regulation to 

accommodate the changes to the 

funding and premium rules; to replace 

many automatic waivers with a new and 

simpler system of waivers featuring 

‘‘safe harbors’’ for five events based on 

plan sponsors’ financial soundness and 

on high levels of plan funding; and to 

make other modifications. 

Reports required by section 4043 of 

ERISA tell PBGC about events that may 

presage distress termination of plans or 

require PBGC to monitor or 

involuntarily terminate plans. These 

important reporting requirements are 

designed to protect participants and 

PBGC. 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 minimize the plan’s 

potential funding shortfall through 

involuntary termination and maximize 

recovery of the shortfall from all 

possible sources. 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 may have 

been lost. But while such information 

can be critical to the protection of the 

pension insurance system, the 

circumstances surrounding some events 

may make reporting unnecessary. Thus, 

the regulation includes a system of 

waivers and extensions to ease reporting 

burdens in certain cases. 

Automatic Waivers and Extensions— 

Overview 

Section 4043.4 of the reportable 

events regulation provides that PBGC 

may grant waivers and extensions case 

by case. In addition, the existing 

regulation provides automatic waivers 

and extensions for most of the 

reportable events. For example, waivers 

are provided in some cases for small 

plans, for plans that meet certain 

funding tests, or for events affecting de 

minimis segments of controlled groups 

or foreign entities. In cases where it may 

be impossible to know by the filing due 

date whether criteria for a particular 

waiver are met, an extension gives a 

potential filer an opportunity to 

determine whether the waiver applies. 

PBGC proposes to replace many of 

these automatic waivers with a new and 

simpler system, including many of the 

automatic waivers currently available 

and featuring new automatic waivers 

that would apply where a sponsor or 

plan comes within a financial 

soundness safe harbor.6 The proposal 

would retain the complete waivers 

provided for certain statutory events—in 

§§ 4043.21 (disqualification or 

noncompliance), 4043.22 (amendment 

decreasing benefits), 4043.24 

(termination), and 4043.28 (merger, 

consolidation, or transfer)—that have 

been replaced by events defined in the 

regulation. PBGC also proposes to 

eliminate the automatic extensions 

under the existing regulation. These 

extensions are currently needed because 

many existing waivers are based on facts 

that may not be known when an event 

occurs. Since waivers of this kind are 

being replaced, related extensions are 

no longer needed.7

To give plans and sponsors time to 

institute any necessary eventmonitoring programs and otherwise 

adjust to changes in the regulation, 

PBGC is proposing to defer the 

applicability date of the final rule. 

PBGC’s experience indicates that 

many of the automatic waivers and 

extensions in the existing reportable 

events regulation are depriving it of 

early alerts that would enable it to 

mitigate distress situations. For 

example, the 2009 proposed rule noted 

that of the 88 small plans terminated in 

2007, 21 involved situations where, but 

for an automatic waiver, an active 

participant reduction reportable event 

notice would have been required an 

average of three years before 

termination. Had those notices been 

filed, the need for some of those 

terminations might have been avoided, 

and PBGC might have been able to 

reduce the impact of other terminations 

on the pension insurance system.8

Concerns of this kind led PBGC in 2009 

to propose the elimination of most 

automatic waivers in the reportable 

events regulation. 

The commenters uniformly opposed 

the proposal to eliminate most waivers. 

Commenters said that the increase in 

the public’s burden of compliance 

would outweigh the benefit to the 

pension insurance system of the 

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9For multiple employer plans, all sponsors 

would have to qualify. 

10 In 2011, 90 percent of reportable events reports 

from filers that were below investment grade 

resulted in the opening of case files. 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. 

11See Technical Update 00–3. 

12See Private Pensions, Recent Experiences of 

Large Defined Benefit Plans Illustrate Weaknesses 

in Funding Rules, GAO, May 2005, http:// 

www.gao.gov/new.items/d05294.pdf, p. 30. For this 

purpose, GAO considered ‘‘investment grade’’ to 

correspond to a rating of BBB or higher. 

13See section 939A of the Dodd-Frank Act. 

additional reporting. They averred that 

the circumstances in which existing 

waivers apply pose little risk to PBGC 

and expressed concern that the 

proposed changes to the rule would 

discourage employers from continuing 

to maintain pension plans covered by 

Title IV. 

In response to the comments, PBGC 

has attempted to identify circumstances 

that appear less likely to call for 

involuntary plan termination and is 

now proposing a new set of automatic 

waivers more appropriately tailored to 

focus on such situations. In particular, 

PBGC proposes to create safe harbors 

based on sponsor and plan financial 

soundness. These safe harbors would 

apply to post-event reporting 

requirements for the events of active 

participant reduction, distribution to a 

substantial owner, controlled group 

change, extraordinary dividend, and 

transfer of benefit liabilities—all the 

reportable events to which a fundingbased waiver applies under the existing 

regulation, except liquidation and loan 

default. PBGC feels that the occurrence 

of one of these latter two events is at 

odds with the premise of financial 

soundness underlying the safe harbor 

and portends likely deterioration in 

plan funding due to missed 

contributions. (As discussed below, this 

consideration would not apply if the 

event qualified for a foreign-entity or de 

minimis waiver.) 

Financial Soundness Safe Harbor for 

Plan Sponsors 

Many commenters on the 2009 

proposal contended that if fundingbased waivers were eliminated, plans 

and plan sponsors would be required to 

report events posing minimal risk to 

PBGC and the pension insurance 

system. To address the issue of risk, 

PBGC proposes to provide a risk-based 

‘‘safe harbor.’’ PBGC is open to 

suggestions from the public to help 

identify existing, widely accepted 

standards that could form the basis for 

such a safe harbor. Pending such 

suggestions, PBGC is proposing, as 

discussed below, to base the safe harbor 

on the adequate capacity of an employer 

to meet its financial commitments in 

full and on time based on a combination 

of five factors, including a standard of 

financial strength reflected by 

commercial credit report scores and four 

confirmatory standards. 

The new safe harbor would generally 

apply if, when a reportable event 

occurred for a plan, the applicable 

financial soundness criteria were met by 

the plan’s contributing sponsor 9 or 

(where the contributing sponsor was a 

member of a controlled group) by the 

contributing sponsor’s highest U.S. 

parent in the controlled group (that is, 

the highest level U.S. company in the 

group that was in the contributing 

sponsor’s chain of ownership). For a 

change in contributing sponsor, the 

criteria would be applied to the posttransaction sponsor group; for a transfer 

of benefit liabilities, the criteria would 

be applied to both the transferor and the 

surviving transferee plans’ sponsor 

groups. The regulation would refer to an 

entity that satisfied the applicable 

criteria as ‘‘financially sound.’’ 

Focusing on the financial soundness 

of the plan sponsor (rather than just the 

funding level of the plan) is consistent 

with section 4041 of ERISA, which 

permits distress termination of 

underfunded pension plans only in 

situations where plan sponsors are in 

bankruptcy or severe financial straits. 

This safe harbor proposal reflects 

PBGC’s experience that the financial 

soundness of a plan sponsor generally 

correlates inversely 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 or support the 

plan). 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 risk of 

underfunded termination of a plan 

within the near future depends most 

significantly on the plan sponsor’s 

financial strength.10

In particular, PBGC believes the 

ability of a sponsor to meet its senior 

unsecured debt obligations reflects the 

sponsor’s ability to meet pension plan 

funding obligations because of the 

parity in bankruptcy of senior 

unsecured debt and pension plan 

obligations. PBGC’s experience with its 

Early Warning Program 11 suggests that 

the higher the financial quality of a plan 

sponsor, the greater is the sponsor’s 

commitment to its pension plan and its 

ability to meet its pension funding 

obligations. And analysis of PBGC data 

indicates that the credit ratings of 

sponsors of the vast majority of 

underfunded plans taken over by PBGC 

were below investment grade for many 

years before termination.12

Typically, sponsors of pension plans 

that present the greatest exposure for 

PBGC (large plans that are not fully 

funded) are rated by one or more large 

nationally recognized statistical rating 

organizations (NRSROs) that are 

registered with the Securities and 

Exchange Commission. These NRSRO 

ratings are among the most well-known 

and widely used measures of financial 

soundness for such large plan sponsors. 

But while credit ratings of a plan 

sponsor or its senior unsecured debt 

obligations would seem to be a good 

basis for a financial soundness safe 

harbor, many plan sponsors (primarily 

small plan sponsors) do not have such 

ratings. Furthermore, the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (Pub. L. 111–203) 

requires federal agencies to remove 

references to and requirements of 

reliance on credit ratings in 

regulations.13

To avoid these drawbacks, PBGC 

proposes to use, as one of five criteria 

of financial soundness, credit scores 

reported by commercial credit reporting 

companies (CCRCs), which are already 

issued for the vast majority (over 90 

percent) of businesses that sponsor 

plans covered by Title IV of ERISA. 

These commercial ratings are 

substantially different from traditional 

credit ratings. A CCRC generally 

assesses the creditworthiness of a 

business by reference to the ability of 

the business to pay its trade and other 

debts rather than by reference to the 

financial strength of the business 

reflected in financial statements (as 

credit rating agencies do). Just as a 

company’s credit score is used by 

prospective creditors in evaluating the 

probability that an obligation will be 

paid, PBGC believes that it can 

appropriately use such scores as a 

measure of financial strength, which in 

turn is an indicator of the level of risk 

that a company will fail to meet its 

pension plan funding obligations. 

CCRCs are not within the purview of the 

Dodd-Frank Act since the relevant 

provisions cover credit ratings and 

credit rating agencies but not credit 

reporting companies (or, by implication, 

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20044 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

14The Securities Exchange Act of 1934 (the 

Exchange Act), which is amended by relevant 

portions of the Dodd-Frank Act, defines a ‘‘credit 

rating’’ as an assessment of the creditworthiness of 

an obligor as an entity or with respect to specific 

securities or money market instruments and a 

‘‘credit rating agency’’ as any entity engaged in, 

among other things, the business of issuing credit 

ratings. See sections 3(a)(60) and (61) of the 

Exchange Act. However, the definition of credit 

rating agency under section 3(a)(61) of the Exchange 

Act specifically ‘‘does not include a commercial 

credit reporting company.’’ 

15 Dun & Bradstreet provides free credit reports to 

companies willing to provide certain financial 

information for analysis and a free alert system to 

inform companies of changes in their credit scores 

(to permit inexpensive monitoring) and issues 

credit reports on at least 90 percent of sponsors of 

PBGC-covered plans. The United Kingdom’s 

Pension Protection Fund, which performs pension 

protection functions like PBGC’s, uses Dun & 

Bradstreet analyses to measure the risk of 

insolvency of sponsoring employers. 

16A company may have its credit score reported 

by a CCRC simply by providing relevant data to the 

CCRC. 

the credit scores and reports they 

produce).14

To make the credit scores underlying 

this test for the financial soundness safe 

harbor as reliable and as uniform as 

possible, and minimize the burden of 

obtaining such scores, PBGC proposes to 

require that a credit score be reported by 

a CCRC that is commonly used in the 

business community (e.g., Dun & 

Bradstreet 15 ). To satisfy this criterion 

for the financial soundness safe harbor, 

the credit report of a plan sponsor (or 

highest U.S. parent) by a CCRC that is 

commonly used in the business 

community would have to reflect a 

credit score indicating a low likelihood 

that the company would default on its 

obligations. 

