2004 Enrolled Actuaries Meeting 

Questions to the PBGC 

and Summary of their Responses 

March 2004 

1 
Summary of Discussions between the Enrolled Actuaries Program Committee 

and Staff of the Pension Benefit Guaranty Corporation 

on January 23 and February 25, 2004 

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

discussions on January 23 and February 25, 2004, with representatives of the Enrolled Actuaries Program 

Committee. Included also are summaries of the responses to those questions. The summary responses to the 

questions are intended to reflect as accurately as possible the statements made by the government representatives. 

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

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

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

whether the statements herein are accurate or complete. 

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

Bruce A. Cadenhead, Mercer Human Resource Consulting 

Curtis M. Cartolano, Hewitt Associates LLC 

Marjorie R. Martin, Aon Consulting 

Jay P. Rosenberg, Mellon Human Resources & Investor Solutions 

Donald J. Segal, The Segal Company 

Kenneth A. Steiner, Watson Wyatt Worldwide 

James A. Stinchcomb, Towers Perrin 

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

Stuart A. Sirkin, Director, Corporate Policy and Research Department 

C. David Gustafson, Chief Policy Actuary 

Jane D. Pacelli, Chief Research Actuary 

Karen Krist Justesen, Chief Negotiating Actuary 

Gail Sevin, Manager, Policy Division, Corporate Policy and Research Department 

Peggy Thibault, Actuary 

Deborah Forbes, Analyst 

Rhonda Migdail, Analyst 

James Bloch, Analyst 

Michael Jones, Analyst 

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

James L. Beller, Staff Attorney 

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

Copyright © 2004, Enrolled Actuaries Meeting 

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

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

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

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

does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in 

new collective works, or for sale or resale. 

2 
INDEX 

Subject Matter Questions 

1. Premiums ...................................................................................................................... 1 – 4 

2. Standard Terminations ...................................................................................................5 – 7 

3. Guaranteed Benefits.......................................................................................................8 – 9 

4. Participant Notice...............................................................................................................10 

5. Reportable Events .......................................................................................................11 –13 

6. Employer Reporting...................................................................................................14 – 18

3 
QUESTION 1 

Premiums - Irrevocable Commitments 

When a plan spins off a portion of the plan and terminates that portion (a spinoff/termination), it 

is required to purchase irrevocable commitments for accrued benefits remaining in the ongoing 

plan. How should the ongoing plan treat the irrevocable commitments for premium purposes? 

RESPONSE: 

Assuming all benefit liabilities in the ongoing plan at the date of the spinoff/termination are 

provided for through irrevocable commitments, the future flat-rate and variable-rate premiums 

are determined as follows. 

(a) A flat-rate premium is not payable with respect to any individual if all benefit liabilities 

for the individual have been provided through an irrevocable commitment. However, if 

the individual has benefit liabilities as of any future premium snapshot date (e.g., by 

earning sufficient additional credited service), the individual will then be counted for the 

flat-rate premium. 

(b) IRS staff has advised the PBGC that the funding calculations (including current liability) 

may be determined by either including both or excluding both the assets and liabilities 

related to the irrevocable commitment. Thus, whether the variable-rate premium is 

determined by using the General Rule or the Alternative Calculation Method, the plan 

would either include both or exclude both the assets and liabilities related to the 

irrevocable commitment, in accordance with the way they are treated for the funding 

calculations. 

4 
QUESTION 2 

Premiums - Unlocatable Participants 

Question 9 of the PBGC’s 2002 Blue Book addressed the situation where a plan administrator 

knows that a terminated vested participant is deceased, but does not know with certainty whether 

the participant has a surviving beneficiary. The response made clear that, in such circumstances, 

the plan administrator may drop the participant from the participant count for purposes of the 

PBGC’s flat-rate premium and disregard the benefit attributable to the participant (including any 

survivor benefit) for purposes of the PBGC’s variable-rate premium, if the plan administrator 

reasonably believes that the deceased participant has no living beneficiary who may be entitled 

to benefits from the plan. (The response went on to identify some of the factors to be considered 

in determining when this point may be reached.) 

