2010 Enrolled Actuaries Meeting 


Questions to PBGC 


and Summary of Their Responses 


April 2010 

Summary of Discussions between the Enrolled Actuaries Program Committee 


and Staff of the Pension Benefit Guaranty Corporation 


on February 24, 2010 


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

Corporation at discussions on February 24, 2010, 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 A. Keener, Hewitt Associates LLC 

Marjorie R. Martin, Independent Consultant 

John H. Moore, JP Morgan Compensation and Benefit Strategies 

Jay P. Rosenberg, Buck Consultants 

Donald J. Segal, JP Morgan Compensation and Benefit Strategies 

Maria M. Sarli, Towers Watson 

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 Klion, lV1anager, Regulatory and Policy Division, Legislative and Regulatory 

Department 

Grace Kraemer, Attorney, Legislative and Regulatory Department 

Daniel Liebman, 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 - 10 


2. Standard Terminations .................................................................................... 11 - 13 


3. Distress or Involuntary Terminations ............................................................... 14 - 16 


4. Reportable Events .......................................................................................... 17 - 20 


5. Other Reporting ............................................................................................... 21 - 26 


6. Other ............................................................................................................... 27 - 37 

QUESTION 1 

PPA: Premiums: Termination Premium Collection Experience 

Please describe PBGC's collection experience regarding the $1,250 per participant 

termination premium. In particular, please address the effect, if any, of the decision of the 

Second Circuit in PBGe v. Oneida Ltd., 562 F.3d 154 (2d Cir. 2009) (holding that the 

tennination premium is not a claim that can be discharged as part of a bankruptcy 

reorganization but, rather, must be paid in 100% dollars by the reorganized debtor). 

RESPONSE 

As to the Oneida case, on December 14,2009, the U.S. Supreme Court denied Oneida's 

petition for certiorari, and the Second Circuit decision upholding PBGC's position on 

termination premiums in Chapter 11 reorganization proceedings remains good law. 

Accordingly, PBGC continues to pursue termination premiums in all cases in accordance 

with law. 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. 

2010 Enrolled Actuaries Meeting Blue Book Page 1 
QUESTION 2 

Premiums: Vesting for Premium Purposes of Contingent-Type Benefits 

PBGC issued the following guidance regarding whether and when a contingent-type 

benefit is considered "vested" for variable-rate premium purposes in the preamble to its 

October 5, 1988, proposed rule implementing the variable-rate premium: 

Finally, the PBGC has received inquiries as to whether to include 

contingent benefits, such as "30-and-out" and disability benefits, in 

determining a plan's vested benefits. Unless a participant has met the 

requirements for and become entitled to receive a contingent-type benefit, 

the benefit is not a vested benefit for premium purposes .... Thus, 30-andout benefits and disability benefits for which a participant is not immediately 

eligible as of the last day of the plan year preceding the premium payment 

year are not included in vested benefits as of that date. 

PBGC incorporated this 1988 guidance into its Premium Payment Package for all 

premium payment years from 1998 through and including 2007, but not in its 

Comprehensive Premium Payment Instructions for post-2007 plan years. 

The post-2007 instructions provide guidance on the meaning of "vested" that had been 

developed in connection with PBGC's rulemaking implementing the PPA changes to the 

variable-rate premium. The instructions continue to provide that a disability benefit is not 

vested if the participant is not disabled. However, they do not include the broader 

statement from the pre-PPA premium instructions that, unless a participant has met the 

requirements for and become entitled to receive a contingent-type benefit (such as a "30­

and-out" benefit), the benefit is not vested for premium purposes. 

Is this broader statement from the pre-PPA premium instructions still valid for post-PPA 

plan years (i.e., 2008 and beyond)? 

RESPONSE 

The current regulations on PBGC premiums provide only limited guidance about what 

constitutes "vesting" for premium purposes; contingent benefits in general are not 

addressed. Pending issuance of more comprehensive guidance on this matter, a 

reasonable interpretation of the statute and current regulation is acceptable. 

2010 Enrolled Actuaries Meeting Blue Book Page 2 
QUESTION 3 

Premiums: Determining value of vested benefits for variable-rate premium (VRP) 

purposes 

(a) 	 If a plan provides an ancillary post-retirement death benefit (e.g., a flat $5,000 death 

benefit) for all retirees regardless of the optional annuity form elected, is the value of 

that death benefit considered vested for VRP purposes with respect to participants 

who are already retired? 

(b) 	 A calendar-year plan is amended in 2010 to provide a 10% ad hoc COLA, effective 

July 1, 2011, to retirees who began receiving payments before 2005. Is the COLA 

considered vested for 2011 VRP purposes, since participants who retired before 2005 

must do nothing more than survive from Jan. 1, 2011 to July 1, 2011 to receive the 

COLA? Do IRC section 436 plan amendment restrictions affect the analysis (since the 

amendment cannot take effect if the AFT AP would be less than 80% after taking the 

COLA into account)? For example, if the employer must make a section 436 

contribution by July 1, 2011 for the amendment to take effect, is the COLA treated as 

nonvested at January 1,2011? Is the COLA vested if no IRC section 436 contribution 

or credit balance waiver will be required for the amendment to take effect? 