Scores that satisfy the standard in the 

regulation may change over time, 

because of changes in scoring methods 

or for other reasons. PBGC will provide, 

and update as necessary, reportable 

events filing instructions to guide filers 

in determining whether their credit 

scores meet the standard. The 

instructions will include one or more 

examples of scores by commercial credit 

reporting companies commonly used in 

the business community that indicate a 

low likelihood that a company will 

default on its obligations. To give an 

idea of the level of score that PBGC has 

in mind, a minimum Dun & Bradstreet 

financial stress score of 1477 would 

have satisfied the standard in 2011. 

PBGC invites commenters to identify 

CCRCs other than Dun & Bradstreet that 

are commonly used in the business 

community now and to suggest ways 

that PBGC can remain currently 

informed of the identity of all such 

CCRCs as usage by the business 

community changes over time. 

This financial strength criterion relies 

on private-sector commercial credit 

scores that most plan sponsors (or their 

U.S. parents) already have and that are 

used in a wide variety of business 

contexts. Such scores represent well 

known, objective, non-governmental 

assessments of financial soundness. 

PBGC would not itself evaluate the 

creditworthiness of plan sponsors as a 

condition to sponsors’ use of the safe 

harbor. Sponsors would not have to 

certify or prove creditworthiness to 

PBGC—or even report a credit score—in 

order to take advantage of the safe 

harbor. For a sponsor not currently the 

subject of credit reporting, PBGC 

believes it would entail minimal effort 

and expense to have a CCRC that is 

commonly used in the business 

community begin issuing such reports 

on the sponsor.16 As discussed below 

under Small-Plan Waivers, small plans 

would have separate exemptions. 

As stated above, a sponsor would 

come within the financial soundness 

safe harbor if it passed the ‘‘credit 

report’’ test and in addition satisfied 

four further criteria. 

One of these further criteria for the 

sponsor financial soundness safe harbor 

would be based on whether the sponsor 

(or its highest-level U.S. parent) has 

secured indebtedness. A lender’s 

insistence on security reflects a level of 

concern over whether its loan will be 

timely repaid, typically because it 

judges that the borrower’s 

creditworthiness is questionable. Thus, 

in general, if a company is forced to 

make use of secured debt, there is the 

suggestion of risk of loss that must be 

mitigated by the securing of collateral. 

If the borrower is a plan sponsor, there 

is a concomitant risk of underfunded 

plan termination during that same time 

frame. Conversely, this implication of 

risk does not arise where a company is 

not forced to borrow with security. 

Thus, an absence of secured 

indebtedness tends to be associated 

with a greater degree of financial 

soundness. 

For purposes of this test, PBGC would 

except indebtedness incurred in 

connection with the acquisition or 

improvement of property and secured 

only by that property—such as 

mortgages and equipment financing 

(including capital leases). Secured debt 

of this kind is not uncommon even for 

financially sound businesses. But PBGC 

is 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 seeks public 

comment on the extent to which the 

proposed no-secured-debt test might be 

failed by plan sponsors whose risk level 

is in fact as low as that of other sponsors 

capable of passing the test. PBGC also 

seeks suggestions for ways to modify the 

no-secured-debt test—for example, by 

carving out a wider class of debt than 

purchase-money obligations—to make it 

correspond better with commercial 

reality. 

Another criterion for the sponsor 

financial soundness safe harbor would 

be that, for the past two years, the 

sponsor (or its highest-level U.S. parent) 

has had positive net income under 

generally accepted accounting 

principles (GAAP) or International 

Financial Reporting Standards (IFRS). 

This requirement serves to confirm both 

that the business is successful and that 

it has been operating for at least two 

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

income’’ would be measured as the 

excess of total revenue over total 

expenses as required to be reported on 

Internal Revenue Service Form 990.) 

In this connection, PBGC seeks public 

comment on the extent to which there 

are companies whose financial 

statements are not prepared using GAAP 

or IFRS but whose income level is 

comparable to the standards proposed 

for this criterion. PBGC seeks 

suggestions for supplementing the 

GAAP/IFRS standards with alternative 

standards to accommodate such 

companies. 

The two remaining criteria are 

intended similarly to supplement and 

confirm the general picture of financial 

soundness painted by the satisfaction of 

the credit report test. These two 

requirements would be that the business 

have no debt service problems and be 

current with its pension plan 

contributions. More specifically: 

• For the past two years, the business 

would have to have not met the criteria 

for an event of default with respect to 

a loan with an outstanding balance of 

$10 million or more, regardless of 

whether the default was cured or if the 

lender entered into a forbearance 

agreement or waived the default. 

Defaults on credit agreements suggest 

the business may be underperforming 

and at greater risk of not meeting its 

debt obligations. 

• For the past two years, the business 

would have to have no missed pension 

contributions, other than quarterly 

contributions for which reporting is 

waived. Like the debt service 

requirement, this criterion addresses the 

likelihood that the business will reliably 

fund its pension plans. 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20045 

17 In general, the variable-rate premium is based 

on unfunded vested benefits. However, in some 

cases no variable-rate premium might be owed 

because of an exemption. For example, before 2008, 

ERISA provided an exemption from the variablerate premium for a plan at the ‘‘full-funding limit,’’ 

even if the plan had unfunded vested benefits. The 

exemption was removed by PPA 2006. 

18The sole exception is a waiver for the benefit 

liability transfer event, which applies if (among 

other things) the transferor and transferee plans are 

fully funded using the computation methods for 

calculating employer liability for terminated plans. 

19Some 134 plans fall into this category, but 17 

were excluded because of incomplete or 

questionable data. 

20As discussed above under Automatic waivers 

and extensions—overview, PBGC proposes to 

exclude the liquidation and loan default events 

from the funding-based waiver because those two 

events imply sponsor financial difficulties that may 

affect plan contributions and lead to a decline in 

funding level. 

Because of the novelty of the sponsor 

financial soundness standard and in the 

spirit of E.O. 13563’s call for greater 

public participation in rulemaking, 

PBGC specifically invites public 

comment on the new risk-based 

financial soundness safe harbor for plan 

sponsors, as well as suggestions from 

the public for other tests or 

combinations of tests on which the 

sponsor financial soundness safe harbor 

might be based. PBGC seeks answers to 

the questions listed under Public 

Participation below and suggestions for 

alternative approaches to determining 

financial soundness based on widelyavailable and accepted financial 

standards. 

Financial Soundness Safe Harbor for 

Plans 

Most of the commenters opposed the 

elimination from the reportable events 

regulation of automatic reporting 

waivers based on plan funding, as 

proposed in 2009. PBGC now proposes 

to retain plan funding as a basis for 

relief from filing requirements for the 

same five events as the sponsor 

financial soundness safe harbor 

discussed above, by providing new 

‘‘safe harbors’’ based on plan financial 

soundness. The standard of financial 

soundness for these new safe harbors 

would be a plan’s funding status. A 

special rule would accommodate the 

needs of small plans in determining 

funding status. 

The safe harbors would be less 

complex than the current funding-based 

waivers. The current regulation 

provides funding-based waivers with 

several different thresholds—for 

example, waivers are available where a 

plan pays no variable-rate premium,17

has less than $1 million in unfunded 

vested benefits, or is 80 percent funded 

for vested benefits. Some waivers are 

based on a combination of a funding 

criterion and a non-funding criterion— 

for example, reporting of a controlled 

group change event is waived where a 

plan is 80 percent funded and the plan 

sponsor is a public company. Different 

waiver criteria or combinations of 

criteria apply to different events. 

PBGC’s proposed safe harbors for 

financially sound plans would involve 

just two alternative tests, which would 

be the same for all events covered by the 

safe harbors. 

Both tests (like most of the current 

funding-based waiver tests) would be 

based on plan funding level, which is a 

comparison of assets to liabilities. 

Determining liabilities—calculating a 

present value for the obligation to pay 

benefits for years into the future— 

requires that actuarial assumptions be 

made about such things as the rate of 

return on investments, when 

participants are likely to retire, and how 

long they are likely to live. The actuarial 

assumptions used, and thus the present 

value arrived at, may differ significantly 

depending on whether the plan is 

considered ‘‘ongoing’’—that is, expected 

to continue in operation indefinitely— 

or terminating. For example, 

assumptions about when participants 

will retire would be different for an 

ongoing plan than a terminating plan; in 

a terminating plan, participants 

generally retire earlier and may receive 

early retirement subsidies. Liabilities— 

the present value of future benefits—are 

typically higher on termination 

assumptions than on ongoing 

assumptions, and thus, for a given 

amount of assets, a plan’s terminationbasis funding percentage is typically 

lower than its funding percentage on an 

ongoing basis. 

From PBGC’s perspective, it is more 

appropriate to measure plan funding 

levels using termination-basis 

assumptions than ongoing-plan 

assumptions because termination is 

what brings a plan under PBGC 

administration. In the context of the 

pension insurance system, a plan’s 

funding level on a termination basis 

provides the better measure of 

exposure—that is, the magnitude of the 

financial impact PBGC and participants 

would suffer if the plan then (or soon 

thereafter) terminated. But from a plan 

perspective, funding on an ongoing 

basis is the more common measure. 

Variable-rate premiums, required 

contributions, benefit restrictions, and 

annual funding notices are all based on 

ongoing-plan calculations. Unless filing 

is required under ERISA section 4010 

(dealing with annual financial and 

actuarial information reporting for 

controlled groups with large 

underfunding), plans typically do not 

calculate funding on a termination 

basis. PBGC considers it desirable to 

adopt a funding measure that links with 

calculations that plans already make. 

The funding-based waivers in the 

existing regulation are generally tied to 

variable-rate premium computations,18

which use ongoing-plan assumptions. 

Under the current regulation, plans that 

are funded for 80 percent of premium 

liability qualify for reporting waivers for 

several reportable events. PBGC has 

found this test to be an inadequate 

threshold measure, because premium 

liability is significantly lower than 

termination liability, so that a plan that 

is 80 percent funded on a premium 

basis is likely to be much more 

significantly underfunded on a 

termination basis. In developing the 

revised plan funding safe harbor 

thresholds, PBGC reviewed plans with 

at least 100 participants that PBGC 

trusteed in fiscal years 2009 and 2010 

and through April of fiscal year 2011 

and compared the funded percentage at 

the date of plan termination (DOPT) 

measured on a termination basis to the 

VRP funded percentage for the plan year 

before the year in which DOPT 

occurred.19 This analysis showed that 

the average termination funded status at 

DOPT was 54 percent and the average 

VRP funded status for the year before 

DOPT was 84 percent. The analysis also 

showed great variability of funded 

status among the plans, and PBGC 

found no direct correlation between the 

two funding measures. 

If a plan is fully funded on a 

termination basis, on the other hand, 

any risk associated with a reportable 

event can reasonably be ignored because 

the exposure can reasonably be 

considered to be zero. PBGC therefore 

proposes to provide a safe harbor from 

reporting for most of the events to 

which funding-based waivers now 

apply 20 if the plan involved is fully 

funded on a termination basis on the 

last day of the plan year preceding the 

event year. But since funding on a 

termination basis is not commonly 

calculated for most plans—and since 

PBGC wants to provide another way to 

qualify for the safe harbor that is more 

accessible and yet provides a reasonably 

low exposure when compared to a 

termination-basis measurement—PBGC 

is also proposing to extend the safe 

harbor treatment to any case where the 

plan involved is 120 percent funded on 

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20046 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

21 Variable-rate premium (‘‘VRP’’) funding 

information for a plan year is generally unavailable 

until the latter part of the year or (for many small 

plans) the early part of the following year. Thus it 

is more feasible to base the safe harbor test on 

premium information for the year before the event 

year. One of the reasons PBGC chose the ratio of 

assets to liabilities calculated according to premium 

rules as the standard for the funding-based safe 

harbor, rather than the vested portion of the funding 

target attainment percentage (‘‘FTAP’’) defined in 

section 430(d)(2) of the Internal Revenue Code, is 

that the FTAP is not reported (and may not be 

calculated) until a year later than the VRP. Another 

reason is that the VRP is determined using current 

market value of assets, whereas the FTAP often 

reflects an actuarially smoothed assets figure. 