(a) Where the plan administrator cannot locate the terminated vested participant, but does not 

know with certainty whether the terminated vested participant is deceased, under what 

circumstances may the plan administrator: 

(1) Drop a participant from the participant count for purposes of the flat-rate 

premium; or 

(2) Disregard the benefit attributable to the participant (including any survivor 

benefit) for purposes of the variable-rate premium? 

(b) Does it make any difference if the plan provides for the forfeiture of benefits in 

accordance with IRS regulation 1.411(a)-4(b)(6)? (This regulation provides that a benefit 

that is payable is not treated as forfeitable merely because the benefit is forfeitable on 

account of the inability to find the participant or beneficiary to whom payment is due, 

provided that the plan provides for reinstatement of the benefit if a claim is made for the 

forfeited benefit.) 

RESPONSE: 

The following response is limited to the premium area. The circumstances in which a participant 

or benefit could be disregarded in other contexts, such as plan termination, may be different. 

(a)(1) Flat-rate premium. The mere fact that the plan administrator cannot locate the 

participant — even if coupled with an inability to locate any potential living beneficiary — is 

not an adequate basis for dropping the participant from the participant count for purposes of 

the flat-rate premium. However, the plan administrator may drop the participant from the 

participant count for purposes of the flat-rate premium if the plan administrator reasonably 

believes that the participant is deceased and has no living beneficiary who may be entitled to 

benefits from the plan. There is no hard-and-fast rule about when this point may be reached. 

Factors to be considered include the length of time since the participant terminated 

employment, what measures the plan has taken to locate the participant and determine 

5 
whether the participant is deceased, how old the participant would be if still alive, whether 

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

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

any possible beneficiary, and what measures the plan has taken to locate any possible 

beneficiary and determine whether the beneficiary is deceased. 

(a)(2) Variable-rate premium. The point at which a plan administrator may disregard the 

benefit attributable to an unlocatable terminated vested participant (including any survivor 

benefit) for purposes of the variable-rate premium depends on when that benefit may be 

disregarded for purposes of determining current liability (because unfunded vested benefits is 

derived from unfunded current liability). IRS staff has advised the PBGC that current 

liability must be determined using reasonable actuarial assumptions and that the PBGC’s test 

for dropping a participant from the participant count for purposes of the flat-rate premium (as 

stated in the previous paragraph) when used for determining current liability is consistent 

with the application of reasonable actuarial assumptions. Therefore, the test for dropping a 

participant from the flat-rate premium (as stated in the previous paragraph) may also be used 

as the test for disregarding the benefit attributable to the participant (including any survivor 

benefit) for purposes of the variable-rate premium. (IRS staff has also advised the PBGC 

that the PBGC’s test, as stated in the response to Question 9 of the PBGC’s 2002 Blue Book, 

for disregarding a potential beneficiary’s benefit for purposes of the variable-rate premium is 

also consistent with the application of reasonable actuarial assumptions when used as the test 

for disregarding that potential beneficiary’s benefit for purposes of determining the plan’s 

current liability.) 

(b) Effect of forfeiture provision. A forfeiture provision as described in the question has no 

bearing on whether an individual may be dropped from the participant count for purposes of 

the flat-rate premium, given that the unlocatable individual does not lose the right to claim 

benefits. However, where there is a forfeiture of benefits in accordance with IRS regulation 

1.411(a)-4(b)(6), IRS staff has advised the PBGC that the benefit attributable to the 

participant (including any survivor benefit) is disregarded for purposes of determining the 

plan’s current liability. In such circumstances, because unfunded vested benefits is derived 

from unfunded current liability, that benefit would also be disregarded for purposes of the 

PBGC’s variable-rate premium. Thus, where there has been a forfeiture of benefits in 

accordance with IRS regulation 1.411(a)-4(b)(6), the participant’s benefit may be disregarded 

for the variable-rate premium even though the participant is included for purposes of the 

flat-rate premium. 