RESPONSE 

(a) 	 Yes. The premium regulation provides that a death benefit is not considered 

nonvested solely because the participant is still alive. The reason there is an 

exception for a ,I;[§.-retirement ancillary death benefit provided in the premium 

regulations is because, in that case, the death benefit will not be paid in certain 

circumstances (for example, if the participant survives until retirement.) However, in 

the case of the post-retirement ancillary death benefit described above that is not the 

case. The benefit will be paid unless the plan is subsequently amended, and the 

regulation provides that a benefit is not considered nonvested solely because the 

plan could be amended to eliminate the benefit at a later date. 

(b) 	 The rules for determining whether/when a mid-year amendment is reflected in the 

funding target falls under Treasury's jurisdiction. If the amendment is reflected in the 

funding target for purposes of determining the minimum required contribution, then it 

is reflected in the premium funding target to the extent vested. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 3 
QUESTION 4 

Premiums: Valuing Social Security Supplements in Determining Premium Funding 

Target 

Assume that a plan provides a temporary supplement of $500 per month payable until age 

62 for participants with at least 30 years of service. As of the UVB Valuation Date, Active 

Participant, Joe has 30 years of service. When determining the portion of the premium 

funding target attributable to Joe, is the temporary supplement considered vested and if 

so, how is it valued? 

RESPONSE 

Joe has satisfied the eligibility criteria with respect to the temporary supplement and 

therefore, the value of the supplement is included in the premium funding target. The 

methodology used for this calculation must be the same as the methodology used to 

determine the funding target for purposes of determining the minimum required 

contribution. For information on how to value temporary supplements, see Treas. Reg. § 

1.430(d)-1 (c)(1 )(ii)(D). 

2010 Enrolled Actuaries Meeting Blue Book Page 4 
QUESTION 5 

Premiums: Experience with Waivers of Late Payment Penalties 

Please describe PBGC's recent experience in connection with waivers of late premium 

payment penalties under ERISA section 4007. 

RESPONSE 

PBGC considers requests for waivers of late premium payment penalties in accordance 

with the appendix to PBGC's regulation on Payment of Premiums (29 CFR Part 4007). In 

most cases, PBGC has denied requests for waivers. For example, PBGC has denied 

requests for waivers in cases of failure to understand and apply the new rules on due 

dates based on plan size and on the determination of variable-rate premiums; forgetting to 

pay by the due date; or reliance on a negligent outside advisor. Most of the cases for 

which PBGC has granted requests for waivers have involved "reasonable cause," that is, 

where failure to pay results from circumstances beyond a premium payer's control and 

could not be avoided by the exercise of ordinary business care and prudence. Examples 

have been natural disasters and sudden death of a person responsible for acting, such as 

a plan administrator. 

2010 Enrolled Actuaries Meeting Blue Book Page 5 
QUESTION 6 

Premiums: Interest on Premium Overpayments 

PPA section 406 allows PBGC to pay, "subject to regulations prescribed by [PBGC]," 

interest on overpayments made by premium payors, effective with respect to interest 

accruing for periods beginning not earlier than PPA's August 17, 2006 enactment date. 

Does PBGC believe it needs to adopt regulations to be able to pay such interest? What 

are PBGC's plans to pay such interest, and for what periods, either with or without 

implementing regulations? 

RESPONSE 

PBGC plans to issue regulations implementing its authority to pay interest on premium 

overpayments to a designated payor and to coordinate the development of those 

regulations with the development of information systems supporting such payments. 

Work in this area is ongoing. PBGC does not currently intend to pay interest on 

overpayments in the absence of implementing regulations. No determination has yet 

been made regarding whether such regulations would apply retroactively. On PBGC's 

Fall 2009 Regulatory Agenda, this regulatory item is listed as being in the "Long-Term 

Actions" stage of rulemaking1. For PBGC's complete Fall 2009 Regulatory Agenda and 

related information, See http://www.reginfo.gov/public/do/eAgendaMain. 

1 An item generally appears in the Long-Term Actions stage of rulemaking if the next action is 

undetermined or will occur more than 12 months after publication of the Agenda." 

2010 Enrolled Actuaries Meeting Blue Book Page 6 
QUESTION 7 

Premiums: Statute of Limitations on Premium Refund/Credit Requests 

PBGC's Comprehensive Premium Payment Instructions for the 2010 premium payment 

year state (at p. 47) that "[a] request for a refund must be made within the period specified 

in the applicable statute of limitations (generally six years after the overpayment was 

made)." 

(a) 	 If a premium refund (or credit) request is made within that period and is pending at 

the time the applicable statute of limitations period for filing a lawsuit ends, will PBGC 

rely on the statute of limitations as a basis for denying the request? 

(b) 	 Would PBGC rely on the statute of limitations as an affirmative defense if it were to 

deny such a refund or credit request (i.e., one that was pending with PBGC when the 

statute of limitations ran out) on the merits and the matter ended up in litigation? 

RESPONSE 

(a) 	 No. 

(b) 	 In such a situation, PBGC would not expect to rely on the statute of limitations as an 

affirmative defense, but cannot rule out the possibility that a case could arise in which 

the equities would weigh in favor of PBGC relying on such a defense. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 7 
QUESTION 8 

Premiums: Alternative Premium Funding Target Election 

Consider a plan for which: 

• 	 The 2009 comprehensive premium filing has already been filed. 