22For some small plans, premium funding is 

computed later in the premium payment year and 

thus nearer (or on) the proposed date for 

determining termination-basis funding. 

23PBGC’s obligation to pay non-vested benefits is 

conditioned on the availability of funds from plan 

assets or recoveries of employer liability for plan 

underfunding. 

24No such extension would be needed for plans 

with 100 or more participants. Such plans calculate 

premiums as of the first day of the plan year and 

file premium declarations well before the end of the 

plan year. Thus, for example, a calendar year plan 

should know by October 15, 2013, whether it 

qualified for the premium-based funding safe 

harbor for events in 2014. 

25Both types of waiver apply to controlled group 

change, liquidation, and extraordinary dividend; 

a premium basis for the plan year 

preceding the event year.21

The 20-percent cushion is needed to 

help compensate for several differences 

between the termination-basis funding 

level and the VRP-basis funding level. 

First, the VRP funding level is to be 

measured in general one year earlier 

than the termination funding level.22

The lapse of a year raises the risk that 

funding will deteriorate between the 

measurement date and the event date. 

Second, the VRP funded percentage is 

calculated with ongoing-plan 

assumptions, which (as discussed 

above) generally yield higher funding 

percentages than termination-basis 

assumptions. Third, premium liability 

reflects only vested benefits, whereas 

termination liability is based on all 

benefits.23

As noted above, PBGC data indicate 

that funded status on a termination 

basis in the recent past was about 30 

percentage points lower than the prior 

year’s VRP funded status. Thus, while a 

20-percent VRP cushion will be in some 

cases more and in others less than 

enough to reduce exposure to the same 

near-zero level as full funding on a 

termination basis, it should overall give 

an acceptable result for purposes of this 

safe harbor. 

One difficulty with tying the safe 

harbor to the prior year’s premium 

calculations is that a small plan’s 

premium calculations may be as of a 

date as late as the last day of the year. 

For this reason, the premium filing due 

date for plans with fewer than 100 

participants is four months after the end 

of the premium payment year. To 

address this situation, PBGC proposes to 

give a filing extension, in cases where 

the plan is small, until one month after 

the prior year’s premium filing due date 

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

prior year). For a small calendar-year 

plan, this would mean that for the five 

reportable events subject to the 

proposed funding-based safe harbor, the 

notice date for an event that occurred 

from January 1st through May 1st would 

be May 31st.24

The corresponding extension under 

the current reportable events regulation 

is available only if the plan would have 

qualified for the funding-based waiver 

for the preceding year. The proposed 

rule omits this qualification. Where an 

event subject to the safe harbor involves 

a small plan that does not qualify for the 

safe harbor, therefore, PBGC would get 

notice of the event as much as three 

months later than the generally 

applicable deadline. This delay might 

significantly impair PBGC’s 

administration of Title IV of ERISA for 

such plans. On the other hand, an 

unconditional extension is simpler, and 

PBGC prefers that the relief provided by 

this small-plan extension not be diluted 

with complexity. Considering the lower 

exposure typically associated with small 

plans, PBGC is proposing to accept the 

(probably modest) impairment of its 

enforcement function in order to make 

compliance easier for such plans. 

Other Safe Harbor Proposals 

Alternatively or in addition to the safe 

harbor proposals described above, PBGC 

is inviting the public to propose variant 

safe harbors that build on the same riskrelated concepts by altering the mix 

and/or relative stringency of the 

constituent tests of the sponsor safe 

harbor or combining tests from the 

sponsor and plan safe harbors. Ideally, 

proposals would reduce reporting 

burden for plans and sponsors for which 

reportable events most likely do not 

pose risks for the pension insurance 

program and thus focus reporting on 

higher-risk events. (See Public 

Participation below.) 

Small-Plan Waivers 

Rather than eliminating the smallplan waiver for active participant 

reductions (as it proposed in 2009), 

PBGC now proposes to retain a modified 

version of the waiver and to make it 

applicable to more events. Some 

commenters expressed concern about 

the adverse effect on small plans of 

eliminating waivers and extensions for 

reporting active participant reductions, 

pointing out that loss of a handful of 

employees as a result of normal 

turnover in a small company could 

cross the reporting threshold but be 

unrelated to financial distress. 

As noted in the preamble to the 2009 

proposed rule, PBGC data suggest that 

in nearly a quarter of small-plan 

terminations, the small-plan reporting 

waiver has prevented PBGC from 

learning about problems that might have 

been resolved through early outreach to 

plan sponsors, avoiding termination or 

reducing underfunding. Information 

from other sources (for example, Form 

5500) is typically neither as detailed nor 

as timely. On the other hand, PBGC can 

get such information without imposing 

any additional burden on plans and 

sponsors. Weighing the disadvantages of 

relying on these other sources of 

information against the challenges faced 

by small plans and their sponsors in 

reporting active participant reduction 

events, PBGC is now proposing to 

provide a waiver for these events like 

the existing small-plan waiver, except 

that, for simplicity, small-plan status 

would be determined in the same way 

as for purposes of the premium filing 

rules. 

In addition, PBGC proposes to extend 

the small-plan waiver to three other 

events: controlled group changes, 

benefit liability transfers, and 

extraordinary dividends. Like active 

participant reductions, these events 

tend to be less serious than the events 

for which the safe harbors are 

unavailable. Furthermore, small plan 

sponsors typically are not members of 

controlled groups and generally do not 

have multiple lines of business. Thus 

stock or asset spinoffs (which could 

result in benefit liability transfers) and 

controlled group changes in general are 

infrequently experienced by such plans 

and sponsors. And extraordinary 

dividend events are relatively unusual 

for sponsors of plans of any size. In 

contrast, the burden on small plans and 

sponsors of monitoring for and reporting 

these events is relatively significant. 

Weighing that burden against the 

number and significance of the resultant 

reports, PBGC has concluded that smallplan waivers for these events seem 

appropriate. 

Foreign-Entity and De Minimis Waivers 

The current reportable events 

regulation provides reporting waivers 

for several events where the entity or 

entities involved in the event are foreign 

entities or represent a de minimis 

percentage of a controlled group.25

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20047 

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, and discussion of 

the foreign-entity waiver in this preamble should be 

understood to incorporate this limitation. 

26PBGC proposes to eliminate one of three 

alternative tests for the annual operating income 

criterion that must be met for de minimis status: 

that such income not exceed 5 percent of the first 

$200 million in controlled group net tangible assets. 

PBGC believes that the other two alternatives 

provide a sufficient threshold. The change would 

apply to both post-event and advance notices. 

27PBGC can obtain bankruptcy filings directly, so 

a separate PBGC report is unnecessary. For this 

reason, PBGC proposes to revise the reportable 

event covering bankruptcy and similar settlements 

to limit it to non-bankruptcy events only. See 

Bankruptcy and Insolvency below. 

28PBGC obtained the loan agreements from the 

Web site of the Securities and Exchange 

Commission (www.sec.gov). The companies with 

distressed plans were selected from an online 

business article titled ‘‘40 Companies Sitting on 

Pension Time Bombs,’’ posted at http:// 

moneycentral.msn.com/content/P87329.asp, on 

August 25, 2004. PBGC found no relationship 

between the assumed financial straits of the 

companies’ plans and any specific loan agreement 

provisions that might have reflected lenders’ 

sensitivity to the significance of reportable events. 

The limited scope of this study reflects the practical 

difficulty of obtaining and reviewing a statistically 

significant sample of loan agreements (the vast 

majority of which are not publicly available) 

involving sponsors of the more than 27,500 singleemployer plans covered by Title IV of ERISA. PBGC 

nonetheless believes that the loan agreements that 

were reviewed do offer some insight into loan 

agreement drafting practices that is relevant to the 

concerns expressed by commenters. 

PBGC’s 2009 proposal preserved most 

de minimis waivers in the existing 

regulation but eliminated all foreignentity waivers, because an increasingly 

large part of PBGC’s insurance 

supervision and compliance cases deal 

with foreign controlled group 

members—a logical consequence of the 

globalization of the economy. All 

members of a plan’s controlled group, 

whether domestic or foreign, are liable 

for plan underfunding. PBGC now 

proposes to provide both de minimis 

and foreign-entity waivers in tandem for 

five reportable events. 

A number of commenters made the 

point that it can be difficult for a plan 

to keep track of events involving foreign 

controlled group members and argued 

that events involving foreign entities are 

too remote to warrant reporting to 

PBGC. Particular events mentioned in 

this regard included loan defaults, 

bankruptcies, controlled group changes, 

and extraordinary dividends. 

Commenters also expressed the view 

that PBGC’s processing burden for 

reports on events involving foreign 

entities would be disproportionate to 

the value of the information in the 

reports, with the implication that 

requiring such reports would result in a 

misallocation of PBGC’s resources. 

PBGC is persuaded that the challenges 

a plan or sponsor faces in keeping 

informed about events involving foreign 

members of the plan’s controlled group 

may prove more burdensome than is 

currently required to protect the 

pension insurance system. Furthermore, 

multinational controlled groups that 

report publicly tend to be tracked by 

PBGC’s Early Warning Program, which, 

while it is no substitute for reportable 

event reports, does give PBGC some idea 

of the status of such groups. PBGC has 

concluded that these considerations 

constitute an appropriate basis for 

providing relief from reporting, even 

though that means it must forgo the 

receipt of useful information that may 

be important to its monitoring and 

enforcement activities. 

Accordingly, PBGC now proposes to 

preserve all post-event foreign-entity 

reporting waivers in the existing 

regulation. As with all regulatory 

provisions, PBGC will monitor 

developments in this area and may 

revisit this position if experience 

indicates a need for stronger monitoring 

mechanisms. In addition, PBGC now 

proposes to retain all post-event 

reporting waivers for de minimis 

transactions 26 and to add de minimis 

waivers for two events—loan defaults 

and non-bankruptcy insolvency 27—that 

do not have such waivers under the 

existing regulation. Thus, this pair of 

waivers would apply to five events. For 

liquidation, loan default, and 

insolvency, the de minimis waiver 

would be available only if the entity 

involved in the event was not a 

contributing sponsor. The waiver would 

use the ten percent de minimis 

standard, even for extraordinary 

dividends and stock redemptions under 

§ 4043.31, for which the existing de 

minimis waiver is limited to a five 

percent segment of a controlled group. 

Effect of Proposal on Loan Agreements 

Some commenters said that, for plan 

sponsors with loan agreements, the 

increased reporting resulting from the 

elimination of waivers could give rise to 

events of default, a view that PBGC has 

been unable to substantiate. The 

commenters, who also said that 

requiring more reporting could preclude 

future loans or provide lenders with a 

pretext for renegotiating loan terms, did 

not provide any actual loan agreement 

provisions to support these contentions; 

to clarify its understanding of the 

commenters’ concerns, PBGC reviewed 

25 credit agreements from 20 distressed 

and/or small public companies.28 PBGC 

reasoned that lenders to distressed 

companies would tend to be particularly 

sensitive to reportable events and that 

this heightened sensitivity would be 

reflected in loan agreement provisions 

of the kind that commenters expressed 

concern about. The smaller reporting 

companies provided a proxy for nonpublic companies (for which loan 

agreements are generally not made 

public). 

