2009 Enrolled Actuaries Meeting 

Questions to the PBGC 

and Summary of Their Responses 

March 2009
Summary of Discussions between the Enrolled Actuaries Program Committee 

and Staff of the Pension Benefit Guaranty Corporation 

on February 4, 2009 

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

Guaranty Corporation at discussions on February 4, 2009, with representatives of the 

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

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

accurately as possible the statements made by the government representatives. However, 

those responses are merely the current views of the individuals and do not represent the 

positions of the Pension Benefit Guaranty Corporation or of any other governmental 

agency and cannot be relied upon by any person for any purpose. Moreover, PBGC has 

not in any way approved this booklet or reviewed it to determine whether the statements 

herein are accurate or complete. 

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

the discussions: 

 

Harold J. Ashner, Keightley & Ashner LLP 

Bruce A. Cadenhead, Mercer Human Resource Consulting 

Eric Keener, Hewitt Associates LLC 

Ken Steiner, Watson Wyatt Worldwide 

Marjorie R. Martin, Aon Consulting 

John H. Moore, JP Morgan Compensation and Benefit Strategies 

Jay P. Rosenberg, Buck Consultants 

Donald J. Segal, JP Morgan Compensation and Benefit Strategies 

James A. Stinchcomb, Towers Perrin 

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

the discussions: 

James J. Armbruster, Assistant Chief Counsel, Office of the Chief Counsel 

Kenneth Cooper, Assistant General Counsel, Office of the General Counsel 

David Gustafson, Director, Policy, Research and Analysis Department 

Catherine B. Klion, Manager, Regulatory and Policy Division, Legislative and 

Regulatory Department 

Grace Kraemer, Attorney, Legislative and Regulatory Department 

Bela Palli, Program Manager, Standard Termination Compliance Division, Insurance 

Programs Office 

Peggy Thibault, Actuary, Policy, Research and Analysis Department 

Neela Ranade, Chief Negotiating Actuary, Department of Insurance Supervision & 

Compliance 

Amy Viener, Senior Policy Actuary, Policy, Research and Analysis Department 

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

for this booklet. 
INDEX 

Subject Matter Pages

1. Premiums .......................................................................................................................1 – 7 

2. Standard Terminations.................................................................................................8 – 12

3. Distress or Involuntary Terminations ........................................................................13 – 14 

4. Guaranteed Benefits...................................................................................................15 – 16 

5. Valuation and Payment of Benefits ...................................................................................17 

6. Reportable Events ......................................................................................................18 – 20 

7. ERISA 4010 Reporting..............................................................................................21 – 24 

8. Other Reporting .........................................................................................................25 – 26 

9. Other ..........................................................................................................................27 – 36 
2009 Enrolled Actuaries Meeting Blue Book Page 1 

QUESTION 1 

Premiums: Pre-retirement Death Benefits 

PBGC’s regulation on premium rates (part 4006) and page 16 of PBGC’s Comprehensive 

Premium Payment Instructions for 2009 explain that a qualified pre-retirement survivor 

annuity (QPSA) does not fail to be vested solely because the participant is still living. 

(a) Is a death benefit in excess of a QPSA vested for premium purposes? 

(b) If a plan has a 100% QPSA for everyone, would it be reasonable to consider the plan 

as having a 50% QPSA and “other” extra pre-retirement death benefits, so that only 

the 50% QPSA would be vested for PBGC premium purposes? 

(c) Under § 4006(d)(3) of PBGC’s premium rates regulation, a pre-retirement lump-sum 

death benefit (other than a benefit that returns accumulated mandatory employee 

contributions) is not vested for premium purposes if the participant is living. 

Consider a cash balance plan under which, in lieu of the 50% QPSA, a survivor may 

elect to receive a pre-retirement death benefit in the form of a lump sum equal to 

100% of the present value of the vested accrued benefit. If the assumed form of 

payment upon death (for valuation purposes) is the lump sum option described above, 

is the entire pre-retirement death benefit a “pre-retirement lump-sum death benefit” 

and therefore not vested for premium purposes? 

RESPONSE 

(a) The regulation does not address the treatment of death benefits in excess of the 

QPSA. Pending the issuance of additional guidance, PBGC would not treat a preretirement death benefit in excess of the QPSA as vested for premium purposes. 

(b) No. The terms of the plan control. If the plan provides for a 100% QPSA, the value 

of the QPSA does not fail to be vested for premium purposes solely because the 

participant is still alive. 

(c) No. The language in part 4006 and the premium instructions on pre-retirement lumpsum death benefits are intended to refer to an incidental death benefit such as a 

$5,000 payout to cover funeral expenses. An optional form of payment tied to the 

accrued benefit is not a pre-retirement lump-sum death benefit. 
2009 Enrolled Actuaries Meeting Blue Book Page 2 

QUESTION 2 

Premiums: Termination Premium Collection Experience 

Please describe the PBGC’s collection experience regarding the $1,250 termination 

premium, whether through ordinary-course PBGC Form T filings or through settlements 

or litigation both in the bankruptcy context and the non-bankruptcy context (e.g., where a 

distress termination is approved under Distress Test 3 (“inability to continue in 

business”)). Please include information as to the number of PBGC Form T filings that 

have been made to date and the total amount of termination premiums paid with such 

PBGC Form T filings. 

RESPONSE 

Because PBGC has collected termination premiums through agreements that typically 

resolve all of PBGC's claims against plan sponsors and controlled group members, the 

total amount of termination premiums paid is not readily ascertainable. As to litigation, 

PBGC has appealed the district court's decision in Oneida (Southern District of New 

York) that the termination premium is a pre-petition bankruptcy claim. The appeal has 

been fully briefed and argued in the Court of Appeals. 
2009 Enrolled Actuaries Meeting Blue Book Page 3 

QUESTION 3 

Premiums: Termination Premium Applicability 

Assume that each member of the controlled group maintaining a plan qualifies for 

distress under Distress Test 1 (Liquidation), and that, therefore, if the termination is 

processed as a distress termination, there is no $1,250 termination premium owed. 

Assume further, however, that the termination is instead processed as a consensual 

involuntary termination under ERISA Section 4042. Would a termination premium be 

owed in such circumstances and, if so, who would pay it and when? 

RESPONSE 

Under section 4006(b)(7) of ERISA, a termination premium is owed in the event of an 

involuntary termination under section 4042 of ERISA; therefore the premium would 

apply in the circumstances described in the question. PBGC will attempt to collect a 

termination premium whenever it arises. However, the plan sponsor and administrator 

should contact PBGC to discuss payment options. 
2009 Enrolled Actuaries Meeting Blue Book Page 4 

QUESTION 4 

Premiums: Exemptions from Electronic Filing Requirement 

PBGC’s regulations mandate e-filing of premium information, subject to PBGC’s 

authority to grant exemptions from the e-filing requirement “for good cause in 

appropriate circumstances” (29 CFR § 4007.3). Please describe the PBGC’s experience 

to date with any such exemption requests. 