• 	 At the time the filing was made, the sponsor had not yet decided what discount rate to 

use for funding purposes, and therefore determined and paid the 2009 variable rate 

premium (VRP) based on the standard premium funding target; the same method 

used for the 2008 VRP. 

• 	 After the filing was made, the sponsor elected to use the October 2008 full yield curve 

to determine the minimum required contribution for 2009 (as is permitted under the 

final Treasury 430 regulation). 

• 	 Had the October 2008 full yield curve been used to determine the premium funding 

target, the 2009 VRP would have been much lower. 

(a) Can the 2009 filing be amended to reflect an election to use the alternative premium 

funding target (Le., recalculate the VRP based on the October 2008 full yield curve) 

and by doing so generate a refund or credit? 

(b) If the answer to (a) is no, what happens if the 2009 filing was amended (as described 

in (a))? 

RESPONSE 

(a) The answer depends on whether the VRP due date for 2009 has passed. The 

deadline for making an election to use the alternative premium funding target for a 

particular plan year is the VRP due date for that year. That is also the due date for the 

comprehensive filing. Because these due dates are the same, by the time a filing is 

made, it is often too late to amend it to reflect an election. However, if the 

comprehensive filing was submitted early and the due date has not yet passed, then it 

is not too late to amend the filing and make the election to use the alternative premium 

funding target. 

(b) 	If a filing is amended to reflect an election to use the alternative premium funding 

target after the VRP due date, the election is invalid (Le., it does not take effect). The 

filing must be amended again so that the most recent version of the 2009 filing (in 

PBGC's system and in the plan administrator's records) is correct. 

If the plan administrator of a plan described in (b) wants to use the alternative premium 

funding target for the following plan year, he/she must make the election in conjunction 

with the next year's filing. In other words, a late election for 2009 does not serve as an 

election for 2010. 

Note - PBGC received several post-due date amended filings (i.e., filings with an 

invalid election) and is in the process of contacting filers to alert them to the problem. 

If your client is in this situation, there is no need to wait for PBGC to contact them 

before rectifying the situation. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 8 
QUESTION 9 

Premiums: PBGC Comprehensive Premium Filing Box 5 -- Alternative Premium 

Funding Target Election 

(a) 	 Assume a plan administrator erroneously checks box 5 (the election to use the 

alternative premium funding target) on the 2009 premium filing, but in box 7d1 

correctly indicates that the standard method was used (the standard method was also 

used in 2008). May the administrator correct this error after the variable-rate premium 

(VRP) due date by changing box 5 in an amended filing? Or does box 5 govern, 

requiring the sponsor to make a corrected filing using the alternative method to 

determine the variable-rate premium? 

(b) 	 Assume a plan administrator elected to use the alternative method to determine the 

2008 variable-rate premium, checking box 5 and correctly completing line 7. In the 

2009 filing, the administrator failed to follow the instructions and checked box 5 again. 

May this error be corrected on an amended filing? If the error is not corrected, is the 

5-year lock-in period extended by a year? 

RESPONSE 

(a) 	 The election (Le., box 5) governs. The filing must be amended and the VRP 

recalculated using the same discount rate used to determine the minimum required 

contribution for the 2009 plan year. 

If additional premiums are due, late payment charges (interest and penalties) will be 

assessed. In such cases, PBGC will consider a request to waive penalties, but does 

not have the authority to waive interest. The decision as to whether penalties are 

waived is based on the relevant facts and circumstances. 

(b) 	 It is not necessary to amend the 2009 filing. The clock does not get re-started. 

Making an election when one is already in effect has no effect. 

2010 Enrolled Actuaries Meeting Blue Book 9 
QUESTION 10 


Premiums: Alternative Premium Funding Target Election/Impact on Subsequent 

Year 

Consider a calendar year plan for which the October 2008 full yield curve was used to 

determine the funding target for purposes of determining the 2009 minimum required 

contribution and an election to use the alternative premium funding target was in effect for 

2009. Therefore, the October 2008 full yield curve was used to determine the 2009 

variable rate premium (VRP). 

Final Treasury regulations permit sponsors to change the discount rate basis for 2010 for 

funding purposes. Final PBGC regulations mandate that an election to use the alternative 

premium funding target must remains in effect for at least five years. 

If the 2010 funding discount rate(s) are the smoothed segment rates for January 2010, 

what discount rates should be used to determine 2010 VRPs? 

(a) The October 2009 full yield curve, or 

(b) The January 2010 smoothed segment rates? 

RESPONSE 

The correct answer is (b). The election to use the alternative premium funding target for 

VRPs is not tied to a particular discount rate or discount rate methodology. The election 

simply means that the discount rates used to determine the minimum required contribution 

(MRC) are also used to determine the VRP. 