• An event of default would not be 

automatically triggered by a reportable 

event in any of the 25 agreements 

reviewed, and 17 of the agreements 

would not have been affected at all by 

the changes in the 2009 proposed rule. 

For each of the eight agreements with 

event-of-default provisions that would 

have been affected by the 2009 proposal, 

an event of default would occur only 

when a reportable event was 

accompanied by some other significant 

condition, such as incurring actual 

liability, creation of grounds for 

termination, or the occurrence of a 

material adverse effect. 

• Nine of the agreements PBGC 

reviewed had no requirement that the 

borrower notify the lender of a 

reportable event. Six agreements 

required notice only if some other 

condition was present (as for events of 

default). Five defined ‘‘reportable 

event’’ without regard to whether 

reporting was waived. 

• Fewer than half of the agreements 

surveyed required representations or 

warranties about reportable events as a 

condition to future advances. 

The results of examining these loan 

agreements are consistent with PBGC’s 

experience from reviewing loan 

documents as part of its direct 

monitoring of corporate events and 

transactions of plan sponsors. PBGC has 

been unable to find a record of any case 

where the filing of a reportable event 

notice has resulted in a default under a 

credit agreement. These observations 

suggest that the elimination of reporting 

waivers would not adversely affect most 

plan sponsors with loan agreements. 

Because PBGC’s current proposal 

provides more waivers than the 2009 

proposal, commenters’ concerns in this 

area should be lessened. And PBGC’s 

proposed 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. 

However, if this concern is raised in a 

comment about the current proposal, 

PBGC requests that the commenter 

document the basis for the comment by 

providing copies of relevant loan 

agreements and information about the 

number and circumstances of plan 

sponsors that have experienced default 

or suffered other adverse consequences 

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20048 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

29Section 303 of ERISA corresponds to section 

430 of the Code. 

30 In most situations, a rough estimate will be 

sufficient to determine if the threshold has been 

crossed. 

related to loan agreements as a result of 

a reportable event. 

Advance Reporting Threshold 

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. The reportable 

events regulation ties the statutory 

threshold test to the related provisions 

of the premium rates regulation. 

The advance reporting threshold test 

in ERISA section 4043(b)(1) provides 

that the advance reporting requirements 

of section 4043(b) are to be applicable 

to a contributing sponsor if, as of the 

close of the preceding plan year— 

• The aggregate unfunded vested 

benefits (UVBs) (as determined under 

ERISA section 4006(a)(3)(E)(iii)) of plans 

subject to title IV of ERISA which are 

maintained by such sponsor and 

members of such sponsor’s controlled 

groups (disregarding plans with no 

unfunded vested benefits) exceed 

$50,000,000, and 

• The funded vested benefit 

percentage for such plans is less than 90 

percent. 

For this purpose, the funded vested 

benefit percentage means the percentage 

which the aggregate value of the assets 

of such plans bears to the aggregate 

vested benefits of such plans 

(determined in accordance with ERISA 

section 4006(a)(3)(E)(iii)). 

PPA 2006 revised ERISA section 

4006(a)(3)(E)(iii) to say that UVBs 

means, for a plan year, the excess (if 

any) of the funding target of the plan as 

determined under ERISA section 303(d) 

for the plan year by only taking into 

account vested benefits and by using the 

interest rate described in ERISA section 

4006(a)(3)(E)(iv), over the fair market 

value of plan assets for the plan year 

which are held by the plan on the 

valuation date. 

The section 303 of ERISA referred to 

here is a completely new section added 

by PPA 2006.29 Under new ERISA 

section 303(g)(1), the value of plan 

assets and the funding target of a plan 

for a plan year are determined as of the 

valuation date of the plan for the plan 

year. Under new ERISA section 

303(g)(2), the valuation date for virtually 

all plans subject to advance reporting 

under ERISA section 4043 will be the 

first day of the plan year. Thus, while 

ERISA section 4043(b)(1) refers to UVBs, 

assets, and vested benefits ‘‘as of the 

close of the preceding plan year,’’ in 

nearly all cases these quantities must, 

with respect to plan years beginning 

after 2007, be calculated as of the 

beginning of a plan year. This creates an 

ambiguity with regard to the date as of 

which the advance reporting threshold 

test is to be applied. 

This proposed rule, like the prior 

proposal, would resolve this ambiguity 

by requiring that the advance reporting 

threshold test be applied as of the 

valuation date for ‘‘the preceding plan 

year.’’ That is the same date as of which 

UVBs, assets, and vested benefits must 

be determined for premium purposes for 

the preceding plan year under the 

premium rates regulation as amended 

by PBGC’s final rule on VRPs under 

PPA 2006. Measuring these quantities as 

of that date for purposes of the 

advanced reporting threshold test will 

thus be less burdensome than requiring 

that separate computations be made as 

of the close of that year. It will also 

enable a plan to determine before a 

reportable event occurs (and before an 

advance report is due) whether it is 

subject to the advance reporting 

requirement. 

The new proposed rule (like the prior 

proposal) would make a number of 

editorial changes to the advance 

reporting threshold provisions with a 

view to improving clarity and simplicity 

as well as accommodating the changes 

discussed above. It would also provide 

that the plans whose funding status is 

taken into account in applying the 

threshold test are determined as of the 

due date for the report, and that the 

‘‘public company’’ status of a 

contributing sponsor or controlled 

group member to which the event 

relates is also determined as of that date. 

Although the existing regulation does 

not explicitly address this issue, PBGC 

believes it is implicit that these 

determinations be current. Requiring 

that they be made as of the due date for 

the report ensures currency. 

Active Participant Reduction 

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. 

Several commenters remarked that a 

loss of more than 20 percent of active 

participants within a year (or more than 

25 percent within two years) may result 

from gradual attrition and that if no 

waiver is applicable, constant vigilance 

is required to catch the moment when 

the threshold for reporting is crossed. 

Such vigilance could be burdensome for 

a large plan and might simply not be 

exercised for a small one. PBGC is 

sympathetic to this issue and is 

proposing to modify the definition of 

the active participant reduction event to 

address it. 

Under the proposed change, a 

reportable event would occur during the 

plan year only when the reporting 

threshold was crossed either within a 

single 30-day period or as a result of a 

single cause like the discontinuance of 

an operation, a natural disaster, a 

reorganization, a mass layoff, or an early 

retirement incentive program. Such 

circumstances should be easy to spot 

without exercising unusual vigilance. 

To capture events arising from gradual 

attrition, the proposed regulation would 

require that plans measure active 

participant reductions at the end of each 

year and report if the threshold has been 

crossed. Fluctuations within the year 

would be ignored. If the active 

participant count at the end of the year 

were more than 20 percent below the 

count at the beginning of the year, or 

more than 25 percent below the count 

at the beginning of the prior year, 

reporting would be required. To provide 

time to count active participants as of 

the end of the year, the notice date for 

attrition events would be extended to 

120 days after year end, by which time 

PBGC expects many or most plans to 

have a final count.30

For convenience, if a plan counted 

participants, for purposes of the 

following year’s premiums, as of a day 

other than the last day of the year for 

which active participant loss was being 

measured (such as where there was a 

qualifying merger or spinoff), the plan 

could use the active participant count 

on that other day as the year-end count 

for determining whether active 

participant attrition had exceeded the 

threshold. However, the reduction in 

active participants would still be 

considered to have occurred at the end 

of the measurement year. 

Because this change would render 

unnecessary the waiver in the 2009 

proposed rule for a report within one 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20049 

31On August 10, 2010 (at 75 FR 48283), PBGC 

published a proposed rule to provide guidance on 

the applicability and enforcement of ERISA section 

4062(e). PBGC is currently giving careful 

consideration to the comments on that proposed 

rule. 

32Such ‘‘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. 

year of a prior report, that provision is 

absent from the current proposal. 

However, the changes now being 

proposed include the provision from 

2009 that dealt with substantial 

cessations of operations under ERISA 

section 4062(e) and substantial 

employer withdrawals under ERISA 

section 4063(a). Events covered by 

section 4062(e) or 4063(a) must be 

reported to PBGC under section 4063(a). 

With a view to avoiding duplicative 

reporting, this proposal, like the 2009 

proposal, would limit the active 

participant reduction event by 

excluding from consideration—in 

determining whether a reportable 

active-participant-reduction event has 

occurred—active participant reductions 

to the extent that they (1) fall within the 

provisions of section 4062(e) or 4063(a) 

and (2) are timely reported to PBGC as 

required under ERISA section 4063(a). 

One commenter expressed satisfaction 

with this provision; two others raised 

issues about the interplay of this event 

and a section 4062(e) event, suggesting, 

for example, that there was opportunity 

for confusion between the 30-day notice 

requirement under section 4043 and the 

60-day notice requirement for 4062(e) 

events. PBGC does not see how this 

provision would exacerbate any such 

problems (and indeed believes that it 

would tend to ameliorate them).31

Finally, one commenter requested 

clarification that participants do not 

cease to be active if they leave 

employment with one member of a 

plan’s controlled group to become 

employed by another controlled group 

member. PBGC proposes to add a 

provision to make this point clear. 

Missed Contributions 

A missed contribution event occurs 

when a plan sponsor fails to make any 

required plan contribution by its due 

date. 

PBGC proposes (as it did in 2009) to 

clarify the language in § 4043.25, 

dealing with the reportable event of 

failure to make required contributions. 

This reportable event does not apply 

only to contributions required by statute 

(including quarterly contributions under 

ERISA section 303(j)(3) and Code 

section 430(j)(3), liquidity shortfall 

contributions under ERISA section 

303(j)(4) and Code section 430(j)(4), and 

contributions to amortize funding 

waivers under ERISA section 303(e) and 

Code section 430(e)). It also applies to 

contributions required as a condition of 

a funding waiver that do not fall within 

the statutory provisions on waiver 

amortization charges. The proposed 

revision would make this point 

clearer.32

The 2009 proposed rule called for 

eliminating all reporting waivers for 

missed contributions. PBGC now 

proposes to provide waivers for this 

event. 

Some commenters urged PBGC to 

retain the grace-period waiver in the 

current regulation (where payment is 

made within 30 days after the due date). 

Commenters pointed out that 

contributions are sometimes missed 

through administrative error and that 

the availability of the grace-period 

waiver gives sponsors an incentive to 

make up missed contributions. 

Commenters also suggested that because 

new rules require a sponsor to elect to 

apply a funding balance towards a 

quarterly installment, a late installment 

often results from a late election due to 

administrative error. 

PBGC is persuaded that missed 

contributions that are made up within 

30 days do not generally pose excessive 

risk to the pension insurance system. 

Form 5500 filings provide another 

(albeit somewhat later) source of 

information about late contributions, 

and there is an independent reporting 

requirement for large cumulative missed 

contributions under ERISA section 

303(k)(4) and Code section 430(k)(4) 

(implemented by § 4043.81 of the 

reportable events regulation). 

Accordingly, the current proposal 

would restore the grace-period waiver in 

the existing regulation that the 2009 

proposal would have eliminated. 

Commenters also urged PBGC to 

provide small-plan missed-quarterly 

reporting relief like that which has for 

years been provided by Technical 

Update, and PBGC proposes to do so. 

Commenters said that small plans often 

forgo or delay quarterly contributions to 

strategically manage cash flow or until 

valuations are completed (a practice that 

does not accord with the law and that 

PBGC does not condone). Commenters 

suggested that late quarterly 

installments often do not signal a plan 

sponsor’s actual financial distress or a 

plan’s imminent termination. 