6 
 QUESTION 3 

Premiums - Full Funding Limit Exemption for De Minimis Mergers 

Question 8 of the PBGC 2002 Blue Book addresses the full funding limitation exemption from 

payment of PBGC variable-rate premiums in the case of plan mergers. Is this applicable to de 

minimis mergers (as defined under the IRS regulations section 414(l)-1(h))? Are there any 

special exemptions applicable to de minimis mergers, e.g., the smaller plan may be ignored for 

purposes of satisfying the full funding limitation exemption? 

RESPONSE: 

The same principles that are provided in Question 8 of the 2002 Blue Book would apply to a de 

minimis merger. There are currently no special exemptions with respect to the full funding 

limitation in connection with de minimis mergers. 

7 
 QUESTION 4 

Premiums - Interpretation of Significant Event 7 

Certain plans are required to take into account the occurrence of “significant events” in 

calculating unfunded vested benefits for purposes of the variable-rate premium. Significant event 

7 (described in § 4006.4(d)(2)(vii)) is “[a]ny other event or trend that results in a material 

increase in the value of unfunded vested benefits.” If there is such an “other event or trend” that 

results in a material decrease in unfunded vested benefits, may the plan reflect the decrease 

under Significant Event 7? 

RESPONSE: 

No. Under the plain language of the PBGC’s regulation describing Significant Event 7, the plan 

is not permitted to reflect a decrease in unfunded vested benefits. If the inability to reflect such a 

decrease makes use of the Alternative Calculation Method undesirable, the General Rule is 

always available. 

8 
 QUESTION 5 

Standard Terminations - Time for Determining Majority Owner Status 

A plan is terminating in a standard termination. The plan administrator issues the notice of intent 

to terminate on April 15, 2004. The proposed termination date is July 1, 2004. On August 1, 

2004, the majority owner sells his interest in the plan’s contributing sponsor and is no longer a 

majority owner. May the former majority owner elect an alternative treatment of his benefit in 

accordance with 29 CFR § 4041.21(b)(2) on August 15, 2004? 

RESPONSE: 

No. The PBGC noted in the preamble to the final rule providing for an alternative treatment by a 

majority owner that it would not “permit participants other than majority owners . . .to elect such 

an alternative treatment of their benefit . . . out of concern that they might be coerced into so 

electing.” 57 Fed. Reg. 59200, 59212 (December 14, 1992). The PBGC interprets its 

regulations as limiting the ability to elect such an alternative treatment to those participants who 

are majority owners at the time of the election because such an interpretation should serve to 

effectively eliminate the risk of coercion. 

9 
QUESTION 6

Standard Terminations - Application of Constructive Ownership Rules in Determining 

Majority Owner Status 

A plan is terminating in a standard termination. 

(a) A husband and wife are both participants in the plan and each owns 40 percent of the 

contributing sponsor. Is each a majority owner and thus able to elect alternative 

treatment of his or her benefit in accordance with 29 CFR § 4041.21(b)(2)? 

(b) Three persons are each participants in the plan and each owns one third of the stock of 

the contributing sponsor and each has an unrestricted option to buy out the other owners 

(subject to an ordering rule). Is each of these persons a majority owner and therefore able 

to elect an alternative treatment of his or her benefit in accordance with 29 CFR § 

4041.21(b)(2)? 

RESPONSE: 

(a) Yes. Under the constructive ownership rules of Code sections 414(b), each spouse would 

be a majority owner and thus able to elect an alternative treatment of his or her benefit in 

accordance with 29 CFR § 4041.21(b)(2). See Code section 1563(e)(5) and Treas. Reg. § 

1-414(b)-1. 

(b) Yes. If three persons (whether or not related) each owned one-third of the contributing 

sponsor, with each owner having an unrestricted option to buy out the other owners 

(subject to an ordering rule), each would be a majority owner under the constructive 

ownership rules of Code section 414(b) and thus able to elect an alternative treatment of 

his or her benefit in accordance with 29 CFR § 4041.21(b)(2). See Code section 

1563(e)(1) and Treas. Reg. § 1.414(b)-1. 