RESPONSE 

To date, PBGC has received fewer than 10 requests for exemptions from e-filing 

premium information for 2008 premium payment years. PBGC denied some requests 

and granted others. For example, PBGC granted a request for an exemption in a case 

involving the unexpected death of a filing coordinator. In that case, the Plan 

Administrator contacted PBGC to report that she would be able to submit a paper 

premium filing by the due date, but that if she had to file electronically, she would file 

late because she needed time to become familiar with MyPAA. (Alternatively, the Plan 

Administrator could have filed late and requested a waiver of any resulting penalty.) 

PBGC may get a few more requests for e-filing exemptions for 2008 premium payment 

years, particularly since the earliest due date for small plans to file 2008 premiums is 

April 30, 2009. 
2009 Enrolled Actuaries Meeting Blue Book Page 5 

QUESTION 5 

Premiums: PBGC Audit and Enforcement Program 

Please describe the PBGC’s program relating to PBGC premiums, including recent 

activity, flat-rate and variable-rate premium audit findings and results (along with a brief 

summary of the most common problems found), and plans for future audits. 

RESPONSE

PBGC continues its active Premium Compliance Evaluation Program, which is designed 

to enforce compliance with PBGC premium requirements and promote voluntary 

compliance. PBGC uses computer matching and electronic data analysis to identify plans 

for audit, including potential on-site evaluations. By comparing data contained in Form 

5500 databases and Premium databases, PBGC is able to identify non-filers, differences 

in reported asset figures, and plan type differences. PBGC is also able to identify large 

participant count changes and other anomalies in the premium database that suggest the 

need for additional scrutiny. Participant count errors have been associated with improper 

employee coding, lack of integration between payroll and benefit systems, multiple 

participant databases, and failure to keep records of participants for whom premiums 

were paid, and other issues. Maintaining a static copy of electronic databases as of the 

premium snapshot date and highlighting those participants for whom premiums were paid 

can serve to streamline evaluations of reported participant counts. 

The Pension Protection Act of 2006 (PPA 2006) eliminated the full funding limit 

exemption from the variable rate premium starting with 2008 plan years. For plan years 

before 2008, PBGC continues to electronically identify plans that appear to have 

incorrectly reported that they qualified for the full funding limit exemption. 

PBGC is developing a new audit plan for premium filings under the post-PPA 2006 rules 

(i.e., for 2008 and later plan years). PBGC may investigate such matters as — 

 If election to use the alternative premium funding target was in effect, whether a plan 

reported discount rates consistent with the discount rates used for funding purposes 

(as reported on Schedule SB); 

 If an election to use the alternative premium funding target was not in effect, whether 

the reported segment rates used to determine the standard premium funding 

target were the spot segment rates for the month prior to the month in which the plan 

year begins; 

 Whether a plan filed in accordance with an election to use the alternative premium 

funding target for at least five years; 

 Whether a plan reported the same asset value when it reconciled an estimated 

premium funding target as it reported when it filed the estimated premium funding 

target; and 

 Whether a plan that filed an estimated premium funding target is a large or mid-size 

plan. 
2009 Enrolled Actuaries Meeting Blue Book Page 6 

QUESTION 6 

Premiums: Effect of Merger on UVB Determination 

Assume that Plans A and B, both calendar-year plans, have 1/1 and 12/31 valuation dates, 

respectively, and that both plans have UVBs for variable-rate premium purposes as of 

their respective valuation dates. If Plan A were to merge into Plan B effective 7/1/09, 

would Plan B base its variable-rate premium payment for the 2009 plan year on the 

combined UVBs of Plans A and B as of 12/31/09, even though Plan A’s variable-rate 

premium payment for the 2009 plan year would have already taken into account Plan A’s 

UVBs as of 1/1/09? 

RESPONSE 

Plan B’s variable-rate premium is based on UVBs on its “UVB valuation date”, which in 

this case is 12/31/2009. Because the assets and liabilities of Plan A were merged into 

Plan B before this date, they would be included in the UVB calculation. The fact that 

Plan A’s also owes a VRP based on these assets and liabilities (but measured on 

1/1/2009) has no impact on the amount owed by Plan B. 
2009 Enrolled Actuaries Meeting Blue Book Page 7 

QUESTION 7 

Premiums: Effect of mid-year benefit increase on value of vested benefits 

A calendar year plan with a flat dollar benefit multiplier has a benefit increase 

adopted before January 1, 2009 (the valuation date) that is scheduled to take effect July 1, 

2009 and that will apply retroactively. The increase does not apply to participants who 

terminate employment before July 1, 2009. 

Assuming that under Treasury/IRS rules, the increase is reflected in the funding target as 

of January 1, 20091

, is the increase vested for premium purposes as of January 1, 

2009, and therefore included in the premium funding target used to determine the PBGC 

variable rate premium for 2009? 

RESPONSE 

PBGC’s regulation on premium rates (part 4006) provides limited guidance on the meaning 

of "vested" for premium purposes. Pending issuance of more comprehensive guidance on 

this matter, PBGC would not treat the benefit increase as vested for premium purposes as 

of January 1, 2009. 

 

1

 See IRS proposed regulations on measurement of assets and liabilities, 72 FR 74215, Dec. 31, 2007, and 

2008 Gray Book Q&A 7. 
2009 Enrolled Actuaries Meeting Blue Book Page 8 

QUESTION 8 

Standard Terminations: Irrevocable Commitment Purchases Before Standard 

Termination 

In its response to Question 7 of the 2007 Blue Book, PBGC described its new audit 

initiative relating to plans that distribute plan assets in satisfaction of plan liabilities 

before or without filing a standard termination notice with the PBGC. 

(a) Please describe PBGC’s experience in connection with this audit initiative, in 

particular with large plans purchasing annuity contracts shortly before termination 

(for example, to lock in favorable interest rates for the benefit of the plan and plan 

participants)? 

(b) What concerns, if any, would PBGC have in connection with this new audit initiative 

where a plan that is about to undergo a standard termination purchases irrevocable 

commitments for all participants in pay status before initiating the standard 

termination process? What sanction, if any, would be imposed on a plan 

administrator for purchasing such irrevocable commitments where PBGC concludes 

that the irrevocable commitments are proper in all respects other than the timing of 

their purchase? 

RESPONSE 

(a) To date PBGC has selected for audit over 120 cases in which plans distributed plan 

assets in satisfaction of plan liabilities before or without filing a standard termination 

notice with PBGC. To date, virtually all of these cases involved small plans that did 

not file a standard termination notice with PBGC and that distributed plan assets 

through payment of lump sums. After PBGC identifies such a plan, generally when it 

fails to pay premiums, it requires the plan to file a standard termination notice and 

post-distribution certification. PBGC is developing procedures to better identify large 

plans that purchase annuity contracts shortly before termination. As with all standard 

termination audits, the focus of this audit initiative is to ensure that participants 

received the benefits to which they were entitled. PBGC reserves the right to take 

other appropriate action in connection with this audit initiative, including penalties 

under section 4071 for each missed notice or filing. 