PBGC believes that a small-plan 

missed-quarterly waiver can strike an 

effective balance between PBGC’s need 

for information on potentially troubled 

plans and the reporting challenges faced 

by small entities. Furthermore, since 

annual reports on Form 5500 are now 

filed electronically, PBGC believes that 

contribution information on Schedule 

SB to Form 5500 can help round out the 

information submitted under the 

reportable events regulation. Thus, 

PBGC is proposing to add to the 

regulation a simplified small-plan 

missed-quarterly waiver to replace the 

Technical Update waivers. The codified 

waiver would apply to any failure to 

make a quarterly contribution to a plan 

considered small for purposes of the 

premium filing rules (i.e., having fewer 

than 100 participants; the waiver under 

Technical Update 11–1 applies only to 

plans with fewer than 25 participants). 

Unlike the grace-period waiver, the 

small-plan waiver would apply only to 

quarterly contributions. 

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. 

As in 2009, PBGC proposes to clarify 

the large-plan waiver of the reporting 

requirement for inability to pay benefits 

when due. This waiver provision 

reflects PBGC’s judgment that it need 

not require reporting of this event by 

larger plans that are subject to the 

‘‘liquidity shortfall’’ rules imposing 

more stringent contribution 

requirements where liquid assets are 

insufficient to cover anticipated 

disbursement requirements. For these 

larger plans, (1) if the contributions 

required by the liquidity shortfall rules 

are made, the inability to pay benefits 

when due is resolved, and (2) if the 

required contributions are not made, 

that fact is reportable to PBGC as a 

failure to make required contributions. 

Accordingly, this provision waives 

reporting unless the plan is exempt from 

the liquidity shortfall provisions. 

Distribution to Substantial Owner 

Distributions to substantial owners 

must generally be reported if they 

exceed $10,000 in a year unless the plan 

is fully funded for nonforfeitable 

benefits. 

One commenter on the 2009 proposal 

argued that distributions to substantial 

owners tend to be thought of as routine 

and may ‘‘creep’’ beyond the $10,000 

reporting threshold unremarked and 

unreported. In response, PBGC proposes 

to make two changes to the regulation. 

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20050 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

First, PBGC proposes to add to the 

description of this event a provision 

limiting the event to circumstances 

where the distributions to one 

substantial owner exceed one percent of 

plan assets or the distributions to all 

substantial owners exceed five percent 

of plan assets. (The one-percent 

provision echoes a waiver for this event 

that is in the existing regulation but that 

PBGC proposes to eliminate.) In either 

case, assets would be end-of-year 

current value of assets as required to be 

reported on Schedule H or I to Form 

5500, and the one percent or five 

percent threshold would have to be 

exceeded for each of the two prior years. 

By requiring notices only for larger 

distributions that should be noticeable 

and thus not challenging to detect and 

report, PBGC believes that it would 

strike an acceptable balance between the 

burden of reporting and PBGC’s need for 

timely information about such events. 

In addition, PBGC proposes to limit 

reporting for distributions in the form of 

annuities to one notice: The first notice 

required under the normal reporting 

rules would be the only notice required 

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. 

Controlled Group Change 

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. 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. However, 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 asked PBGC to clarify 

that a reportable event does not occur 

when there is a reorganization within an 

employer’s controlled group in which a 

member ceases to exist because it is 

merged into another member. The 

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

regulation indicates that such a merger 

is a reportable event because the 

disappearing member has ceased to be 

a member of the controlled group. After 

consideration, PBGC has decided to 

delete this example from the proposed 

rule to clarify that such a change solely 

within a controlled group is not a 

reportable event for purposes of the 

regulation. 

PBGC has also from time to time 

received requests to clarify whether an 

agreement that is not to be effective 

unless some condition is met, such as 

the obtaining of some governmental 

approval or the occurrence of some 

other event, is nonetheless legally 

binding within the meaning of the 

regulation. The proposed rule would 

provide that whether an agreement is 

legally binding is to be determined 

without reference to any conditions in 

the agreement. PBGC’s administration of 

the pension insurance system may be 

impaired if reporting is not required 

until all conditions are met. As for all 

reportable events, case-by-case waivers 

may be granted. 

Extraordinary Dividends 

An extraordinary dividend or stock 

redemption occurs when a member of a 

plan’s controlled group declares a 

distribution (a dividend or stock 

redemption) that alone or in 

combination with previous distributions 

exceeds a level specified in the 

regulation. The current regulation 

specifies different threshold levels for 

cash and non-cash distributions and 

provides a method for aggregating cash 

and non-cash distributions in order to 

determine whether in combination they 

exceed the reporting threshold. Cash 

distributions must be tested over both a 

one-year and a four-year period, noncash distributions only over a one-year 

period. The cash distribution threshold 

is 100 percent of net income; the noncash distribution threshold is ten 

percent of net assets. Distributions 

within a controlled group are treated the 

same as any other distributions. 

PBGC proposes to simplify the 

description of this event. The simplified 

event would occur when a controlled 

group member declared a dividend or 

redeemed its stock and the (cash or noncash) distribution, alone or together 

with other cash and non-cash 

distributions, exceeded 100 percent of 

net income for the prior fiscal year. 

Testing would be over a one-year period 

only. The new formulation would 

eliminate much of the computational 

detail that the existing regulation 

prescribes for determining whether a 

reportable event has occurred by 

providing that the computations be 

done in accordance with generally 

accepted accounting principles. 

Distributions within a controlled group 

would be disregarded. 

Eliminating the four-year test for cash 

distributions would tend to make more 

events of this kind reportable. 

Disregarding intra-group distributions 

would have the opposite effect. The 

effect of using only a net income figure 

as a threshold is harder to assess. But 

PBGC expects the effects of all of these 

changes to be modest. And elimination 

of much of the detail for combining the 

effects of cash and non-cash 

distributions should reduce the 

administrative burden of compliance 

with the requirement to report such 

events. 

Transfer of Benefit Liabilities 

Section 4043(c)(12) of ERISA 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 and because the transferee 

may not be as financially healthy as the 

transferor. 

The existing reportable events 

regulation does not make clear whether 

the satisfaction of benefit liabilities 

through the payment of a lump sum or 

the purchase of an irrevocable 

commitment to provide an annuity 

constitutes a transfer of benefit 

liabilities for purposes of this reporting 

requirement. PBGC has received 

inquiries seeking clarification of this 

point and now proposes (as in 2009) to 

provide that such cashouts and 

annuitizations do not constitute 

transfers of benefit liabilities that must 

be reported under the regulation. 

Section 436 of the Code and section 

206(g) of ERISA (as added by PPA 2006) 

prohibit or limit cashouts and 

annuitizations by significantly 

underfunded plans. These provisions 

thus tend to prevent cashouts and 

annuitizations that would most 

seriously reduce a transferor plan’s 

funded percentage. And since cashouts 

and annuitizations satisfy benefit 

liabilities (rather than transferring them 

to another plan), there is no concern 

about a transferee plan’s financial 

health. 

Section 4043.32(a) of the existing 

reportable events regulation requires 

post-event reporting not only for a plan 

that transfers benefit liabilities, but also 

for every other plan maintained by a 

member of the transferor plan’s 

controlled group. However, existing 

§ 4043.32(d) provides a waiver that in 

effect limits the post-event reporting 

obligation to the transferor plan. 

Existing § 4043.65 (dealing with 

advance reporting of benefit liability 

transfers) does not provide a similar 

waiver. 

PBGC has concluded—as the 

preamble to the 2009 proposed rule 

indicated—that it is unnecessary to 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20051 

extend the advance reporting 

requirement for benefit liability 

transfers beyond the transferor plan. 

PBGC thus proposes to revise 

§ 4043.32(a) to narrow the reporting 

requirement to the transferor plan; to 

remove § 4043.32(d) (which would be 

redundant); and to revise § 4043.65(a) to 

remove the provision requiring that 

§ 4043.32(d) be disregarded. The effect 

of these changes would be to leave the 

post-event notice requirement 

unchanged and to limit the advance 

notice requirement to the transferor 

plan. 

Loan Default 

Under the existing regulation, a loan 

default reportable event occurs when a 

loan payment is more than 30 days late 

(10 days in the case of advance 

reporting), when the lender accelerates 

the loan, or when there is 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 

loan defaults is so great that reporting 

should not be restricted to the current 

list of defaults. Rather, PBGC believes 

that any default on a loan of $10 million 

or more—even a default on a loan 

within a controlled group—should be 

reported unless a reportable event 

waiver applies. Accordingly, PBGC 

proposes to revise the definition of the 

loan default event so that it covers 

acceleration by the lender and default of 

any kind by the debtor. 

In addition, PBGC proposes to expand 

this event to encompass any amendment 

or waiver by a lender of any loan 

agreement covenant for the purpose of 

avoiding a default. PBGC believes that a 

debtor can often anticipate a default 

situation, and that when it does, it may 

typically initiate discussions with its 

lender with a view to obtaining the 

lender’s waiver of the covenant it 

expects to breach or an amendment of 

the loan agreement to obviate the 

default. In PBGC’s view, such actions 

may reflect financial difficulty and thus, 

like actual defaults, pose serious 

challenges for the pension insurance 

system. These changes would apply for 

both post-event notices and advance 

notices. 

PBGC believes that the treatment of 

loan defaults under the proposed rule is 

comparable to the treatment that would 

be experienced with a typical creditor. 

PBGC seeks the views of the public as 

to whether that belief is well-founded. 

PBGC further seeks public comment as 

to how it might better approximate such 

a model in its treatment of loan default 

events, whether there should be a 

materiality threshold with respect to 

events of default, and whether there is 

a category of ‘‘technical’’ defaults that 

should not be reportable events. 

Bankruptcy and Insolvency 

The existing regulation defines the 

bankruptcy reportable event to include 

bankruptcy under the Bankruptcy Code 

and any other similar judicial or 

nonjudicial proceeding. Notice of 

bankruptcies under the Bankruptcy 

Code can be (and routinely is) reliably 

obtained by other means. Accordingly, 

PBGC proposes to limit the reporting 

requirement to exclude bankruptcies 

under the Bankruptcy Code. 

Advance-Notice Extensions 

The current reportable events 

regulation provides extensions of the 

advance-notice filing deadline for three 

events: funding waiver requests, loan 

defaults, and bankruptcy/insolvency. 

The extension for funding waiver 

requests avoids the need to give one 

government agency (PBGC) advance 

notice of a filing with another 

government agency (IRS). The 

extensions for notices of loan defaults 

and bankruptcies or insolvencies 

accommodate situations where such 

events occur without the debtors’ 

advance knowledge. 

In general, however, a debtor is aware 

well in advance that a loan default or 

insolvency event is going to befall it, 

and indeed is actively engaged in 

preparation for the event. PBGC thinks 

it not unreasonable, therefore, that a 

debtor subject to advance reporting 

should generally give the advance 

notice provided for in the statute. 

Accordingly, PBGC proposes to 

eliminate reporting extensions for 

advance notice of loan default and 

insolvency events, except for events 

where insolvency proceedings are filed 

against a debtor by someone outside the 

plan’s controlled group. In such 

adversarial filing cases, it is reasonable 

to expect that the debtor is unable to 

anticipate the event and thus unable to 

report it in advance. 

PBGC is aware that there may be loan 

defaults that (like adversarial insolvency 

filings) can come as a surprise to the 

debtor, making compliance with the 

advance notice requirement impossible. 

However, since PBGC believes such 

loan defaults are very infrequent, the 

proposed rule does not contain an 

automatic extension for such situations. 

If inability to anticipate a loan default 

event were to make it impossible to 

comply with the advance notice 

requirement, the delinquent filer could 

seek a retroactive filing extension from 

PBGC based on the facts and 

circumstances. (An extension may 

similarly be requested if a filer learns of 

an impending event such a short time 

before the advance notice deadline as to 

make timely filing difficult.) PBGC 

specifically invites comment on 

whether this approach represents an 

adequate solution to any problem of 

surprise loan defaults that may exist. 