10 
QUESTION 7 

Standard Terminations - Refusal by Participant to Return Election Form 

A plan is terminating in a standard termination. With the exception of one participant, all 

participants have elected lump sums. However, one participant, who is entitled to a non-de 

minimis benefit, refuses to return the election form. What are the plan’s options for completing 

the standard termination? 

RESPONSE: 

The plan must purchase an annuity contract for the participant in order to complete the 

termination. Under 29 CFR § 4041.28(c), the plan administrator must, in accordance with all 

applicable requirements under the Code and ERISA, distribute plan assets in satisfaction of all 

plan benefits by purchase of an irrevocable commitment from an insurer or in another permitted 

form. If a participant refuses to elect another permitted form, the plan administrator has no 

choice but to purchase an irrevocable commitment for the participant in order to complete the 

termination. The annuity contract must preserve all of the participant’s benefit options. This 

would include not only the qualified joint-and-survivor annuity, but also any other optional 

forms, such as a “certain-and-continuous” benefit. 

11 
QUESTION 8 

Guaranteed Benefits - Post-65 Maximum Guaranteed Benefit 

The PBGC maximum guaranteed benefit is reduced where a participant is younger than age 65 at 

the later of the termination date or the time the participant begins to receive the benefit. Is the 

maximum guaranteed benefit increased where the participant is older than age 65? 

RESPONSE: 

Where the benefit application was received, or the formal benefit determination was issued, on or 

after March 6, 2000, the PBGC maximum guaranteed benefit is increased where the participant 

is older than age 65 at the later of the termination date or the time the participant begins to 

receive the benefit. The table below shows a sample of the late retirement factors the PBGC uses 

to increase the maximum guaranteed benefit. 

PBGC Late Retirement Factors 

Age Factor 

65 1.0000 

66 1.1000 

67 1.2100 

68 1.3400 

69 1.4900 

70 1.6600 

71 1.9360 

72 2.2120 

73 2.4880 

74 2.7640 

75 3.0400 

76 3.7160 

77 4.3920 

78 5.0680 

79 5.7440 

80 6.4200 

81 8.4480 

82 10.4750 

83 12.5040 

84 14.5320 

85 16.5630 

12 
QUESTION 9 

Guaranteed Benefits - Phase-in of Scheduled Benefit Increases 

Pursuant to a collective bargaining agreement, Plan X was amended to provide scheduled benefit 

increases for the three years covered under the collective bargaining agreement. The amendment 

was adopted on December 31, 1999. The first scheduled increase was effective on January 1, 

2000; the second scheduled increase was effective on January 1, 2001; and the third scheduled 

increase was effective on January 1, 2002. Plan X terminates on June 30, 2004. How should this 

amendment be treated for phase-in purposes? 

RESPONSE: 

For phase-in purposes, a benefit increase is effective on the later of the date it is adopted or 

effective. In this case, the three scheduled increases became effective on January 1 of 2000, 

2001, and 2002, respectively. Therefore, the first scheduled increase was in effect for four full 

years as of the termination date and is phased in at the rate of 80% (or, if greater, $80 per 

month). The second scheduled increase was in effect for three full years and is phased in at the 

rate of 60% (or, if greater, $60 per month). The third scheduled increase was in effect for two 

full years and is phased in at the rate of 40% (or, if greater, $40 per month). 

13 
QUESTION 10 

Participant Notice - Persons Entitled to Receive Notice; Time of Notice 

The PBGC’s regulation on Participant Notices (29 CFR Part 4011) contains certain constraints 

on changing, “from one plan year to the next,” the date for determining who is a person that must 

receive the Participant Notice and on changing, “from one plan year to the next,” the issuance 

date of the Participant Notice. 

(a) For the first plan year for which a Participant Notice is required to be issued, are there 

any constraints on selecting the date for determining who is a person that must receive 

the Participant Notice or the issuance date of the Participant Notice, provided that in each 

case the date is within the permitted time period? 