If the election was in effect for 2009, it remains in effect for 2010. That means the 2010 

VRP will be determined using the same discount rate(s) that will be used to determine 

2010 MRC, even if those rates are different than what was used for the 2009 MRC. 

2010 Enrolled Actuaries Meeting Blue Book Page 10 
QUESTION 11 

Standard Terminations: Cessation of Accruals Information for Non-Frozen Plan with 

No Active Participants 

The notice of intent to terminate {"NO IT") that must be issued in a standard termination is 

required to include one of the following three statements regarding the cessation of 

accruals: 

(1) 	 that U[b]enefit accruals will cease as of the termination date, but will continue if the 


plan does not terminate"; 


(2) 	 that Uta] plan amendment has been adopted under which benefit accruals will cease, 

in accordance with ERISA section 204(h) , as of the proposed termination date or a 

specified date before the proposed termination date, whether or not the plan is 

terminated"; or 

(3) 	 that U[b]enefit accruals ceased, in accordance with ERISA section 204(h), as of a 


specified date before the notice of intent to terminate was issued." 


See 29 CFR § 4041.23(b)(4). The same requirement applies to the NOIT in the case of a 

distress termination; see 29 CFR § 4041.43{b){5). 

In the case of a non-frozen plan where the sponsor is winding up its affairs after 

operations have ceased and all employees have terminated employment, the only one of 

the above three statements that might apply is the first one, and it could be misleading. In 

such circumstances, may the plan administrator instead or also state in the NOIT that 

benefit accruals ceased when all employees were terminated in connection with the 

winding up of the affairs of the company? 

RESPONSE 

The plan administrator must include in the NOIT one of the three statements described 

above, whichever is applicable. However, in the case of a non-frozen plan where the 

sponsor is winding up its affairs after operations have ceased and all employees have 

terminated employment, the plan administrator may also include a statement in the NOIT 

that benefit accruals ceased when all employees were terminated in connection with the 

winding up of the affairs of the company. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 11 
QUESTION 12 

Standard Terminations: Audits 

Please describe PBGC's recent experience with audits of standard terminations, including 

the level of compliance, common errors found, and any issues with the PPA changes in 

the interest rate and mortality table used in calculating minimum lump sum amounts. 

RESPONSE 

PBGC audited approximately 270 plan termination filings in fiscal year 2009, of 

which 75% were plans with 300 or fewer participants. PBGC is continuing to audit 

the termination of all plans with more than 300 participants. Of the audited plans, 

PBGC required corrective action in approximately 16% of the cases. The most 

common errors involved incorrect accrued benefit calculations, inaccurate lump 

sum calculations, missing participants' benefits not transferred to PBGC, 

attempted election of alternative treatment ("waiver") of benefits by individuals who 

were not majority owners, and missing election and spousal consent forms. 

Accrued benefit calculation errors generally resulted from plans ­

• 	 not fully vesting terminated participants who had not incurred a five-year break 


in service and had not received a distribution of the entire benefit as of the 


date of plan termination; 


• 	 in the case of a restated plan, not protecting benefits accrued under prior plan 


proviSions until the later of the effective date or the adoption date of the 


restated plan; 


• 	 not paying the top heavy benefit if greater than the accrued benefit; or 

• 	 incorrectly taking into account service or compensation in the calculation of 


the benefit. 


In general, mistakes in lump sum valuations resulted from the use of the wrong 

interest rate or mortality assumptions. In a few plans the definition of "Applicable 

Interest Rate" did not comply with the Code, resulting in an invalid look back 

month. It is helpful if plans clearly define the "Stability Period" and "Look back 

Month" in their plan documents. In addition, in FY 2009, PBGC pursued 

enforcement action in two plans that terminated in the 2007 plan year and used the 

PPA Applicable Interest rate and mortality in the valuation of lump sums. 

PBGC continues to see plans that roll over missing participants' benefits to 

Individual Retirement Accounts instead of either purchasing irrevocable 

commitments (and submitting the information to PBGC) or transferring the 

designated benefit to PBGC. Occasionally, PBGC finds that designated benefits 

have not been calculated in accordance with PBGC's Missing Participants 

regulation, or that interest is not paid to the extent deSignated benefits are sent to 

PBGC more than 90 days after the distribution deadline. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 12 
QUESTION 13 

Standard Terminations: Effect of PPA Interest Rate Floor 

PPA section 409 ("Treatment of Certain Plans Where Cessation or Change in 

Membership of a Controlled Group") added a new ERISA section 4041(b)(5), which 

provides a special rule that, in specified circumstances, sets an interest rate floor to be 

used in determining whether a plan is "sufficient for benefit liabilities" in a standard 

termination under ERISA section 4041 (b). However, to complete a standard termination, 

the plan must be "sufficient for benefit liabilities" based on the cost of irrevocable 

commitments and of other permitted forms of distribution (principally lump sums). 

(a) 	 Does the new PPA section 409 interest rate floor have any effect on a standard 

termination, including the manner or cost of distributing benefits in satisfaction of all 

benefit liabilities? 

(b) 	 If the answer to (a) is no, what is the effect of the new section 409 interest rate floor 

that is to be used in determining whether a plan is "sufficient for benefit liabilities" in a 

standard termination? 

RESPONSE 

The intent and application of PPA section 409 are unclear. Currently, PBGC has no plan 

to issue guidance under section 409. If you have a specific client situation where you 

believe these rules may apply, please contact PBGC. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 13 
QUESTION 14 

Distress or Involuntary Terminations: USERRA Benefits in Terminated Plans. 

Will sponsors of pension plans terminated in distress or involuntary termination (or their 

successors) be expected to provide records to PBGC to corroborate USERRA claims of 

current or former employees under the final regulations published November 17, 2009? 