Forms and Instructions 

PBGC proposes to eliminate some of 

the documentation that must now be 

submitted with notices of two reportable 

events, but to require that filers submit 

with notices of most events some 

information not currently called for. 

Because the additional information to be 

submitted with notices is now typically 

requested by PBGC after notices are 

reviewed, the proposed changes would 

not significantly impact filers’ total 

administrative burden. 

PBGC also proposes, as it did in 2009, 

to make use of prescribed reportable 

events forms mandatory and to 

eliminate from the regulation the lists of 

information items that must be reported. 

PBGC anticipates that as it gains 

experience with the new reporting 

requirements and engages in further 

regulatory review, it may find it 

appropriate to make changes in the 

information required to be submitted 

with reportable events notices. In 

particular, resolution of uncertainties 

about the operation of PPA 2006 

provisions may call for changes in the 

data submission requirements for 

failures to make required contributions 

timely. Forms and instructions can be 

revised more quickly than regulations 

can in response to new developments or 

experience (and both processes are 

subject to public comment). 

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. 

Under the existing regulation, 

however, use of PBGC forms for 

reporting events under subparts B and C 

of the regulation is optional. The data 

items in the forms do not correspond 

exactly with those in the regulation, and 

the regulation recognizes that filers that 

use the forms may report different 

information from those that do not use 

the forms. PBGC believes that making 

use of prescribed reportable events 

forms mandatory would promote greater 

uniformity in the reporting process and 

attendant administrative simplicity for 

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33The existing regulation contains a ‘‘partial 

electronic filing’’ provision under which a filing is 

considered timely made if certain basic information 

(specified in PBGC’s reporting instructions) is 

submitted on time electronically and followed up 

within one or two business days (depending on the 

type of report) with the remaining required 

information. PBGC’s mandatory electronic filing 

proposal would make the ‘‘partial electronic filing’’ 

provision anachronistic, and it would be removed. 

34Section 4043.62(b)(1) of the existing regulation, 

headed ‘‘Small plan,’’ provides a waiver where a 

plan has 500 or fewer participants. The premium 

payment regulation keys filing due dates to whether 

a plan is small (fewer than 100 participants, midsize (100 or more but fewer than 500 participants), 

or large (500 or more participants). In the interest 

of uniformity, PBGC proposes to change 

§ 4043.62(b)(1) to provide a waiver where a plan has 

fewer than 500 participants and to change the 

heading to read ‘‘Small and mid-size plans.’’ 

PBGC. Eliminating lists of information 

items from the regulation would mean 

that the information to be reported 

would be described in the filing 

instructions only (rather than in both 

the filing instructions and the 

regulation). 

Mandatory Electronic Filing 

PBGC encourages electronic filing 

under the existing regulation 33 and now 

proposes to make it mandatory. This 

proposal is part of PBGC’s ongoing 

implementation of the Government 

Paperwork Elimination Act. 

Electronic filing has become the norm 

for PBGC’s regulated community. 

Electronic filing is mandatory for 

reports under ERISA section 4010 

(starting with 2005 information years), 

PBGC premiums (starting with 2007 

plan years for all plans), and Form 5500 

(starting with 2009 plan years). 

PBGC does not currently have a webbased filing application for reportable 

events as it does for section 4010 or 

premium filings. However, it has 

become common for documents to be 

created electronically in a variety of 

digital formats (such as WPD, DOC, and 

XLS) and easy to create electronic 

images (for example, in PDF format) of 

documents that do not exist in 

electronic form. PBGC proposes that 

filers be permitted to email filings 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. (Forms 

10 and 10-Advance do not require 

signatures, and PBGC already accepts 

imaged signatures for Form 200 filings.) 

The current versions of PBGC Form 10, 

Form 10-Advance, and Form 200 are 

already available in ‘‘fillable’’ format; in 

connection with the change to 

electronic filing, new versions of these 

forms will be available in ‘‘fillable’’ 

format to facilitate electronic filing. 

PBGC would be able to waive 

electronic filing for voluminous paper 

documents to relieve filers of the need 

to scan them, pursuant to § 4043.4(d) 

(case-by-case waivers). 

PBGC would expect its reportable 

events e-filing methodology to evolve as 

Internet capabilities and standards 

change, consistent with resource 

effectiveness. Such developments 

would be reflected in PBGC’s reportable 

events e-filing instructions. 

PBGC seeks public comment on its 

proposal to require electronic filing. For 

example, PBGC would like to know 

whether there are differences 

commenters might see between Form 

5500 filings and premium filings (which 

are submitted electronically) and 

reportable events filings that would 

make the latter less suited to electronic 

filing. PBGC would also like to know 

whether there are particular categories 

of plans or sponsors that would find 

electronic filing sufficiently difficult 

that PBGC should by regulation either 

exempt them from e-filing (rather than 

just providing case-by-case exceptions) 

or defer the applicability of mandatory 

e-filing to them (i.e., provide for phasein of the e-filing requirement, and if so, 

over what period of time). Finally, 

PBGC seeks comment on e-filing 

methodology, such as the convenience 

of submitting documents in the form of 

data rather than images and the 

usefulness of pre-filled data fields. 

Commenters are encouraged to describe 

actual rather than hypothetical 

circumstances and to provide 

comparisons between the burdens that 

would be associated with e-filing versus 

paper filing or with one e-filing method 

versus another. This information will 

help PBGC evaluate both the 

appropriateness of e-filing for reportable 

events in general and the need for 

special rules to accommodate specific 

categories of filers. 

Other Changes 

PBGC’s 2009 proposed rule on 

reportable events would have added two 

new events to the reportable events 

regulation. One event would have 

occurred when a plan’s adjusted 

funding target attainment percentage 

(AFTAP) was found or presumed to be 

less than 60 percent. The other event 

would have occurred when a transfer of 

$10 million or more was made to a 

plan’s health benefits account under 

section 420(f) of the Code (as added by 

PPA 2006) or when plan funding 

thereafter deteriorated below a 

prescribed level. Commenters seemed 

generally accepting of the 

appropriateness of the former event but 

questioned the value to PBGC of the 

latter event. PBGC is not including 

either event in this proposal. AFTAPs 

under 60 percent trigger significant 

restrictions on plans that to some degree 

provide remediation that serves the 

same kind of function as the action that 

PBGC might take upon getting a low 

AFTAP notice. And PBGC has 

concluded that its need for health 

benefit account notices is not great 

enough to make it clearly appropriate to 

require them at this time. 

PBGC recognizes that the changes 

made by PPA 2006 in the statutory 

provisions dealing with missed 

contributions—which are reportable 

under §§ 4043.25 and 4043.81—affect 

the computation of interest on missed 

contributions, a circumstance that in 

turn affects the reporting requirements. 

This proposed rule includes no 

amendment to the reportable events 

regulation dealing with such issues, but 

PBGC is providing guidance on this 

subject in the filing instructions. The 

guidance will be revised if and when 

necessary to take into account as 

appropriate any relevant guidance from 

the Internal Revenue Service. 

The proposed rule would clarify that 

if an event is subject to both post-event 

and advance notice requirements, the 

notice filed first satisfies both 

requirements. (In unusual 

circumstances, the post-event notice 

required in connection with a 

transaction may be due before the 

advance notice required in connection 

with the same transaction.) 

To conform to the statute, the 

proposed rule would limit the 

applicability of the confidentiality 

provisions in ERISA section 4043(f) to 

submissions under subparts B and C of 

the reportable events regulation. 

The proposed rule would make a 

number of editorial and clarifying 

changes to part 4043 and would add 

definitional cross-references, change 

statutory cross-references to track 

changes made by PPA 2006, and update 

language to conform to usage in PPA 

2006 and regulations and reporting 

requirements thereunder.34 Where a 

defined term is used in only one section 

of the regulation, the definition would 

be moved from § 4043.2 to the section 

where the term is used. 

The proposed changes to the 

reportable events regulation make it 

unnecessary to define a number of terms 

at the beginning of the regulation. 

Accordingly, the definitions of ‘‘fair 

market value of the plan’s assets,’’ 

‘‘Form 5500 due date,’’ ‘‘public 

company,’’ ‘‘testing date,’’ ‘‘ultimate 

parent,’’ ‘‘unfunded vested benefits,’’ 

‘‘variable-rate premium,’’ and ‘‘vested 

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benefits amount’’ would be removed 

from § 4043.2. 

Summary Chart 

The following table summarizes 

waiver and safe harbor provisions for 

reportable events for which post-event 

reporting is required under the current 

regulation, the 2009 proposal, and this 

proposed rule. (As explained in detail 

above, the current proposal also 

provides filing 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 provision of 

filing extensions such as for active 

participant reductions that occur by 

attrition.) 

BILLING CODE 7709–01–P 

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BILLING CODE 7709–01–C 


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Other Regulations 

Several other PBGC regulations also 

refer to plan funding concepts using 

citations outmoded by PPA 2006: 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 2006 

and with the revised premium 

regulations. This proposed rule would 

make the necessary conforming 

revisions. 

Applicability 

PBGC proposes to make the changes 

to the reportable events regulation in 

this proposed rule applicable to postevent reports for reportable events 

occurring on or after January 1, 2014, 

and to advance reports due on or after 

that date. Deferral of the applicability 

date would provide time for plans and 

plan sponsors to institute any necessary 

event monitoring programs to comply 

with the new rules. PBGC is also giving 

consideration to making the waiver and 

safe harbor provisions in the final 

regulation available (in addition to the 

waivers in the current regulation) 

during the period from the effective date 

of the final rule (30 days after 

publication in the Federal Register) to 

January 1, 2014. 

Public Participation 

PBGC welcomes comments from the 

public on all matters relating to the 

proposed rule. In particular, PBGC seeks 

public comments on the following 

specific questions: 

(1) What are the advantages and 

disadvantages of the proposed safe 

harbor for financially sound plan 

sponsors? 

(2) What are commenters’ experiences 

with commercial credit reporting 

companies that might be relevant to 

developing a reportable events safe 

harbor? Do credit report scores change 

when reportable events occur? How 

often or easily are changes in credit 

report scores provided to users and the 

public? Can companies obtain timely 

updates that allow for an accurate 

assessment of financial soundness at a 

particular time? 

(3) Does the proposal provide an 

appropriate way to assess financial 

soundness of plan sponsors? Is a 

commercial credit report score an 

appropriate basis for measuring 

financial strength for purposes of the 

safe harbor? Does the secured debt test 

for financial soundness include and 

exclude appropriate categories of debt 

from the test criteria? For example, 

should receivables financing be 

excluded from the test? Is the net 

income test too stringent or too lenient? 

Do the debt service and plan 

contribution tests include and exclude 

appropriate events? Are the proposed 

standards for the sponsor safe harbor too 

complex? 

(4) Regarding the number and 

stringency of the criteria for the 

financially sound company safe harbor: 

• Should there be more or fewer 

criteria than the five proposed in this 

rule? If more, what should the 

additional ones be? If fewer, which ones 

should be eliminated? 

• Are the relative stringencies of the 

criteria appropriate for determining 

company financial soundness? 

• Should alternative combinations of 

a subset of the five criteria be 

permissible? 

• Should financial soundness criteria 

for companies and plans be combined? 

(5) Are there standard, commonly 

used metrics that could be applied to 

determine financial soundness that do 

not rely on third party commercial 

credit reporting companies (e.g., based 

on balance sheet or cash-flow ratios, 

such as current assets to current 

liabilities, debt to equity, or some form 

of debt-service to cash-flow ratio)? 