(b) How do the rules on permitted changes to the date for determining who is a person that 

must receive the Participant Notice or the issuance date of the Participant Notice apply 

where a Participant Notice is not required to be issued for a particular plan year, e.g., 

where a Participant Notice was required for the 2002 plan year, was not required to be 

issued for the 2003 plan year, and is required to be issued for the 2004 plan year? 

RESPONSE: 

The PBGC’s Participant Notice regulation provides that, in determining who is a person that must 

receive the Participant Notice for a plan year, the plan administrator may select any date during the 

period beginning with the last day of the previous plan year and ending with the day on which the 

Participant Notice for the plan year is due, provided that a change in the date from one plan year to 

the next does not exclude a substantial number of participants and beneficiaries (29 CFR § 4011.7). 

The regulation also provides that a plan administrator must issue the Participant Notice for a plan 

year no later than two months after the deadline (including extensions) for filing the annual report 

for the previous plan year and may change the date of issuance of a Participant Notice from one 

plan year to the next, provided that the effect of any change is not to avoid disclosing a minimum 

funding waiver or a missed contribution (29 CFR § 4011.8). 

(a) For the first plan year for which a Participant Notice is issued, there are no constraints on 

selecting the date for determining who is a person that must receive the Participant Notice 

or the issuance date of the Participant Notice, provided that in each case the date is within 

the permitted time period. 

(b) Where the plan administrator is not required to issue a Participant Notice for the 

immediately preceding plan year, there are no constraints on selecting the date for 

determining who is a person that must receive the Participant Notice for the current plan 

year or the issuance date of that Participant Notice, provided that in each case the date is 

within the permitted time period. 

14 
QUESTION 11 

Reportable Events - Asset Sale 

Company X, which maintains a defined benefit pension plan, is planning to sell all of its assets to 

Company Y. Company Y is not assuming the pension plan. What are some key PBGC issues 

for the plan sponsor and plan administrator to consider? 

RESPONSE: 

(a) Reporting. Although the sale of assets is not itself an event that must be reported to the 

PBGC pursuant to ERISA section 4043 and Part 4043 of the PBGC’s regulations, it is 

often the case that such a sale will be accompanied by or give rise to an event that is 

reportable (unless a waiver applies). For instance, when all the assets of a company are 

sold, the plan will often have a significant reduction in active participants. (See 29 CFR 

§ 4043.23.) In addition, the transfer of the proceeds from the sale to another member of 

the controlled group may be an extraordinary dividend. (See 29 CFR § 4043.31 and .64.) 

And in some cases, the plan’s sponsor, or a member of the sponsor’s controlled group, 

may be involved in a liquidation, bankruptcy filing, or loan default at or about the time of 

the asset sale. (See 29 CFR §§ 4043.30, .34, .35, .63, .67, and .68.) The asset sale may 

also constitute a substantial cessation of operation that must be reported to the PBGC 

pursuant to ERISA § 4062(e). 

(b) PBGC monitoring. In some cases, the PBGC will contact the plan sponsor or plan 

administrator for information about the asset sale or any related transactions, even if 

reporting is not otherwise required. For instance, the PBGC may contact a company 

pursuant to the PBGC’s Early Warning Program. See Technical Update 00-3: PBGC’s 

Early Warning Program (July 24, 2000). This Technical Update can be found on the 

PBGC Web site at www.pbgc.gov/laws/techupdates/tech00-3.htm. 

(c) Plan termination and employer liability. Even if a company is going out of business in 

connection with an asset sale (or otherwise), the plan administrator (who is often the plan 

sponsor) is responsible for continuing the operation of the plan until it is terminated and 

the termination process is complete (including any required distribution of assets). 

Company X will have to decide what it intends to do with the pension plan. Other 

members of Company X’s controlled group could continue to maintain the plan. 

Company X could seek to terminate the plan voluntarily, either in a distress or standard 

termination depending upon the circumstances. Or the PBGC may determine that it 

should seek to have the plan terminated under ERISA section 4042. The PBGC routinely 

seeks to recover the full amount of unfunded benefit liabilities under section 4062 from 

the sponsor and any members of its controlled group. In addition, if the facts suggest that 

a principal purpose of any person entering into a transaction is to evade or avoid pension 

liability, the PBGC may also seek to recover under section 4069. 