RESPONSE 

With respect to USERRA claims of current or former employees under final regulations 

published November 17, 2009, sponsors of pension plans terminated in distress or 

involuntary termination (or their successors) would be expected to provide to PBGC only 

those records that would be provided in the normal course of the trusteeship process, 

such as "leave codes" indicating when a participant was on leave from employment and 

what type of leave. 

2010 Enrolled Actuaries Meeting Blue Book Page 14 
QUESTION 15 


Distress or Involuntary Termination: Experience with Distress Terminations Outside 

of Bankruptcy 

Please describe PBGC's experience over the past year in connection with applications for 

distress termination outside of bankruptcy under Distress Test 3 ("Continuation in 

Business") or Distress Test 4 ("Unreasonably Burdensome Pension Costs"). 

RESPONSE 

The number of applications by controlled groups for distress terminations under 

Distress Test 3 increased sharply in FY09; in fact the filings have about doubled 

from the prior year. Since it takes some time to process such an application, 

PBGC staff cannot indicate the disposition of the filings. As in the past, there have 

been virtually no distress terminations under Distress Test 4. 

2010 Enrolled Actuaries Meeting Blue Book Page 15 
QUESTION 16 

Distress or Involuntary Terminations: "Follow-On" Plan Policy 

In connection with PBGC's policy against "follow-on" plans: 

(a) 	 If the employer adopts a defined contribution plan, can that be a "follow-on" plan? 

(b) 	 If an employer waits five years before adopting a new plan, is that sufficient to 

preclude the new plan from constituting a "follow-on" plan? 

RESPONSE 

(a) 	 PBGC has taken the position that a replacement or "follow-on" plan is abusive if, in 

combination with PBGC guarantees, it provides participants substantially the same 

benefits they would have received had no termination occurred. A defined 

contribution plan could run afoul of the "substantially the same benefits" test in a 

number of ways, even if not explicitly designed to make up for past losses. 

(b) 	 There is no bright line test, but the longer the period between the plan termination 

and the establishment of the new plan, the lower the concern; the shorter the time 

period, the greater the concern. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 16 
QUESTION 17 

Reportable Events: Active Participant Reductions Where No Significant Overall 

Reductions 

Many PBGC-covered plans are frozen for participation and therefore can experience only 

decreases, but not offsetting increases, in their active participant counts. Assume that 

such a plan crosses over either or both of the thresholds for an active participant reduction 

reportable event (under 80% of the count at the beginning of the current plan year or 75% 

of the count at the beginning of the prior plan year) under 29 CFR § 4043.23, but that the 

overall employment levels within the controlled group have not experienced a comparable 

decline and may have remained level or even increased. In the circumstances just 

described, would PBGC be willing to grant case-by-case reporting relief for such plans 

(e.g., by waiving reporting going forward unless overall employment levels decline to 

specified levels)? 

RESPONSE 

When considering whether to grant a request for a waiver under its reportable events 

regulation, PBGC considers facts and circumstances on a case-by-case basis. The fact 

that a plan is frozen does not necessarily indicate that a large reduction in active 

participants is not cause for concern. 

2010 Enrolled Actuaries Meeting Blue Book Page 17 
QUESTION 18 

Reportable Events: Interim Guidance Pending Rulemaking 

On November 23, 2009, PBGC issued a proposed rule that would make significant 

changes to its reportable events regulations. Pending finalization of that proposed rule, 

what is the status for the 2010 plan year of PBGC's guidance in Technical Updates 09-1 

(on post-PPA determinations of funding based waivers and extensions, and the advance 

reporting threshold test, for reportable event purposes for event years beginning in 2009) 

and 09-3 (on missed quarterly contributions for small plans for the 2009 plan year)? 

RESPONSE 

In Technical Update 09-4, PBGC extended the guidance in these two Technical Updates 

to the 2010 plan year pending finalization of the proposed rule. Technical Update 09-4 is 

avai lable at http://www. pbgc.gov/practitioners/law-reg u lations-informa 1­

guidance/contentltu16998.html. 

2010 Enrolled Actuaries Meeting Blue Book Page 18 
QUESTION 19 

Reportable Events: Reportable event created by mandatory credit balance 

reduction 

When a required contribution is not timely made, reporting to PBGC is required under 

ERISA 4043. PBGC Form 10 is generally used for this report. In addition, if the 

aggregate amount of missed contributions exceeds $1 million, reporting to PBGC is 

required under ERISA 303(k) and IRC 430(k). PBGC Form 200 is used for this report. 

Under final Treasury regulations, a mandatory reduction of a carryover or prefunding 

balance (Le.,. a deemed election") can retroactively create a late quarterly contribution by 

rendering invalid a prior election to apply a credit balance against the quarterly required 

contribution and retroactively create a "missed" quarterly contribution. Can such an event 

cause a Form 10 or Form 200 to be considered not timely filed? 