Would such metrics be available and 

appropriate for all plan sponsors? What 

would be the advantages or 

disadvantages of using such an 

approach? Are there other alternatives 

to determining financial soundness? 

(6) Should PBGC adopt other 

standards of creditworthiness? 

(7) For the proposed safe harbor via 

plans, what alternative funding 

percentage(s) (on a termination basis or 

premium basis) should be permitted, 

and why? 

(8) Should PBGC provide other 

alternative waivers? Should such 

alternatives be in addition to, or in place 

of, the proposed financial soundness 

safe harbors for companies and plans? 

(9) How can PBGC implement safe 

harbors, whether based on financial 

soundness or other factors, in a 

consistent, transparent, well-defined, 

and replicable or verifiable way? 

In responding to the above questions, 

to the extent possible, commenters are 

requested to provide quantitative as 

well as qualitative support or analysis 

where applicable. 

A public hearing has been scheduled 

for June 18, 2013, beginning at 2:00 

p.m., in the PBGC Training Institute, 

Washington, DC, shortly after the close 

of the comment period. Pursuant to 

building security procedures, visitors 

must arrive at 1200 K Street not more 

than 30 minutes before the hearing 

starts and present government-issued 

photo identification to enter the 

building. 

PBGC requests that any person who 

wishes to present oral comments at the 

hearing file written comments on this 

proposed rule (see DATES and ADDRESSES

above). Such persons also must submit 

by June 4, 2013, an outline of topics to 

be discussed and the amount of time to 

be devoted to each topic. The outline of 

topics to be discussed must be 

submitted by email to 

regs.comments@pbgc.gov or by mail or 

courier to Regulatory Affairs Group, 

Office of the General Counsel, Pension 

Benefit Guaranty Corporation, 1200 K 

Street NW., Washington, DC 20005– 

4026. An agenda identifying the 

speakers will be prepared after the 

deadline for receiving outlines. Copies 

of the agenda will be available free of 

charge at the hearing. 

Regulatory Procedures 

Executive Order 12866 ‘‘Regulatory 

Planning and Review’’ and Executive 

Order 13563 ‘‘Improving Regulation and 

Regulatory Review’’ 

PBGC has determined, in consultation 

with the Office of Management and 

Budget, that this rule is a ‘‘significant 

regulatory action’’ under Executive 

Order 12866. The Office of Management 

and Budget has therefore reviewed this 

notice 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 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 which would have other 

substantial impacts. In accordance with 

OMB Circular A–4, PBGC has examined 

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37Filings that involve section 4062(e) events 

always result in the opening of cases and were 

excluded from the analysis. 

38See www.pbgc.gov/documents/plan-forregulatory-review.pdf. 

39See, 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. 

40See, 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. 

41See, e.g., DOL’s final rule on Prohibited 

Transaction Exemption Procedures, 76 FR 66,637, 

66,644 (Oct. 27, 2011). 

42See PBGC 2010 pension insurance data table S– 

31, http://www.pbgc.gov/Documents/pensioninsurance-data-tables-2010.pdf. 

the economic and policy implications of 

this proposed 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 is financially 

sound and the risk of plan termination 

low. Reports of such events are 

unnecessary in the sense that PBGC 

typically reviews but takes no action on 

them. PBGC analyzed 2011 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).37 It found 

that the proportion of unnecessary 

filings would be much lower under the 

proposed regulation than under the 

existing regulation—5 percent (10 

filings) compared to 42 percent (79 

filings). Thus, although the total number 

of filings may be a little higher under 

the proposed rule, the proportion of 

unnecessary reports, and the regulatory 

burden on financially sound sponsors 

and plans, would be dramatically 

reduced. 

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 proposed 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 38

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 

proposed 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 under the proposal, and is 

consistent with certain requirements in 

Title I of ERISA 39 and the Internal 

Revenue Code,40 as well as the 

definition of a small entity that the 

Department of Labor (DOL) has used for 

purposes of the Regulatory Flexibility 

Act.41 Using this proposed definition, 

about 64 percent (16,700 of 26,100) of 

plans covered by Title IV of ERISA in 

2010 were small plans.42

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 proposal 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 therefore requests 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. 

On the basis of its proposed 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 

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 $800 (virtually 

the same as under the current 

regulation). PBGC invites public 

comment on this burden estimate. 

Paperwork Reduction Act 

PBGC is submitting the information 

requirements under this proposed rule 

to the Office of Management and Budget 

for review and approval under the 

Paperwork Reduction Act. There are 

two information collections under the 

reportable events regulation, approved 

under OMB control number 1212–0013 

(covering subparts B and C) and OMB 

control number 1212–0041 (covering 

subpart D), both of which expire March 

31, 2015. Copies of PBGC’s requests may 

be obtained free of charge by contacting 

the Disclosure Division of the Office of 

the General Counsel of PBGC, 1200 K 

Street NW., Washington, DC 20005, 

202–326–4040. 

PBGC is proposing the following 

changes to these information 

requirements: 

• 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 are currently 

required to submit some of this 

information for some events, but PBGC 

wants to make its information collection 

for all these events more uniform. 

Accordingly, PBGC proposes to require 

that every post-event filing for one of 

these events include these items (except 

that financial information is 

unnecessary for reports of insolvency 

because PBGC can typically obtain most 

of the information from court records). 

Actuarial information would no longer 

have to be submitted with post-event 

notices of other events. (1) The actuarial 

information required would be a copy of 

the most recent actuarial valuation 

report for the plan, a statement of 

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subsequent material changes, and the 

most recent month-end market value of 

plan assets. (2) The financial 

information required would 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.) (3) The controlled group 

information required would be tailored 

to the event being reported and would 

generally include identifying 

information for each plan maintained by 

any member of the controlled group, a 

description of the controlled group with 

members’ names, and the status of 

members (for example, liquidating or in 

bankruptcy). 

• Similarly, PBGC has found that it 

needs the same actuarial, financial, and 

controlled group information for 

advance-notice filings. For notices of 

funding waiver requests, the 

information can typically be gleaned 

from the copy of the request that 

accompanies the reportable event 

notice. And financial information is 

unnecessary for reports of insolvency 

because PBGC can typically obtain most 

of the information from court records. 

With these exceptions, PBGC proposes 

to require that every advance notice 

filing include these items. 

• Controlled group changes and 

benefit liability transfers involve both 

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

controlled group. PBGC already requires 

submission of controlled group 

information with notices of controlled 

group changes, and now proposes to do 

the same for benefit liability transfers. 

• Because extraordinary distributions 

raise questions about controlled group 

finances, PBGC proposes to require 

submission of financial information 

with notices of events of this type. 

• Inability to pay benefits and 

liquidation both raise the specter of 

imminent sponsor shutdown and plan 

termination. Accordingly, for notices of 

these two events (including advance 

notices of liquidation events), PBGC 

proposes to require submission of 

copies of the most recent plan 

documents and IRS qualification letter, 

the date or expected date of shutdown, 

and the identity of the plan actuary if 

different from the actuary reported on 

the most recent Form 5500 Schedule SB. 

Plan documents would no longer be 

required with notices for other events. 

• PBGC proposes to require email 

addresses for plan administrators, 

sponsors, and designated contact 

persons. 

• PBGC proposes to require that both 

post-event and advance report filings 

state explicitly the date of the event or 

the actual or anticipated effective date 

of the event (as applicable). This 

requirement will avoid the potential for 

confusion or ambiguity in the 

description of the event regarding this 

date. 

• PBGC has found that it often does 

not need the actuarial valuation report 

that must currently be included with 

notice of a substantial owner 

distribution and thus proposes to 

eliminate that requirement. However, 

PBGC proposes to add a requirement 

that notices of this event give the reason 

for the distribution to help PBGC 

analyze its significance. 

• For both post-event and advance 

notices of loan defaults, PBGC proposes 

to require that any cross-defaults or 

anticipated cross-defaults be described. 

• PBGC has found that some filers 

that should file Form 200 under 

§ 4043.81 of the reportable events 

regulation (missed contributions 

totaling over $1 million) file only Form 

10 under § 4043.25 (missed 

contributions of any amount). This has 

led to delays in enforcing liens under 

ERISA section 302(f) and Code section 

412(n) (corresponding to ERISA section 

303(k) and Code section 430(k) as 

amended by PPA 2006). To address this 

issue, PBGC proposes that Form 10 

filings for missed contributions include 

the amount and date of all missed 

contributions since the most recent 

Schedule SB. 

• PBGC proposes to eliminate Form 

200 information submission 

requirements for documents that PBGC 

typically can now obtain timely on its 

own and to add new information 

submission requirements to help it 

analyze the seriousness of the plan’s 

status and perfect statutory liens 

triggered by large missed contributions. 

Documentation to be eliminated would 

be copies of Form 5500 Schedule SB, 

SEC filings, and documents connected 

with insolvency, liquidation, 

receivership, and similar proceedings. 

New information to be required would 

be a statement of material changes in 

liabilities since the most recent actuarial 

valuation report, most recent month-end 

market value of plan assets, description 

of each controlled group member’s 

status (for example, liquidating or in 

bankruptcy), information about all 

controlled group real property, and 

identity of controlled group head 

offices. 

• PBGC Form 10 currently requires 

for the bankruptcy/insolvency event 

that the bankruptcy petition and docket 

(or similar documents) be submitted. 

Form 10-Advance requires that all 

documents filed in the relevant 

proceeding be submitted. Both forms 

require that the last date for filing 

claims be reported if known. PBGC 

proposes to replace these requirements 

with a requirement that filers simply 

identify the court where the insolvency 

proceeding was filed or will be filed and 

the docket number of the filing (if 

known). 

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 contributing 

sponsor financial problems. PBGC 

estimates that it will receive such filings 

from about 1,085 respondents each year 

and that the total annual burden of the 

collection of information will be about 

5,744 hours and $857,195. This 

represents a burden comparable to that 

under the existing regulation, as the 

following table shows: 

Annual burden: Under existing 

regulation: Under proposed rule: 

Number of responses ................................................................. 1,026 .................................................... 1,085. 

Hour burden ................................................................................ 5,400 hours .......................................... 5,744 hours. 

Dollar burden .............................................................................. $821,826 .............................................. $857,195. 

As discussed above, however, the 

proposal is designed to reduce burden 

dramatically on financially sound plans 

and sponsors (which present a low 

degree of risk); thus, burden under the 

proposed rule would be 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-risk and high-risk entities. The 

burden for low-risk sponsors would go 

down from 417 hours and $121,725 to 

zero. The burden for high-risk sponsors 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20059 

43 In comparison, PBGC’s most recent annual 

burden estimate for this information collection was 

110 responses, 670 hours, and $102,000. 

would go up by approximately 760 

hours and $157,100. 

Low-risk Volume Hours Cost 

Current ......................................................................................................................................... 144 417 $121,725 

Proposed ...................................................................................................................................... 0 0 $0 

Change ........................................................................................................................................ (144) (417) (121,725) 

High-risk Volume Hours Cost 

Current ......................................................................................................................................... 882 4,983 $700,101 

Proposed ...................................................................................................................................... 1,085 5,744 857,195 

Change ........................................................................................................................................ 203 761 157,094 

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 136 

respondents each year and that the total 

annual burden of the collection of 

information will be about 816 hours and 

$125,000.43

Comments on the paperwork 

provisions under this proposed rule 

should be sent to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Attention: Desk Officer for Pension 

Benefit Guaranty Corporation, via 

electronic mail at 

OIRA_DOCKET@omb.eop.gov or by fax 

to (202) 395–6974. Although comments 

may be submitted through June 3, 2013, 

the Office of Management and Budget 

requests that comments be received on 

or before May 3, 2013 to ensure their 

consideration. Comments may address 

(among other things)— 

• Whether each proposed collection 

of information is needed for the proper 

performance of PBGC’s functions and 

will have practical utility; 

• The accuracy of PBGC’s estimate of 

the burden of each proposed collection 

of information, including the validity of 

the methodology and assumptions used; 

• Enhancement of the quality, utility, 

and clarity of the information to be 

collected; and 

• Minimizing the burden of each 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

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 

proposes to amend 29 CFR parts 4000, 

4001, 4043, 4204, 4206, and 4231 as 

follows. 