15 
QUESTION 12 

Reportable Events - Transfer of Benefit Liabilities 

Section 4043.32 of the PBGC’s Reportable Events regulation contains a number of waivers for 

the reportable event notice required within 30 days of a transfer of benefit liabilities to a plan of 

another controlled group. Typically, plan spinoff calculations are done some time after the 

actual “as of” or effective transfer date. Until the calculations are done, the contributing sponsor 

and plan administrator may not know whether one of the waivers applies, such as the waiver for 

calculations made using PBGC safe harbor assumptions. 

(a) How is the 30-day deadline determined in these situations: from the date as of which the 

spinoff occurs, or from the date the final determination is made and it is known whether 

the safe harbor rates will, or will not, be used? 

(b) If the former, is it likely that the full late filing penalty would be assessed in these 

situations where the notice is delayed until calculations are completed?

RESPONSE: 

(a) Deadline and extension requests. The 30-day deadline is measured from the date the plan 

administrator or contributing sponsor knows or has reason to know that the reportable 

event has occurred, regardless of the potential availability of any waiver from reporting. 

Note that the information that PBGC Form 10 (“Post-Event Notice of Reportable 

Events”) calls for in connection with a transfer of benefit liabilities would ordinarily be 

available before final spinoff (or other transfer) calculations have been done. That 

information consists of identifying information, a brief description of “the pertinent facts 

relating to the event,” the “[n]ame, contributing sponsor and EIN/PN of transferee 

plan(s); [an] [e]xplanation of the actuarial assumptions used in determining the value of 

benefit liabilities (and, if appropriate, plan assets) transferred; [and an] [e]stimate of the 

assets, liabilities, and number of participants whose benefits are transferred” (emphasis 

added). Nevertheless, if there is a problem in filing a complete report by the deadline, the 

plan administrator or contributing sponsor should contact the PBGC, preferably well 

before the deadline has passed, to request a case-specific waiver or extension. The PBGC 

has authority to grant case-specific waivers and extensions when it finds convincing 

evidence that a waiver or extension is appropriate. (See 29 CFR § 4043.4.) 

(b) Penalties. Any late filing penalty would be based on a review of the facts and 

circumstances. In deciding the amount, if any, of the penalty, the PBGC would take into 

account whether and when the plan administrator or contributing sponsor contacted the 

PBGC to request a waiver or extension and the basis for the request. (Of course, if the 

PBGC granted a complete reporting waiver, or granted a reporting extension and a 

complete report was filed by the extended deadline, there would be no penalty.) 

16 
QUESTION 13 

Reportable Events - “Retroactively Missed” Contributions 

In the following situations, will the PBGC assess a penalty for failure to file a reportable events 

notice or Form 10, or perfect or enforce any lien that may have arisen under IRC section 412(n)? 

(a) “Recharacterized” contributions. Assume that: 

(1) Contributions are made to a calendar year plan on April 15, 2004, and July 15, 2004, 

in amounts that would be sufficient to satisfy the first two quarterly contribution 

requirements for the 2004 plan year if those amounts were designated as being “for” 

the 2004 plan year. 

(2) Those amounts are later designated as being “for” the 2003 plan year in the plan’s 

2003 Form 5500, Schedule B. 

(3) No portion of the recharacterized contributions is needed to avoid a funding 

deficiency in the plan’s funding standard account for the 2003 plan year (after taking 

into account the “catch-up” contribution made to the plan on September 15, 2004). 

(4) No reportable events notice is filed within 30 days after April 15, 2004, or within 30 

days after July 15, 2004. 

(5) No Form 200 is filed within 10 days after either of those dates. 

(b) “Missed” quarterlies due to “corridor” interest rate choice. Assume that: 

(1) Contributions are made to a calendar year plan on April 15, 2003, July 15, 2003, 

October 15, 2003, January 15, 2004, April 15, 2004, and July 15, 2004, in amounts 

that would be sufficient to satisfy each of the four quarterly contribution requirements 

for the 2003 plan year and each of the first two quarterly contribution requirements 

for the 2004 plan year if the plan used a current liability interest rate for the 2003 plan 

year that is at the top of the “corridor” for the 2003 plan year. 