(b) In connection with this audit initiative, PBGC would be concerned that a purchase of 

irrevocable commitments for all participants in pay status (or for any other 

participants) before initiating the standard termination process could circumvent the 

termination requirements, including statutory and regulatory notice and disclosure 

requirements. The key issue for PBGC would be whether the purchase was made in 

contemplation of the termination. The analysis of this issue would be done on a 

case-by-case basis. The PBGC does note, however, that the concern only arises if the 

purchase is of an irrevocable commitment. A purchase of an annuity contract that is 

not an irrevocable commitment as defined in section 4001.2 of PBGC's regulations 

and that is held as an investment asset of the plan (i.e., there is no distribution of plan 

assets), as is sometimes done by ongoing plans, does not raise these concerns. 
2009 Enrolled Actuaries Meeting Blue Book Page 9 

If PBGC determines the purchase of irrevocable commitments was made in 

contemplation of the termination, PBGC would verify the accuracy of the benefits 

provided, determine whether the annuity contract mirrors the provisions of the plan 

document, and require the plan to take corrective action where appropriate. In 

addition, the scope of the audit would increase (e.g., much larger samples) and PBGC 

might take other appropriate action, including penalties under section 4071 for each 

missed notice or filing. 

PBGC is developing guidance on purchases of irrevocable commitments before a 

standard termination. Plan sponsors may contact PBGC to discuss any situations in 

which such purchases are being contemplated (such as to lock in interest rates). 
2009 Enrolled Actuaries Meeting Blue Book Page 10 

QUESTION 9 

Standard Terminations: Lump Sum Amendments 

Consider a plan that provides for lump sums to be calculated as the minimum statutorily 

required amount (i.e., the present value of the normal retirement benefit using 417(e)(3) 

assumptions) and that is undergoing a standard termination with a termination date in 

November 2009. Assume that this plan is amended, on or before its termination date, to 

provide that lump sums with annuity starting dates in or after the 2010 plan year will be 

calculated as the greater of the minimum statutorily required amount and an amount 

determined on an alternative basis that satisfies all qualification requirements. 

If the distribution takes place in the 2010 plan year and the alternative basis produces 

higher lump sums, may or must the lump sums be calculated and paid on the alternative 

basis? 

RESPONSE 

The lump sums must be calculated and paid on the alternative basis. 
2009 Enrolled Actuaries Meeting Blue Book Page 11 

 QUESTION 10 

Standard Terminations: Lump Sum Amendments 

How do the PPA 2006 changes in the interest rate and mortality table used in calculating 

minimum lump sum amounts apply in standard terminations where lump sums are paid in 

a year subsequent to the year of termination? 

RESPONSE 

Guidance on this issue was provided in Technical Updates 07-3 and 08-4. In summary: 

 Technical Update 07-3 addresses the situation where the plan's termination date is 

before the PPA 2006 effective date of the changes to IRC 417(e) (i.e., plan years 

beginning after 2007). In these cases, the PPA 2006 changes do not apply. 

Minimum lump sums are determined based on the pre-PPA 2006 statutory 

requirements regardless of when the lump sum is paid. 

 Technical Update 08-4 addresses the situation where the plan's termination date is 

on or after the PPA 2006 effective date of the changes to IRC 417(e). In these 

cases, assuming the plan was amended to reflect the PPA 2006 changes before 

termination, the interest rate phase-in percentage and mortality assumption are 

tied to the annuity starting date2

, not the year of termination. 

For example, assume a calendar year plan is amended in 2008 to reflect PPA 2006 

minimum lump sum assumptions and terminates on July 1, 2009. Also assume 

that the plan has a one-year stability period and a two-month lookback. 

Therefore, a lump sum paid in 2010 is calculated using the following 

assumptions: 

- Interest — based on the phase-in percentage for the plan year beginning in 

2010 and the November 2009 rates. Accordingly, a lump sum paid in 2010 

would be determined using a blended rate based on a 60 percent weighting of 

the November 2009 segment rates and a 40 percent weighting of the 

November 2009 30-year Treasury rate. 

- Mortality — based on the RP-2000 unisex mortality table project, in 

accordance with IRS rules, for annuity starting dates in 2010. 

Technical Updates 07-3 and 08-4 are available at http://pbgc.gov/practitioners/lawregulations-informal-guidance/content/tu16272.html) and 

http://www.pbgc.gov/practitioners/law-regulations-informalguidance/content/tu16620.html) respectively. 

 

2

 For convenience, this response assumes that the distribution date is the annuity starting date. 
2009 Enrolled Actuaries Meeting Blue Book Page 12 

QUESTION 11 

Standard Terminations: Audits 

In the response to Question 6 of the 2007 Blue Book, PBGC stated that it interpreted 29 

CFR § 4041.24(a), which requires the issuance of a Notice of Plan Benefits to each 

person (other than the PBGC and any employee organization) who is an affected party as 

of the proposed termination date, as not requiring issuance of such a notice to a 

participant whose benefits are paid out in accordance with 29 CFR § 4041.22 on or 

before the due date for issuing the Notice of Plan Benefits. Then, in the response to 

Question 7 of the 2008 Blue Book, PBGC stated that such a participant is to be included 

among the participants whose distributions of benefit liabilities are certified to and 

described (by category and amount) in the post-distribution certification (PBGC Form 

501), unless the participant’s benefits are paid out prior to the plan’s termination date. 

Assuming that such a participant’s benefits are not paid out prior to the plan’s termination 

date, would the distribution of benefits to that participant be subject to PBGC review as 

part of a standard termination audit, even though the affected party’s benefits were paid 

out in accordance with 29 CFR § 4041.22 before the distribution period for the standard 

termination? 

RESPONSE 

Yes. A PBGC standard termination audit will generally cover (at least through 

sampling), at a minimum, any participant or beneficiary who is an affected party as of the 

plan’s termination date, regardless of the timing of the distribution for that affected party. 
2009 Enrolled Actuaries Meeting Blue Book Page 13 

QUESTION 12 

Distress or Involuntary Terminations: Disclosure of Termination Information 

Please describe PBGC’s experience in connection with any requests that have been made, 

whether to PBGC or to the plan administrator or contributing sponsor, for information in 

accordance with PPA section 506 (“Disclosure of Termination Information to Plan 

Participants”)? 

RESPONSE 

PBGC has received one request (from a labor union) for information in accordance with 

PPA section 506. The request was made before PBGC published its final rule on 

Disclosure of Termination Information. PBGC complied with that request following 

procedures set forth in its proposed rule. On November 18, 2008 (at 73 FR 68333), 

PBGC published the final rule; the procedures in the final rule are the same as those in 

the proposed rule. PBGC has no information on whether any requests for such 

information have been made to plan administrators or plan sponsors 
2009 Enrolled Actuaries Meeting Blue Book Page 14 

QUESTION 13 

Distress or Involuntary Terminations: Disclosure of Termination Information 

Section 506 of PPA, which deals with disclosure of termination information in distress 

and involuntary termination proceedings, provides that a court may limit disclosure of 

confidential information to an “authorized representative” of the participants and 

beneficiaries that agrees to keep the information confidential. Does the PBGC interpret 

this provision, in the context of a plan covering non-union employees, to allow for the 

designation by the court of a non-union “authorized representative” for this purpose? 