PART 4000—FILING, ISSUANCE, 

COMPUTATION OF TIME, AND 

RECORD RETENTION 

■ 1. 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, new 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, except as otherwise 

provided by PBGC. 

* * * * * 

■ 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). 

■ 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 Financial soundness. 

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20060 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

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. 1082(f), 1302(b)(3), 

1343. 

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. 

Financially sound has the meaning 

described in § 4043.9. 

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. 

Notice 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. 

U.S. entity means an entity subject to 

the personal jurisdiction of the U.S. 

district court. 

§ 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 notice), § 4043.61 (for 

advance notice), 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 

(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 

assess against each person required to 

provide the notice a separate penalty 

under section 4071 of ERISA. PBGC may 

pursue any other equitable or legal 

remedies available to it under the law. 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20061 

§ 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 

information requirements 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 

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(c) of ERISA. 

§ 4043.5 How and where to file. 

Reportable event notices required 

under this part must be filed 

electronically using the forms and in 

accordance with the instructions 

promulgated by PBGC, which are posted 

on PBGC’s Web site. 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. 

§ 4043.9 Financial soundness. 

(a) In general. The term ‘‘financially 

sound’’ is defined in paragraph (b) of 

this section for an entity that is a plan 

sponsor or member of a plan sponsor’s 

controlled group and in paragraph (c) of 

this section for a plan. 

(b) Financially sound sponsor or 

controlled group member. For purposes 

of this part, an entity that is a plan 

sponsor or member of a plan sponsor’s 

controlled group is ‘‘financially sound’’ 

as of any date (the determination date) 

if on the determination date 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. 

(1) The entity is scored by a 

commercial credit reporting company 

that is commonly used in the business 

community, and the score indicates a 

low likelihood that the entity will 

default on its obligations. 

(2) The entity has no secured debt, 

disregarding leases or debt incurred to 

acquire or improve property and 

secured only by that property. 

(3) For the most recent two fiscal 

years, the entity has positive net income 

under generally accepted accounting 

principles (GAAP) or International 

Financial Reporting Standards (IFRS). 

For purposes of this provision, net 

income of a tax-exempt entity is the 

excess of total revenue over total 

expenses as required to be reported on 

Internal Revenue Service Form 990. 

(4) For the two-year period ending on 

the determination date, no event 

described in § 4043.34(a)(1) or (2) 

(dealing with a default on loan with an 

outstanding balance of $10 million or 

more) has occurred with respect to any 

loan to the entity, regardless of whether 

reporting was waived under 

§ 4043.34(c). 

(5) For the two-year period ending on 

the determination date, the entity has 

not failed 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 is waived under 

§ 4043.25(c) for failure to make the 

contribution. 

(c) Financially sound plan. For 

purposes of this part, ‘‘financially 

sound’’ means, with respect to a plan for 

a plan year, that the plan meets the 

requirements of either paragraph (c)(1) 

or paragraph (c)(2) of this section. 

(1) A plan meets the requirements of 

this paragraph (c)(1) if, as of the last day 

of the prior plan year, the plan had no 

unfunded benefit liabilities (within the 

meaning of section 4062(b)(1)(A) of 

ERISA) as determined in accordance 

with §§ 4044.51 through 4044.57 of this 

chapter (dealing with valuation of 

benefits and assets in trusteed 

terminating plans) and § 4010.8(d)(1)(ii) 

of this chapter. 

(2) A plan meets the requirements of 

this paragraph (c)(2) if for the prior plan 

year, the ratio of the value of the plan’s 

assets as determined for premium 

purposes in accordance with part 4006 

of this chapter to the amount of the 

plan’s premium funding target as so 

determined was not less than 120 

percent. 

Subpart B—Post-Event Notice of 

Reportable Events 

§ 4043.20 Post-event filing obligation. 

(a) In general. 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 reporting 

obligation applies to the person who is 

the plan administrator or contributing 

sponsor of the plan on the 30th day after 

the reportable event occurs. 

(b) Extension for certain events. For 

the events described in §§ 4043.23, 

4043.27, 4043.29, 4043.31, and 4043.32, 

if the plan’s premium due date for the 

plan year preceding the event year was 

determined under § 4007.11(a)(1) 

(dealing with small plans) or 

§ 4007.11(c) (dealing with new and 

newly covered plans) of this chapter, 

the notice date is extended until the last 

day of the seventeenth full calendar 

month that began on or after the first 

day of such preceding plan year (the 

effective date, in the case of a new plan). 

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20062 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

§ 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: 

(1) Single-cause event. When the 

reductions in the number of active 

participants under a plan due to a single 

cause—such as a reorganization, the 

discontinuance of an operation, a 

natural disaster, a mass layoff, or an 

early retirement incentive program—are 

more than 20 percent of the number of 

active participants at the beginning of 

the plan year or more than 25 percent 

of the number of active participants at 

the beginning of the previous plan year. 

(2) Short-period event. When the 

reductions in the number of active 

participants under a plan over a short 

period (disregarding reductions reported 

under paragraph (a)(1) of this section) 

are more than 20 percent of the number 

of active participants at the beginning of 

the plan year, or more than 25 percent 

of the number of active participants at 

the beginning of the previous plan year. 

For this purpose, a short period is a 

period of 30 days or less that does not 

include any part of a prior short period 

for which an active participant 

reduction is reported under this section. 

(3) Attrition event. On the last day of 

a plan year if the number of active 

participants under a plan are reduced by 

more than 20 percent of the number of 

active participants at the beginning of 

the plan year, or by more than 25 

percent of the number of active 

participants at the beginning of the 

previous plan year. The reduction may 

be measured by using the number of 

active participants on either the last day 

of the plan year or the participant count 

date (as defined in § 4006.2 of this 

chapter) for the next plan year, but in 

either case is considered to occur on the 

last day of the 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. 

(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 

paragraphs (a)(1) and (a)(2) 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) Current-year small 

plan. Notice under this section is 

waived if the plan had fewer than 100 

participants for whom flat-rate 

premiums were payable for the plan 

year preceding the event year. 

(2) Financial soundness. Notice under 

this section is waived if— 

(i) For each contributing sponsor of 

the plan, either the sponsor or the 

sponsor’s highest level controlled group 

parent that is a U.S. entity is financially 

sound when the event occurs, or 

(ii) The plan is financially sound for 

the plan year in which the event occurs. 

(e) Extension—attrition event. For an 

event described in paragraph (a)(3) of 

this section, the notice date is extended 

until 120 days after the end of 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 satisfies the requirements of this 

section. 

(c) Waivers—(1) Current-year 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 

fewer than 100 participants for whom 

flat-rate premiums were payable for the 

plan year preceding the event year. 

(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. 

§ 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), or 

(ii) The need to verify a person’s 

eligibility for benefits; the inability to 

locate a person; or any other 

administrative delay if 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 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20063 

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—non-increasing annuity. In 

the case of a non-increasing 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, 

periodic amount, and duration of the 

annuity satisfies the requirements of 

this section with respect to all 

subsequent payments under the 

annuity. 

(d) Waivers—financial soundness. 

Notice under this section is waived if— 

(1) For each contributing sponsor of 

the plan, either the sponsor or the 

sponsor’s highest level controlled group 

parent that is a U.S. entity is financially 

sound when the event occurs, or 

(2) The plan is financially sound for 

the plan year in which the event occurs. 

§ 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. 

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 

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) Current-year small plan. Notice 

under this section is waived if the plan 

had fewer than 100 participants for 

whom flat-rate premiums were payable 

for the plan year preceding the event 

year. 

(4) Financial soundness. Notice under 

this section is waived if— 

(i) For each post-event contributing 

sponsor of the plan, either the sponsor 

or the sponsor’s highest level controlled 

group parent that is a U.S. entity is 

financially sound when the event 

occurs, or 

(ii) The plan is financially sound for 

the plan year in which the event occurs. 

(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 

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20064 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

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 binding 

contract), 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. If, on the 30th day 

after Company Q and Company R enter 

into the binding contract, 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 30th day, 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) Extraordinary 

dividends and stock redemptions. 

Notice under this section of the 

reportable event described in section 

4043(c)(11) of ERISA related to 

extraordinary dividends and stock 

redemptions is waived except to the 

extent reporting is required under this 

section. 

(2) 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. 

(3) Foreign entity. Notice under this 

section is waived if the person making 

the distribution is a foreign entity other 

than a foreign parent. 

(4) Current-year small plan. Notice 

under this section is waived if the plan 

had fewer than 100 participants for 

whom flat-rate premiums were payable 

for the plan year preceding the event 

year. 

(5) Financial soundness. Notice under 

this section is waived if— 

(i) For each contributing sponsor of 

the plan, either the sponsor or the 

sponsor’s highest level controlled group 

parent that is a U.S. entity is financially 

sound when the event occurs, or 

(ii) The plan is financially sound for 

the plan year in which the event occurs. 

§ 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 

(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) Current-year small 

plan. Notice under this section is 

waived if the plan had fewer than 100 

participants for whom flat-rate 

premiums were payable for the plan 

year preceding the event year. 

(2) Financial soundness. Notice under 

this section is waived if, for both the 

transferor plan (if it survives the 

transfer) and the transferee plan— 

(i) For each contributing sponsor of 

the plan, either the sponsor or the 

sponsor’s highest level controlled group 

parent that is a U.S. entity is financially 

sound when the transfer occurs, or 

(ii) The plan is financially sound for 

the plan year in which the transfer 

occurs. 

§ 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 for the purpose of avoiding a 

default. 

(b) Notice date. The notice date is 30 

days after the person required to report 

knows or has reason to know of an 

acceleration or default under paragraph 

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 20065 

(a)(1) of this section, without regard to 

the time of any other conditions 

required for the acceleration or default 

to be reportable. 

(c) 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 reporting 

obligation applies to 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 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; 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 for 

premium purposes in accordance with 

part 4006 of this chapter 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 

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 

§ 4044.51–57 of this chapter. 

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20066 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Proposed Rules 

(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 (dealing with valuation of 

benefits and assets in trusteed 

terminating plans) 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 A 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. 

§ 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 25th day of 

March 2013. 

Joshua Gotbaum, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2013–07664 Filed 4–2–13; 8:45 am] 

BILLING CODE 7709–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket No. USCG–2013–0129] 

RIN 1625–AA08 

Special Local Regulations; Marine 

Events, Spa Creek and Annapolis 

Harbor; Annapolis, MD 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of Proposed Rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish special local regulations 

during the swim segment of the 

‘‘TriRock Triathlon Series’’, a marine 

event to be held on the waters of Spa 

Creek and Annapolis Harbor on July 20, 

2013. These special local regulations are 

necessary to provide for the safety of life 

on navigable waters during the event. 

This action is intended to temporarily 

restrict vessel traffic in a portion of Spa 

Creek and Annapolis Harbor during the 

event. 

mstockstill on DSK4VPTVN1PROD with PROPOSALS