(2) The plan instead uses a current liability interest rate for the 2003 plan year that is not 

at the top of the corridor for the 2003 plan year. 

(3) As a result, the amounts paid on each of these six dates is less than the amount 

required. 

(4) There is no accumulated funding deficiency in the plan’s funding standard account 

for the 2003 plan year (after taking into account the “catch-up” contribution made to 

the plan on September 15, 2004). 

17 
(5) No reportable events notice is filed within 30 days after April 15, 2003, July 15, 

2003, October 15, 2003, January 15, 2004, April 15, 2004, or July 15, 2004. 

(6) No Form 200 is filed within 10 days after any of those dates. 

RESPONSE: 

In each of the situations described in the question, both the determination of if and when there 

was a missed contribution resulting from the “recharacterized” contributions (as described in 

paragraph (a)) or from the choice of a “corridor” interest rate (as described in paragraph (b)) and 

the determination of if and when a lien arose as a result of any such missed contribution are 

made under the Internal Revenue Code and are within the jurisdiction of the Internal Revenue 

Service. However, in each of these situations, assuming that there was such a missed 

contribution or that such a lien arose, as a matter of enforcement discretion the PBGC would 

neither assess a penalty based on failure to file a timely reportable events notice or Form 200 nor 

perfect or enforce that lien, provided that a reportable events notice or Form 200 (as applicable) 

is filed with the PBGC within 30 days (in the case of a reportable events notice) or within 10 

days (in the case of a Form 200) after the 2003 Schedule B is filed. Note that, in situation (b), it 

makes no difference whether the current liability interest rate that the plan used for any pre-2003 

plan year was at the top, middle, or bottom of the corridor for that plan year. 

18 
QUESTION 14 

Employer Reporting - Short Information Year 

Assume that a controlled group’s fiscal year (for all controlled group members) is changed from 

one beginning July 1 to one beginning October 1 and, as a result, there is a short information 

year (July 1 to September 30) for purposes of employer financial and actuarial reporting under 

ERISA section 4010 and 29 CFR Part 4010. Assume further that, during this short information 

year, a particular plan (e.g., a calendar year plan) has no plan year ending date. In such 

circumstances, how does the PBGC interpret the provisions of its Part 4010 regulations that refer 

to the plan year that ends in the information year? 

RESPONSE: 

Under 29 CFR § 4010.4(b), unfunded vested benefits (“UVBs”) for purposes of the $50 million 

UVB threshold test in § 4010.4(a)(1) are determined “at the end of the plan year ending within 

the . . . information year.” Similarly, § 4010.8(a) requires the reporting of the fair market value 

of the plan’s assets and the value of the plan’s benefit liabilities “at the end of the plan year 

ending within the filer’s information year,” along with a copy of the actuarial valuation report for 

that plan year. 

The plan is not disregarded for the purposes described in the question merely because there is no 

plan year ending date within the short information year. In such a case, the $50 million UVB 

threshold test would be determined as of the end of the last plan year that ended before the 

information year; the fair market value of the plan’s assets and the value of the plan’s benefit 

liabilities would also be determined as of the end of that plan year; and the copy of the actuarial 

report that must be submitted would be the one for that plan year. If the filer was required to file 

for the previous information year, the actuarial information required to be reported would 

ordinarily have been included in the previous year’s report; if so, the filer may refer to the 

actuarial information in the previous submission instead of resubmitting that information. 

19 
QUESTION 15 

Employer Reporting - Foreign Plan of U.S. Controlled Group 

Assume that a U.S. controlled group has two plans: a U.S. plan that is covered by Title IV of 

ERISA and a foreign plan that is exempt from Title IV coverage under ERISA section 

4021(b)(7). Under ERISA section 4010 and 29 CFR Part 4010 (“Annual Financial and Actuarial 

Information Reporting”): 

(a) Are the unfunded vested benefits of the foreign plan taken into account for purposes of 

the $50 million UVB threshold test in § 4010.4(a)(1)? 