RESPONSE 

Section 506 of PPA does not address limiting the disclosure of confidential information 

in cases where there is no “authorized representative.” PBGC has not provided guidance 

on this issue. Courts may address this issue in specific cases. 
2009 Enrolled Actuaries Meeting Blue Book Page 15 

QUESTION 14 

Guaranteed Benefits: Application of Title IV Guarantee Limitations to Participants’ 

Plan Benefits 

(a) In what order does PBGC apply the three principal guarantee limitations – the 

“accrued-at-normal” limitation, the “maximum guarantee” limitation, and the “phasein” limitation – to participants’ plan benefits? 

(b) How is the accrued-at-normal limitation in section 4022.21 of PBGC’s regulations 

applied when there are early retirement factors and/or reductions for a form of benefit 

other than life-only? 

RESPONSE

(a) PBGC applies these limitations by first determining the plan benefit, and then 

applying the limitations in “A-M-P” order: i.e., first the “accrued-at-normal” 

limitation, then the “maximum guarantee” limitation, and then the “phase-in” 

limitation. 

(b) Here is an example showing how the accrued-at-normal limitation is applied. 

Assumptions

 A plan has an early retirement benefit that is reduced by 5% for each year by 

which commencement precedes age 62. Participants who retire prior to age 62 

with 30 or more years of service receive a $400 monthly early retirement 

supplement. The supplement ends at age 62. No Title IV limitation other than the 

accrued-at-normal limit applies. 

 Employee A retires at age 60 with a 50% J&S option, 30 years of service, and a 

life-only accrued benefit of $1,000. The 50% J&S option factor is 91%. 

Employee A’s early retirement benefit adjusted for form is $1,000 x .9 x .91 = 

$819. The plan would pay Employee A $819 for life plus a $400 supplement 

from ages 60 to age 62 (for a total of $1,219 before age 62). 

Application of the accrued-at-normal limitation

A participant’s guaranteed benefit under section 4022.21 is limited to his or her lifeonly accrued benefit payable at normal retirement. For Employee A, this limit is 

$1,000. Therefore PBGC would guarantee payment of $1,000 to Employee A from 

ages 60 to 62 and $819 after age 62. 
2009 Enrolled Actuaries Meeting Blue Book Page 16 

QUESTION 15 

Guaranteed Benefits: Phase-in of Shutdown Benefits 

Section 403 of the Pension Protection Act equates the date that a shutdown (or other 

unpredictable contingent event) occurs to the date a plan amendment is “adopted.” The 

phase-in period for the PBGC’s guarantee starts to run on the later of the adoption date 

and the effective date of an amendment. How would the PBGC determine the “effective” 

date of such a deemed amendment? In particular, would it be a single date for a 

particular shutdown, such as the date the shutdown occurs (i.e., the deemed adoption date 

of the plan amendment) or could it be multiple dates for a particular shutdown (e.g., by 

tying it to the date each participant is separated as a result of the shutdown)? 

RESPONSE 

PBGC is in the process of drafting a proposed regulation implementing Section 403 of 

PPA 2006. PBGC expects to address this and other related issues in that proposed 

regulation. 
2009 Enrolled Actuaries Meeting Blue Book Page 17 

QUESTION 16 

Valuation and Payment of Benefits: Hybrid Plans 

PPA Section 701 added ERISA Section 204(b)(5)(B)(vi), which requires hybrid plans 

with variable indices to determine the interest crediting rate and conversion rate that 

apply if the plan terminates as the average of the rates used under the plan during the 5-

year period ending on the termination date. If the requirement is not met, the hybrid plan 

is treated as failing to meet the age discrimination requirements of ERISA Section 

204(b)(1)(H). 

(a) Does the 5-year average rule apply in the case of an equity index? 

(b) Is the “5-year period ending on the termination date” measured in plan years, 

calendar years or months? 

(c) Will this provision change how PBGC values cash balance plans and provides 

information to participants as to their benefits? 

RESPONSE 

PBGC is in the process of drafting a proposed regulation implementing Section 701 of 

PPA 2006. PBGC expects to address this and other related issues in that proposed 

regulation. 
2009 Enrolled Actuaries Meeting Blue Book Page 18 

QUESTION 17 

Reportable Events: PPA Transition Guidance 

PBGC Technical Update 07-2 generally provided (among other things) that, for event 

years that begin in 2008 under the reportable events regulation (29 CFR Part 4043, 

subparts A, B, and C), certain premium-related determinations are made without regard 

to the PPA 2006 changes to the variable-rate premium (VRP) rules that went into effect 

starting with the 2008 plan year. (Technical Update 07-2 — “Funding-Related 

Determinations for Reporting under Parts 4010 and 4043; Effect of the Pension 

Protection Act of 2006; Transitional Guidance” — is available at 

http://www.pbgc.gov/practitioners/law-regulations-informalguidance/content/tu16267.html.) 

What is the status of any guidance relating to event years that begin after 2008? 

RESPONSE — PBGC is working on a proposed rule to amend its reportable events 

regulation to conform to changes under the Pension Protection Act of 2006 and PBGC’s 

premium regulations. On January 9, 2009, PBGC issued Technical Update 09-1, 

providing transitional guidance relating to event years that begin in 2009. (Technical 

Update 09-1 — “Reportable Events; Funding-Related Determinations for Threshold Test, 

Waivers, and Extensions; Effect of the Pension Protection Act of 2006; Guidance for 

2009 Plan Years” — is available at http://pbgc.gov/practitioners/law-regulationsinformal-guidance/content/tu16637.html.) 

In general, Technical Update 09-1 provides that for purposes of the reportable events 

regulation, a plan’s unfunded vested benefits and the value of its assets and vested 

benefits are determined for a plan year beginning in 2009 in the same manner as for 

premiums for the preceding plan year. For example, in the case of a calendar year plan 

with a January 1 valuation date, the value of assets and vested benefits and the amount of 

unfunded vested benefits determined as of January 1, 2008, for purposes of the 2008 

variable rate premium are also used for applying the $50 million advance-reporting 

threshold test for events becoming effective in 2009. 
2009 Enrolled Actuaries Meeting Blue Book Page 19 

QUESTION 18 

Reportable Events: Small Plan Missed Quarterly Waivers 

PBGC Technical Update 08-2 (“Waiver for Small Employer Reporting of Missed 

Quarterly Contribution” (available at http://www.pbgc.gov/practitioners/law-regulationsinformal-guidance/content/tu16372.html) provided a waiver of ERISA 4043 reporting 

requirements for small plans that did not make a required quarterly installment (either 

intentionally or in error) if certain criteria were met (generally related to funded status). 

That waiver applied only to plan years beginning in 2008. Similar waivers were granted 

for plan years beginning in 1996-2007 

Has a similar waiver been granted for plan years beginning in 2009? 