RESPONSE 

The answer differs depending on which reporting requirement applies. PBGC's 

regulation on Reportable Events and Certain Other Notification Requirements (29 CFR 

Part 4007) provides guidance on these issues. Specifically: 

• 	 ERISA section 4043 - the deadline for reporting a missed contribution under section 

4043{a) of ERISA is 30 days after the plan administrator or contributing sponsor knows 

or has reason to know that the contribution has been missed. If the plan administrator 

or contributing sponsor had no way of knowing that the forfeiture would occur, the 30­

day clock starts ticking on the day the carryover or prefunding balance was forfeited. 

Thus, while a quarterly contribution might be "retroactively missed," the report of the 

missed contribution would not necessarily be "retroactively untimely." 

Note also that if the missed quarterly contribution is made before the 30-day clock runs 

out, reporting under 4043 is waived (see 29 CFR § 4043.20). 

• 	 ERISA section 303(k) & IRC section 430{k) - With respect to notice of large 

aggregate missed contributions, the due date for notice to PBGC is 10 days after the 

contribution is missed. There is no waiver if the missed contribution is made up during 

that 10-day period. If a forfeiture of a carryover or prefunding balance creates a 

retroactively missed quarterly contribution that alone (or in combination with other 

missed contributions) exceeds $1 million, the notice to PBGC will be considered late 

unless it is made within 10 days of the due date for the contribution. In such a case, 

PBGC would consider a request to waive penalties for late reporting. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 19 
QUESTION 20 

Reportable Events: Late election to cover a quarterly with credit balance 

When a required contribution is not timely made, reporting to PBGC is required under 

ERISA 4043. PBGC Form 10 is generally used for this report. In addition, if the 

aggregate amount of missed contributions exceeds $1 million, reporting to PBGC is 

required under ERISA 303(k} and IRC 430(k}. PBGC Form 200 is used for this report. 

Before PPA, quarterly contributions were not considered late if a credit balance existed 

that covered them. Final Treasury regulations implementing PPA treat an election to 

apply credit balance to cover a quarterly required contribution as not timely made if the 

election is not made by the due date of the contribution. 

There appears to be no increased risk to PBGC if an election to apply credit balance 

against a quarterly required contribution is made, but not made by the due date for the 

quarterly. Q&A 27 in the 2009 Blue Book discusses the implications of this guidance for 

liens and Form 200 filing requirements (applicable if the total of missed contributions, 

including interest, is at least $1,000,000). In that Q&A, PBGC notes that it is not its role to 

determine whether a quarterly installment was "missed." 

For purposes of reportable events and Form 200, does PBGC intend to treat a quarterly 

installment as missed if an election to use credit balance was not made by the quarterly 

installment due date? 

RESPONSE 

It is not PBGC's role to determine whether a quarterly installment was "missed." That falls 

within Treasury's jurisdiction. At the time the 2009 Blue Book was issued, Treasury had 

not yet issued a final regulation on this issue and therefore it was not entirely clear when a 

quarterly installment was considered missed (or late). Since that time, Treasury has 

issued a final regulation in which they made clear when a quarterly installment is 

considered late. Now that there is definitive guidance, those rules apply with respect to 

reportable events (Form 10) and Form 200 filing requirements. 

2010 Enrolled Actuaries Meeting Blue Book Page 20 
QUESTION 21 

Other Reporting: 4010 Filing threshold for plans with delayed PPA funding 

PBGC's section 4010 regulation provides that the provisions of sections 104,105, 106 

and 402(b) of PPA are generally disregarded for section 4010 reporting. For plans to 

which such sections apply, how should the funding target attainment percentage (FTAP) 

be determined for purposes of the section 4010 80% FT AP gateway test? Specifically, 

should the value of plan assets used to determine the FTAP be reduced by any credit 

balance as of the valuation date? 

RESPONSE 

PBGC's section 4010 regulation does not address the issue of how the funding target 

attainment percentage (FTAP) is determined for plans subject to sections 104,105,106 

and 402(b) of PPA. In particular, the regulation is silent as to whether the credit balance is 

treated as if it were a carryover balance and thus subtracted from assets when 

determining the FTAP. Final Treasury regulations under IRC section 430 provide that the 

FTAP for these plans be determined using unreduced assets. 

Pending issuance of PBGC guidance on this issue, the definition of FTAP provided in final 

Treasury regulations under IRC section 430 may be used for purposes of the section 4010 

80% FT AP gateway test. 

2010 Enrolled Actuaries Meeting Blue Book Page 21 
QUESTION 22 

Other Reporting: 4010 - Acquisitions/Divestitures on last day of information year 

Under PBGC's section 4010 regulation, only plans that are maintained by the filer (or any 

member of the filer's controlled group) on the last day of the information year are 

considered for purposes of the gateway tests. Plans that have been transferred outside 

of the filer's controlled group during the information year are not considered. 

Suppose a corporate transaction occurs on the last day of the information year resulting in 

a change of sponsor and that the new sponsor (Le., the buyer) is not in the prior sponsor's 

(i.e., the seller) controlled group. 

(a) 	 Do both the seller and buyer count the plan for purposes of the gateway tests? 

(b) 	 If both the buyer and the seller file 4010 information, do both filers include actuarial 

information (i.e., Schedule P) for the plan in question? 

RESPONSE 

(a) 	 In the situation noted above, both the seller and the buyer must count the plan for 

purposes of the gateway tests. However, if both the buyer and the seller are required 

to file 4010 information and the only reason the seller is required to file 4010 

information is because the transferred plan is counted, it is likely that PBGC would 

grant a request from the seller to waive the filing requirement entirely. 