(b) If the controlled group is required to file a report, is plan actuarial information under 

29 CFR § 4010.8 required with respect to the foreign plan? 

RESPONSE: 

(a) $50M UVB threshold test. No. Under 29 CFR § 4010.4(a)(1), the UVBs of all “plans” 

are taken into account for purposes of the $50 million UVB threshold test. However, 

29 CFR § 4001.2 defines “plan” for various purposes (including for purposes of 29 CFR 

Part 4010) as “a defined benefit plan within the meaning of ERISA section 3(35) that is 

covered by Title IV of ERISA” (emphasis added). Thus, any UVBs of a plan that is not 

covered by Title IV of ERISA, such as the foreign plan referenced in the question, are 

disregarded for purposes of the $50 million threshold test in § 4010.4(a)(1). 

(b) Required plan actuarial information. No. Under 29 CFR § 4010.4(a)(1), the actuarial 

information must be filed for each “plan” (except for those small plans that are exempted 

from this requirement under 29 CFR § 4010.8(c)). As discussed in paragraph (a) of this 

response, a “plan” is defined to exclude any plan that is not covered by Title IV of 

ERISA, such as the foreign plan referenced in the question. Therefore, actuarial 

information under 29 CFR § 4010.8 is not required with respect to the foreign plan. 

20 
 QUESTION 16 

Employer Reporting - Leap Year 

In general, employer reporting under ERISA section 4010 (and 29 CFR Part 4010) is due 105 

days after the end of the “Information Year.” For a calendar year filer, this is usually April 15. 

However, because calendar year 2004 is a leap year, the filing deadline for the Information Year 

that ends on December 31, 2003, would be April 14, 2004. In 2000, the PBGC granted a one day 

extension of this deadline to offset the effect of the leap year. Is the PBGC doing so for 2004? 

RESPONSE: 

Yes. The PBGC, in Technical Update 04-1, granted an automatic one-day extension for 

reporting by controlled groups whose 105-day reporting period includes February 29, 2004. For 

example, for a calendar year filer, the filing deadline is extended to April 15, 2004. (Note that, 

as always, existing rules extend a filing date that falls on a weekend or Federal holiday to the 

next regular business day.) See the Technical Update for details at 

http://www.pbgc.gov/laws/techupdates/tech04-1a.htm. 

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QUESTION 17 

Employer Reporting - Unreduced Retirement Age 

Assume that a plan provides that normal retirement age is the later of age 65 or the 5th 

anniversary of the date of plan participation. As of December 31, 2003, the participant is age 65 

and began plan participation on December 31, 2000. For purposes of determining employer 

liability under ERISA Section 4010, what is that participant’s unreduced retirement age (URA)? 

Assume the 4010 calculation is done as of December 31, 2003. 

RESPONSE: 

The participant’s URA is age 67, i.e., the 5th anniversary of the date of plan participation. The 

response to question 17 of the 2001 Blue Book said “[e]ligibility service should be frozen at the 

valuation date.” In this case, however, the participant reaches his URA at age 67 even if he has 

no further eligibility service. 

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QUESTION 18 

Employer Reporting - Expected Retirement Age 

Assume that a plan provides a social security bridge benefit – i.e., a temporary benefit payable 

only until the participant reaches social security eligibility age. For purposes of valuing benefit 

liabilities using PBGC termination assumptions for a filing under ERISA section 4010, how is 

the participant’s benefit calculated when determining whether the participant is in the low, 

medium, or high category for expected retirement age (XRA) purposes? 

RESPONSE: 

As discussed in the response to question 25 of the 2000 Blue Book, for filings under ERISA 

section 4010, XRA should be determined using the full accrued benefit (rather than, e.g., the 

vested or guaranteed benefit) payable at normal retirement age to determine whether the 

participant is in the high, medium, or low retirement rate category. Because the social security 

bridge benefit is not part of the full accrued benefit payable at normal retirement age, it is not 

included for this purpose. 

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