RESPONSE — No. For plan years beginning in 2009, small plans must follow the same 

rules as all other plans with respect to 4043 reporting requirements related to a missed 

quarterly installment. See Subpart B of PBGC’s reportable events regulation (29 CFR 

Part 4043) for information on such reporting requirements (available at 

http://www.pbgc.gov/practitioners/law-regulations-informalguidance/content/page14762.html.) 
2009 Enrolled Actuaries Meeting Blue Book Page 20 

QUESTION 19 

Reportable Events: Effect of Merger on Active Participant Reductions 

Under the guidance in Q&A 12 of the 2006 Blue Book, active participants who are 

transferred to another plan as part of a spinoff are considered to be part of any active 

participant reduction for purposes of the reportable events rules and, therefore, a spinoff 

in and of itself may trigger an active participant reduction reportable event. Would active 

participants who are transferred from another plan in a merger similarly be treated as 

offsetting any active participant reduction that might otherwise have occurred for the 

transferee plan for reportable events purposes? For example, assume that Plan A, a 

calendar-year plan, has 1,000 active participants throughout 2008 and at 1/1/09; that Plan 

B with 500 active participants merges into Plan A on 4/1/09, and that 300 active 

participants who were always in Plan A (and not in Plan B) are separated on 7/1/09. In 

such a fact pattern, assuming no other changes to Plan A’s active participant count in 

2009, was there an active participant reduction for Plan A under the reportable events 

rules in 2009? 

RESPONSE 

No. Since the Plan B participants became Plan A participants prior to the reduction, at no 

time in 2009 was the number of active participants in Plan A less than 80% of the number 

at the beginning of the current plan year or less than 75% of the number at the beginning 

of the prior plan year. Therefore the active participant reduction does not result in a 

reportable event. 

Although this is not a reportable event, if PBGC has knowledge of the active participant 

reduction from other sources, such as media reports, the agency might investigate 

whether the merger or the subsequent reduction in active participants raised any concerns 

for the insurance program and, based on the facts and circumstances, might take 

appropriate action. 
2009 Enrolled Actuaries Meeting Blue Book Page 21 

QUESTION 20 

ERISA 4010 Reporting: Experience with Waivers and Extensions 

Please describe PBGC’s experience in connection with requests for waivers or extensions 

under ERISA Section 4010, including examples of situations where relief has been 

granted or denied. 

RESPONSE 

In recent years, PBGC has gotten very few requests for 4010 waivers, so its experience is 

quite limited. In one recent situation, a waiver was requested and granted because the 

plan was in the process of doing a standard termination. 

PBGC usually receives a handful requests for extension of the filing deadline for 4010 

information because certain financial information is not available. Some of the reasons 

given have been that the controlled group included foreign subsidiaries; there were 

companies with different fiscal years in the controlled group, etc. In such cases, if an 

extension was granted, the extension did not apply to the entire report, but rather to a very 

limited number of required data items. In many such cases, PBGC required the filer 

report certain substitute information that was available (e.g., monthly management 

reports, liquidity reports, etc.) as a condition of the limited extension. 

It is too soon to tell if the PPA changes to the 4010 gateway test will impact the number 

of waiver or extension requests. 
2009 Enrolled Actuaries Meeting Blue Book Page 22 

QUESTION 21 

ERISA 4010 Reporting: Anticipated Impact of PPA 

PPA Section 505(a) changes the primary reporting trigger for ERISA Section 4010 

reporting from whether aggregate unfunded vested benefits on a PBGC premium basis 

exceed $50 million to whether any one plan maintained by the controlled group has a 

funding target attainment percentage (FTAP) below 80%. Under PBGC’s pending 

proposed rule, controlled groups with aggregate underfunding not exceeding $15 million 

will be exempt from filing based on this revised trigger. What effect does PBGC 

anticipate that these changes (assuming implementation of the exemption in the proposed 

rule) will have on the number and nature of controlled groups required to file, taking into 

account the recent economic downturn? 

RESPONSE

It is very difficult to estimate the impact, especially because PPA 2006 changed the way 

in which assets and liabilities are measured for this purpose. In addition, it is difficult to 

predict employer behavior with respect to whether credit balances will be waived or 

additional monies contributed to avoid benefit restrictions. 

PBGC does, however, expect that many long-time filers with large amounts of 

underfunding will no longer be required to file. That is because a large plan with 

hundreds of millions of dollars in underfunding will likely be over 80% funded. Under 

pre-PPA law, 4010 reporting would have been required for such plans, but because of the 

PPA change to a percentage-based test, filing is no longer required. 

PBGC does not expect the economic downturn of late 2008 to have any impact on filings 

for 2008 (generally due April 15, 2009) because, under the proposed 4010 regulation, the 

FTAP for most calendar year plans will be based on January 1, 2008 asset values. 

PBGC expects the number of filers will increase somewhat for 2009 because for that 

year, the funded status will generally be based on January 1, 2009 asset values. 

However, given the ability to smooth assets and the increase in corporate bond rates, it is 

difficult to predict how many (or which) plans will have FTAPs below 80%. 

Note —Pending issuance of the final 4010 rule, PBGC issued Technical Update 08-3 

implementing the $15 million waiver information years beginning in 2008. For more 

information see: http://www.pbgc.gov/practitioners/law-regulations-informalguidance/content/tu16612.html. 
2009 Enrolled Actuaries Meeting Blue Book Page 23 

QUESTION 22 

ERISA 4010 Reporting: Modified Actuarial Valuation Reports 

An actuarial valuation report (AVR) containing (or supplemented by) certain specific 

data items must be submitted as part of a 4010 filing. In situations where the AVR is not 

available by the 4010 due date, § 4010.10(b) permits filing it at a later date (i.e., within 

15 days after the applicable Form 5500 deadline). 

Because the Worker, Retiree, and Employer Recovery Act of 2008 amended the rules 

related to asset smoothing, some plan sponsors may be reconsidering the asset method for 

the 2008 plan year, in many cases after an AVR has already been issued based on the 

sponsor’s original choice of asset method. 

If a filer believes that an already-issued AVR may be revised after the 4010 due date (for 

any reason), should the AVR be attached to the 4010 filing or should the filer take 

advantage of the alternative due date noted above until all decisions related to the 2008 

valuation are final? 

RESPONSE 

In the situation described above, PBGC recommends attaching the already-issued AVR to 

the 4010 filing. If the AVR is subsequently revised, the 4010 filing must be amended. 

The e-4010 application is set up to handle this type of amendment very easily. To do so, 

the filing coordinator simply clicks the "Amend Filing" button from the e-4010 home 

page to open the submitted filing. Next, the filing coordinator goes to the Schedule P 

attachment page for the plan in question, deletes the old AVR, attaches the new AVR, 

and re-submits the filing. It should take only a few minutes. 

Given the unusual situation for 2008 plan years, a filer who believes the AVR may be 

revised after the 4010 due date may want to include a comment to that effect with the 

original 4010 filing. 
2009 Enrolled Actuaries Meeting Blue Book Page 24 

QUESTION 23 

ERISA 4010 Reporting: Plan Mergers 

A controlled group sponsors two calendar year pension plans at the beginning of the 2008 

calendar year information year. Both plans have beginning of year valuation dates. Plan 

A’s FTAP is over 80% and Plan B’s FTAP is below 80%. Plan B is merged into Plan A 

in the middle of the year so that at the end of the information year only Plan A remains. 