(b) 	 In the situation noted above, both the seller and the buyer are required to report 

actuarial information (Le., Schedule P) for the plan in question. However, it is likely 

that PBGC would grant a request to waive reporting of actuarial information with 

respect to the transferred plan for one of the filers. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 22 
QUESTION 23 

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 P8GC's experience and enforcement plans 

in connection with finding out about such events (including its policy on penalties for 

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

information on the number of such events over the past year and how P8GC has dealt 

with them, including a brief description of the kinds of settlements P8GC has entered into. 

RESPONSE 

P8GC 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 P8GC's regulation on calculation of liability pursuant to section 4062(e), P8GC 

has seen a noticeable increase in self-reporting under section 4063(a). P8GC's existing 

penalty policy applies to failures to file under ERISA section 4063(a). P8GC assesses 

penalties for such failures or takes other appropriate actions. 

During FY 2009, P8GC's Insurance Programs Office (IPO) settled eleven cases. The 

settlements provided protection valued at about $240M, in total, for pension plans 

covering about 30,000 participants. As of September 30,2009, IPO was working on 97 

cases. P8GC works with companies to structure flexible settlements that fit within the 

parameters of their business plans. 

2010 Enrolled Actuaries Meeting Blue Book Page 23 
QUESTION 24 

Other 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 

only plan with an FTAP less than 80% was being transferred outside of the controlled 

group on the last day of the plan year and the credit balance was large enough that, if 

waived, would result in an FTAP above 80%. 

PBGC received some requests for waivers in situations where the "4010 funding shortfall" 

was more than $15 million, but the only plan with an FTAP below 80% was a small plan. 

Such requests were not granted. 

PBGC usually receives a handful of 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. 

2010 Enrolled Actuaries Meeting Blue Book Page 24 
QUESTION 25 

Other Reporting: Section 4062(e) Events 

Pension plan sponsors that "cease operations at a facility in any location," resulting in 

termination of more than 20% of the employees who are plan participants may face 

liabilities under ERISA section 4062(e). 

(a) 	 Does "cease" mean a 100% total stoppage? 

(b) 	 If a shutdown occurs in multiple stages over an extended period, does liability arise at 

the end of the process? 

(c) 	 What if some "operations at a facility" are terminated, but others continue? 

(d) 	 Does it matter whether the operations are related (for example, different parts of the 

same product line)? 

(e) 	 Does it matter whether the buildings are located close together? 

(f) 	 How do the rules apply to M&A transactions (such as asset or stock sales)? 

RESPONSE 

PBGC is developing a proposed regulation that would provide guidance on the 

applicability and enforcement of ERISA section 4062(e). The proposed regulation may 

address some or all of the issues raised in this question. PBGC expects to publish this 

proposed regulation in 2010. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 25 
QUESTION 26 

Other Reporting: 4062(e) - Treatment of Contributions Receivable 

In determining the unfunded benefit liability (UBL) of a plan that has experienced a 

4062(e) event, does PBGC include contributions that will be made after the event date in 

plan assets? For example, if, for a calendar year plan, a 4062(e) event occurs in July, 

2009 and the minimum required contribution for 2008 is made in September. 2009. what 

value of assets is used to determine the UBL? 

RESPONSE: 

Historically. PBGC has not included contributions receivable when determining the UBLs 

of a plan that has experienced a 4062(e) event. In the example above. PBGC would use 

the fair market value of assets on the event date without any adjustment for contributions 

made after that date. 

PBGC is developing a proposed regulation that would provide guidance on the 

applicability and enforcement of ERISA section 4062(e). The proposed regulation may 

address the issue raised in this question. PBGC expects to publish this proposed 

regulation in 2010. 

2010 Enrolled Actuaries Meeting Blue Book Page 26 
QUESTION 27 

Other: Experience with Private Equity Funds as Controlled Group Members 

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. Please 

describe PBGC's experience since the issuance of this Appeals Board decision in dealing 

with situations where a private equity fund does or might have such liability. 

RESPONSE 

Subsequent to the Appeals Board decision, PBGC has continued to refer to applicable law 

to determine whether a private equity fund is part of a controlled group. Several matters 

including the case that was before the Appeals Board have been resolved to PBGC's 

satisfaction, and there has been no other litigation to date. 

2010 Enrolled Actuaries Meeting Blue Book Page 27 
QUESTION 28 

Other: Overlapping Liabilities under ERISA Sections 4063 and 4064 

Assume that a substantial employer withdraws from a multiple-employer plan and satisfies 

its liability under ERISA section 4063 through an escrow payment to PBGC. Assume 

further that the plan terminates in a distress or involuntary termination within the five year 

period beginning on the date of the withdrawal and, as a result, PBGC treats the escrowed 

payments as if they were plan assets. How would PBGC determine the liability of the 

withdrawn employer for the underfunding upon plan termination under section 4063? In 

particular, what credit would the withdrawn employer get for the payment it made under 

section 4063? 

RESPONSE 

ERISA section 4063(c)(3)(B) provides that upon plan termination. PBGC shall "treat any 

escrowed payments under this section as if they were plan assets and apply them in a 

manner consistent with this subtitle" [governing "Liability"]. PBGC will determine the best 

method to do that in the event such a situation arises. 