(a) Would a 4010 filing be required, or would it depend on the FTAP as of the beginning 

of the plan year of the theoretical combined plan? 

(b) Would the answer be different if Plan A had been merged into Plan B? 

RESPONSE 

(a) In this situation, a 4010 filing would not be required for 2008. An explanation 

follows: 

For the 80% FTAP gateway test for the 2008 information year, Plan B is 

disregarded because Plan B does not exist on the last day of the information year. 

Plan A’s FTAP is determined on the valuation date for the plan year ending within 

the information year, or in this case, January 1, 2008. Under the proposed 4010 

regulation, there is no requirement to adjust the FTAP to reflect significant events 

that occur during the year. The FTAP used for the 80% 4010 gateway test is the 

same FTAP that will be reported on Plan A’s 2008 Schedule SB. 

(b) Yes. If the Plan A had merged into Plan B during 2008 (and all other facts remained 

the same), then Plan B’s FTAP would be the relevant measure and a 4010 filing would

be required for 2008. 
2009 Enrolled Actuaries Meeting Blue Book Page 25 

 QUESTION 24 

Other Reporting: Enforcement Policy for 4062(e) Events 

ERISA Section 4062(e) applies when an employer ceases operations at a facility and, as a 

result, more than 20 percent of employees covered by its defined benefit pension plan 

separate from employment. Please describe the PBGC’s experience and enforcement 

plans in connection with finding out about such events (including its policy relating to 

penalties for reporting failures) and pursuing the related liability. In particular, please 

provide information relating to the number of such events over the past year and how 

PBGC has dealt with them, including a brief description of the kinds of settlements 

PBGC has entered into. 

RESPONSE 

PBGC learns of potential ERISA section 4062(e) events from its monitoring efforts and 

through notices filed under ERISA sections 4043 and 4063(a). Since the publication in 

2006 of PBGC’s regulation on calculation of liability pursuant to section 4062(e), PBGC 

has seen a noticeable increase in self-reporting under section 4063(a). PBGC’s existing 

penalty policy applies to failures to file under ERISA section 4063(a). PBGC assesses 

penalties for such failures or takes other appropriate actions. 

During FY 2008, PBGC’s Insurance Programs Office (IPO) settled five cases. The 

settlements provided protection valued at about $125M, in total, for pension plans 

covering over 13,000 participants. As of September 30, 2008, IPO was working on 38 

cases. PBGC works with companies to structure flexible settlements that fit within the 

parameters of their business plans. 
2009 Enrolled Actuaries Meeting Blue Book Page 26 

QUESTION 25 

Other Reporting: Timing of Notice of 4062(e) Event 

ERISA Section 4063(a) requires notification to PBGC of a Section 4062(e) event within 

a 60-day period. 

(a) When does the 60-day period start to run in the following situations? 

(1) Assume an employer ceases operation on December 31, 2008, but the first 

date on which at least 20% of the plan’s active participants have been 

separated from employment as a result of the cessation is March 31, 2009. 

(2) Assume an employer ceases operation on March 31, 2009, but the first date on 

which at least 20% of the plan’s active participants have been separated from 

employment as a result of the planned cessation was December 31, 2008. 

(b) Does PBGC’s existing policy on the assessment of penalties under ERISA section 

4071, as published in the Federal Register on July 18, 1995 (60 Fed. Reg. 36937), 

including the general “guideline” penalties described therein, apply to failures to 

comply with the ERISA Section 4063(a) reporting requirement when a Section 

4062(e) event occurs? 

RESPONSE 

(a) PBGC evaluates each case based on the facts and circumstances. PBGC encourages 

employers to contact the PBGC’s Department of Insurance Supervision and 

Compliance (DISC) before any section 4062(e) event to discuss the situation and 

any potential liability. The direct telephone number for DISC is (202) 326-4070. 

(b) Yes. 
2009 Enrolled Actuaries Meeting Blue Book Page 27 

 QUESTION 26 

Other: Overlapping PBGC Bankruptcy Claims 

A plan is trusteed by the PBGC and the PBGC presents its claims to the bankruptcy 

court. The plan in question has underfunding of $3,000,000, an expected settlement rate 

of one third on unsecured claims, no unpaid PBGC premiums, and a claim for $300,000 

for contributions owed to the plan (including a priority claim for contributions of $9,000). 

The PBGC presents these claims as $300,000 (including $9,000 in priority status) plus a 

claim for $2,894,000 ($3,000,000 minus the expected amount to be recovered from its 

claim for contributions). Assuming this approach is used by the court and all goes as 

planned, the PBGC then recovers a total of $1,070,667 ($9,000 + [$291,000 

+$2,894,000] / 3). How does essentially $3,000,000 in “overlapping” unsecured claims 

(but with roughly an extra $6,000 recoverable due to the priority claim) generate a 

recovery of anything other than roughly $1,006,000? Obviously as monies are recovered 

for contributions owed to the plan the underfunding decreases so the two separate claims 

“overlap.” 

The bankruptcy estate restates these claims for the court’s consideration as a $9,000 

priority claim plus a claim for an unsecured obligation of $2,991,000 ($3,000,000 minus 

just the priority claim for contributions). Assuming this approach is used by the court 

and all goes as planned, the PBGC then recovers a total of $1,006,000 ($9,000 + 

$2,991,000 / 3). 

Which approach, in PBGC’s view, is correct? 

RESPONSE 

The first approach is correct. The independent claims don’t so much “overlap” as 

recovery on one claim reduces the other. 

Title IV provides that PBGC can recover unpaid contributions on behalf of the plan 

independently from its own claim for the plan’s underfunding. Contributions are plan 

assets. The plan recovers $9,000 on its priority claim, and $97,000 on its unsecured 

claim. Because the increased assets reduce PBGC’s underfunding claim, the latter 

becomes $2,894,000. PBGC’s 1⁄3 recovery on that is $964,667. Therefore, PBGC’s total 

recovery is the $1,070,667 in the first approach. 
2009 Enrolled Actuaries Meeting Blue Book Page 28 

QUESTION 27 

Other: PBGC Enforcement Policy (Liens for Missed Quarterly Contributions) 

In general, a lien, enforceable by the PBGC, arises on the assets of an employer that does 

not make a timely quarterly installment if the total of missed contributions (including 

interest) is at least $1,000,000. In addition, such an employer is required to file a Form 

200 to notify the PBGC of such a missed contribution. 

The IRS proposed rule on minimum funding requirements released April 9, 2008, 

provides that if a plan sponsor wants to use a credit balance to satisfy the minimum 

funding requirement with respect to a quarterly installment, the sponsor must make a 

written election to do so by the due date for that quarterly installment. However, this rule 

is not yet final and it is not clear whether, in order to comply with the statute in 2008, it is 

reasonable not to follow the proposed rule in 2008. 

How has the PBGC been enforcing, and how does it intend to enforce, these requirements 

with respect to a plan sponsor that (1) has a credit balance available and sufficient to 

offset an entire quarterly installment that (together with prior missed payments and 

interest) is in excess of $1 million but (2) does not make a written election to do so by the 

time the installment is due, and (3) does not pay the installment? 

RESPONSE

It is not for PBGC to say whether a 2008 quarterly installment was, in fact, “missed” in 

situations where the credit balance exceeded the required installment, but a written 

election was not made by the due date of the installment. 

In 2008, if PBGC was notified of a situation like the one described, PBGC did not seek to 

perfect a lien if the sponsor confirmed that the amount of available credit balance 

exceeded the required installment and that it was electing to use the credit balance to 

offset the required installment. If the Treasury regulation is not final by the date an 

installment is due for the 2009 plan year, absent additional guidance from PBGC, it is 

likely the same procedures will be followed. In the meantime, questions about this 

should be directed to PBGC’s Department of Insurance Supervision and Compliance at 

(202) 326-4070. 
2009 Enrolled Actuaries Meeting Blue Book Page 29 

QUESTION 28 

Other: “Risk Mitigation” Program 

Please provide an update on the number and kinds of cases the PBGC has been involved 

in over the past year under its “Early Warning” or “Risk Mitigation” program, including 

a description of the results of that involvement. How does the level of activity under this 

program compare to prior years? 

RESPONSE

During FY 2008, PBGC’s Department of Insurance Supervision and Compliance 

identified more than 480 transactions that met the criteria discussed in Technical Update 

00-3. PBGC investigated close to 100 transactions, sought protection related to 7 

transactions, and were successful in obtaining economic protection in 4 cases for a total 

of $121.7 million. The level of activity for 2008 was about the same as in prior years. 

PBGC encourages plan sponsors and their advisors to discuss potential transactions with 

PBGC well in advance in order to allow PBGC time to complete its investigation and 

avoid delaying the closing. PBGC has substantial flexibility to structure settlements that 

mitigate risk to the pension plans while still working within the parameters of companies’ 

business plans. 
2009 Enrolled Actuaries Meeting Blue Book Page 30 

QUESTION 29 

Other: Litigation Issues 

Please describe PBGC litigation in the past year that has established precedent that would 

be of interest to enrolled actuaries. 

RESPONSE 

Oneida, Ltd. v. PBGC (In re Oneida, Ltd.), 383 B.R. 29 (Bankr. S.D.N.Y. 2008), appeal 

pending, No. 08-2964-bk (2d Cir.): The debtor filed an adversary proceeding against 

PBGC, seeking a declaration that the agency’s claim for the statutory termination 

premiums were pre-petition claims that were discharged upon the debtor’s emergence 

from bankruptcy. The bankruptcy court held that the debtor’s obligation to pay the 

termination premium is a pre-petition bankruptcy claim, rejecting PBGC’s position that 

under the plain text of the statute, the premium is a post-discharge obligation that cannot 

be reduced by the bankruptcy court. PBGC and the debtor jointly obtained permission to 

appeal the bankruptcy court’s ruling directly to the U.S. Court of Appeals for the Second 

Circuit, where the case has been fully briefed and argued. 

Davis v. PBGC, 2008 U.S. Dist. LEXIS 106255 (D.D.C. Dec. 2, 2008): In this suit, 

about 1,700 retired pilots are challenging numerous aspects of PBGC's determination of 

their pension benefits under the terminated US Airways pilots plan. In this decision, the 

court denied the pilots’ request to enjoin PBGC from recouping or seeking recovery of 

benefit overpayments from approximately 100 pilots pending completion of the case. 

The district court found that the pilots had failed to demonstrate that they were likely to 

succeed in their challenge of the way PBGC calculated their benefits, because PBGC’s 

interpretation of ERISA and its regulations is entitled to deference. The pilots have 

appealed this decision to the U.S. Court of Appeals for the D.C. Circuit. PBGC’s motion 

to dismiss the complaint in part is still pending before the district court. 

Sara Lee Corp. v. American Bakers Ass’n, 512 F.Supp.2d 32 (2007); 252 

F.R.D. 31 (D.D.C. 2008): PBGC made an administrative determination classifying a 

pension plan to which more than one employer contributed as a multiple-employer plan, 

rather than an aggregate of single-employer plans, as it previously had determined. 

Several contributing employers and the plan trustees challenged PBGC’s determination. 

The district court held that the deferential “arbitrary and capricious” standard applied to 

PBGC’s reclassification of the plan, but held in abeyance its decision with respect to 

PBGC’s motion for summary judgment until it was assured that the administrative record 

was complete. Sara Lee and others then sought extensive discovery, arguing that PBGC 

had used flawed procedures, changed the applicable legal standard, and failed to 

adequately explain various aspects of its determination. The court held that PBGC’s 

submission of the administrative record is entitled to a “strong presumption of 

regularity,” which the challengers fell far short of rebutting. And the court found 

PBGC’s determination, far from being inadequately explained, “clear on its face.” 
2009 Enrolled Actuaries Meeting Blue Book Page 31 

Adey v. PBGC, 2008 WL 4724314 (N.D. W. Va Oct. 24, 2008): In this suit, 49 

participants in the terminated Weirton Steel Corporation Retirement Plan assert that 

PBGC incorrectly determined that they failed to meet the service requirement for a 30-

year pension. In this decision, the court held that PBGC’s benefit determinations are 

entitled to deferential review under the Administrative Procedure Act based on the 

administrative record submitted by the agency, and no discovery to develop an 

independent factual record is allowed. 

Koehler v. PBGC, 2008 WL 1751732 (6th Cir. Apr. 16, 2008): Participants in a 

terminated plan brought suit against PBGC, claiming that they were entitled to disability 

pensions, which had been denied them by the former plan sponsor and, subsequently, by 

PBGC. The participants asserted that PBGC had breached its fiduciary duties by failing 

to pay the claimed benefits. None of the participants had appealed their benefit 

determinations to PBGC’s Appeals Board. The district court dismissed the complaint 

based on the participants’ failure to exhaust their administrative remedies. The court of 

appeals affirmed. 

Stephens v. US Airways Group, Inc., 555 F.Supp.2d 112 (D.D.C. 2008): A group of 

pilot participants sued US Airways for paying lump sum benefits 45 days after their 

retirement date, and without interest. The suit was delayed for years due to US Airways’ 

bankruptcy. While the case was on appeal, the pilots’ plan was terminated. Upon 

remand to district court, the pilots named PBGC as a defendant, seeking interest from 

PBGC, asserting that the alleged delay deprived them of the actuarial equivalent of their 

benefit, and that PBGC committed a fiduciary breach by failing to compensate them for 

the interest/actuarial equivalent they claimed was due. PBGC moved to dismiss certain 

parts of the case. The court agreed with PBGC that the pilots cannot maintain a fiduciary 

breach claim that arises from an alleged failure to pay benefits; that PBGC is not liable 

for the alleged breach by a prior fiduciary; and that the pilots are not entitled to attorneys’ 

fees under Title IV of ERISA. The court found that PBGC’s statute of limitations 

assertion needed further factual development, but noted that the plaintiffs’ arguments on 

this were “quite shaky.” 

Douglas v. PBGC, 2008 WL 2805604 (E.D. Pa. July18, 2008): Applying the deferential 

“arbitrary and capricious” standard, the court upheld PBGC’s benefit determination 

against a challenge by the participant regarding his years of continuous service. 
2009 Enrolled Actuaries Meeting Blue Book Page 32 

QUESTION 30 

Other: Private Equity Fund as "Trade or Business" for Controlled Group Purposes 

A PBGC Appeals Board decision issued on September 26, 2007, held that a private 

equity fund that was unincorporated and that had a controlling interest (at least 80%) in 

one of its portfolio companies was a “trade or business”—rather than, as the private 

equity fund had argued, a passive investment vehicle that was not conducting a “trade or 

business”—and therefore was exposed to ERISA Title IV joint and several controlled 

group liability for the underfunding upon termination of the pension plan of that portfolio 

company. The Appeals Board had based its determination that this private equity fund 

was a “trade or business” on the test announced in Commissioner v. Groetzinger, 480 

U.S. 23 (1987), i.e., (1) whether a taxpayer is engaged in an activity with “the primary 

purpose of income or profit" and (2) whether the activity is conducted with “continuity 

and regularity.” However, in its response to Question 19 of the 2008 Blue Book, PBGC 

stated, without any reference to the Groetzinger test, that “a private equity fund is a trade 

or business under common control with a plan sponsor if the fund meets the bright-line 

test of 80% or greater ownership of the plan sponsor.” 

Is it PBGC’s position that every private equity fund, regardless of its primary purpose or 

level of activities with respect to a portfolio company, would constitute a “trade or 

business” under the Groetzinger test? 

RESPONSE

No. As noted in the introduction of the Blue Book, the responses in the Blue Book 

are not PBGC positions. They reflect the current views of individual PBGC staff 

members. The 2008 Blue Book response was intended to reflect the staff 

experience that, absent unusual facts and circumstances, it is likely that a private 

equity fund will be a “trade or business.” Of course, each case must be decided 

based on its particular facts and circumstances. 
2009 Enrolled Actuaries Meeting Blue Book Page 33 

QUESTION 31 

Other: Substantial Cesssation of Operations 

In its response to Question 22 of the 2007 Blue Book, PBGC stated that a spinoff of a 

portion of a multiple-employer plan to a substantial employer of that plan constitutes a 

withdrawal that needs to be reported under ERISA Section 4063. Assume a multipleemployer plan, Plan AB, in which two employers, Employer A and Employer B, 

participate. Assume further that these two employers, both of which are substantial 

employers, decide that they no longer want to participate in a multiple-employer plan and 

that, effective January 1, 2009, Plan AB is split into two plans: Plan A, which is 

maintained solely by Employer A, and Plan B, which is maintained solely by Employer 

B. How should it be determined whether Employer A, or Employer B, or both, have 

withdrawn from Plan AB within the meaning of ERISA Section 4063? 

RESPONSE

The transaction should be reported to PBGC as a withdrawal of both Employer A and 

Employer B. PBGC will decide, based on all of the facts and circumstances, how the 

matter should be handled. If you have a case in which this is an issue, PBGC 

recommends that you discuss the issue with PBGC’s Department of Insurance 

Supervision and Compliance (DISC) and PBGC’s Office of Chief Counsel (OCC) as 

early as possible. The direct telephone numbers for DISC and OCC are (202) 326-4070 

and (202) 326-4020. 
2009 Enrolled Actuaries Meeting Blue Book Page 34 

QUESTION 32 

Other: Plan Restoration Initiative

It was reported in late 2008 that PBGC had launched an initiative to consider restoring 

terminated plans to companies that may be able to afford to maintain plans that had 

previously been taken over by the PBGC. Please describe the program. 

 

RESPONSE

The program was described in PBGC’s FY 2008 Annual Report (page 5). That 

description is copied below. 

In 2008, PBGC initiated a process to analyze the financial condition of former 

sponsors of trusteed pension plans to examine whether plan restoration may 

be possible. Under ERISA, PBGC has authority to restore a terminated plan to 

the former sponsor, and a key issue is whether the sponsor has become 

financially healthy enough to support the pension plan. Prior to adoption of 

this new process, PBGC did not systematically review the financial condition 

of ongoing companies that previously terminated and transferred their 

underfunded pension plans to PBGC. This analysis will now be a recurring 

operating procedure within the organization. 

PBGC’s annual report is available at http://www.pbgc.gov/docs/2008_annual_report.pdf . 
2009 Enrolled Actuaries Meeting Blue Book Page 35 

QUESTION 33 

Other: Recent DB Plan Trends 

During the past year, has PBGC seen any pattern in plan freezing, termination of frozen 

plans, or growth of cash balance plans? 

RESPONSE 

Most of the data available about plan freezes, frozen plan terminations and hybrid plans 

comes from the Form 5500, so PBGC does not yet have information about patterns that 

may have emerged in 2008. In general, there is a lag of about 2 years for this type of 

data. However, beginning with 2008 plan years, additional information about plan 

freezes will be reported on the PBGC premium filing, so PBGC will have access to plan 

freeze data in a timelier manner. 

The approximate percentage of plans that were “hard frozen” (i.e., had ceased benefit 

accruals) as of the end of the plan year in 2003-2006 were 9.5%, 12%, 14.6%, and 16.8% 

respectively. The rate of plan freezes seems to be slowing, however. Most of the plans 

that are frozen are relatively small plans. 

The termination of frozen plans has appeared to be relatively constant, with 

approximately 20% of frozen plans being terminated in any given year. 

The growth of hybrid plans appears to be continuing. Our preliminary data indicates that 

as of the end of the 2006 plan year: 

 Almost a third of participants in plans PBGC insures were in hybrid plans, and 

 Hybrid plans represented over 8% of single-employer DB plans (the 

corresponding percentage for the prior year was 7.3%). The percentage is much 

higher if you consider only large plans. For example, as of the end of 2006, 

almost a third of insured plans with 5,000 or more participants were hybrid plans. 
2009 Enrolled Actuaries Meeting Blue Book Page 36 

QUESTION 34 

Other: PBGC copy of ERISA 101(f) Annual Funding Notice 

What is the address for sending a copy of the Annual Funding Notice to PBGC? 

RESPONSE 

PBGC will accept an electronic or a hard copy of annual funding notices. Addresses for 

the PBGC-copies are shown below: 

 

 Single employer plans Multiemployer plans 

Hard 

copies 

Pension Benefit Guaranty Corporation 

ATTN: Single-Employer AFN Coordinator 

1200 K Street, NW, Suite 270 

Washington, DC 20005-4026 

Pension Benefit Guaranty Corporation 

ATTN: Multiemployer Data Coordinator 

1200 K Street NW., Suite 930 

Washington, DC 20005-4026 

Electronic 

copies Single-employerAFN@PBGC.gov Multiemployerprogram@PBGC.gov