2010 Enrolled Actuaries Meeting Blue Book Page 28 
QUESTION 29 

Other: Relevance of 2001 Penalty Policy Proposal 

On January 12, 2001, PBGC issued a proposed rule (66 FR 2856) that, among other 

things, provided guidance on: 

(a) the meaning of "reasonable cause" for penalty waivers (both for premium 

underpayment penalties under ERISA section 4007 and for late information penalties 

under ERISA section 4071), and 

(b) the guidelines for assessing penalties under ERISA section 4071. 

In O&A 18 of the 2001 Blue Book, PBGC stated that the proposed rule was "largely 

reflective of the PBGC's current practices" and that "it is likely that current case-by-case 

penalty determinations will be generally consistent with the proposal." Since then, 

however, PBGC has finalized its penalty policy guidance for premium underpayment 

penalties (71 F.R. 66867, Nov. 17,2006), but notfor late information penalties. Is it still 

true that the 2001 proposed guidance on late information penalties is largely reflective of 

PBGC's current practices and that current case-by-case late information penalty 

determinations will be generally consistent with the 2001 proposal? 

RESPONSE 

As a general matter, the 2001 proposed rule is largely reflective of PBGC's current 

practices. PBGC considers the facts and circumstances of each case to ensure that the 

penalty fits the violation. 

2010 Enrolled Actuaries Meeting Blue Book Page 29 
QUESTION 30 


Other: Experience with Assessments and Waivers of ERISA Section 4071 Penalties 

Please describe PBGC's recent experience in connection with assessment and waiver of 

late information penalties under ERISA section 4071. 

RESPONSE 

In 2009, PBGC assessed penalties for failing to make reportable event or section 4010 

filings, notified some late filers that it would not assess penalties based on mitigating 

circumstances particular to each filer's matter, and waived penalties where a sponsor's 

request for reconsideration of a penalty assessment included information that warranted 

such a waiver. In general, all penalty assessments in 2009 in which reconsideration was 

not sought were paid. 

In the last 12 months, PBGC has not assessed any penalties under section 4071 for other 

failures (e.g., failure to report premium information, failure to make required 

disclosures/filings with respect to standard terminations, etc.) 

2010 Enrolled Actuaries Meeting Blue Book Page 30 
QUESTION 31 

Other: PBGe's Role and Experience with Minimum Funding Waivers 

Please describe PBGC's role and recent experience in connection with minimum funding 

waiver requests involving amounts in excess of $1 million, including the criteria PBGC 

considers in evaluating such requests and options for addressing the requirement to 

provide security to ensure repayment of the waived amount. 

REPSONSE 

Although applications for minimum funding waivers are submitted to IRS, PBGC's 

reportable events regulations provide that plan sponsors must notify PBGC of all funding 

waiver requests. ERISA requires that IRS consult with PBGC on funding waiver requests 

for $1 million or more. PBGC and IRS have developed procedures whereby PBGC 

submits a written response to IRS which recommends approval or denial of the waiver 

request. If PBGC's recommendation is to approve the waiver request, PBGC requests 

security (Le., collateral) and other conditions as appropriate. 

When evaluating minimum funding waiver requests for $1 million or more, PBGC reviews 

a plan sponsor's controlled group financial projections and the projected required 

minimum funding contributions for reasonableness in determining whether the hardship 

the company is experiencing is temporary and whether a company can afford to make the 

pension contributions in the future. 

In many cases, the funding waiver request does not include all of the data required under 

IRS Revenue Procedure 2004-15, Internal Revenue Bulletin 2004-7. Specifically, required 

data that is often omitted or incomplete include: 

• 	 5-year financial projections for all members of the plan sponsor's controlled group 


including detailed underlying assumptions and explanations regarding how 


projections may differ from historical financial results 


• 	 5-year required minimum funding projections for the pension plan both assuming a 


waiver is approved and assuming a waiver is denied 


• 	 Options for collateral the plan sponsor can provide to secure the amount of the waiver 

PBGC evaluates the collateral offered to secure a waiver by analyzing the value of the 

collateral, both on a fair market basis and on a liquidation basis. PBGC also considers 

any existing security interests that have been perfected against such collateral and may 

agree to secure the collateral in a subordinate position. In the past, PBGC has accepted 

liens on personal and real property of the plan sponsor, of members of its controlled 

group, and of entities outside of the plan sponsor's controlled group; in some instances, 

PBGC has accepted security in the form of letters of credit, escrow accounts, and other 

such forms of security. 

2010 Enrolled Actuaries Meeting Blue Book 	 Page 31 
QUESTION 32 

Other: "Risk Mitigation" Program 

Please provide an update on the number and kinds of cases 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 (e.g., the number and types of settlements 

reached). How does the level of activity under this program compare to prior years? 

What kinds of protection does PBGC generally look for in settlements under this program? 

RESPONSE 

During FY 2009, PBGC's Department of Insurance Supervision and Compliance (DISC) 

identified more than 540 transactions that potentially posed an increased risk of long run 

loss to the pension insurance program. DISC determined that 75 transactions warranted 

further investigation. In two cases, PBGC obtained protection for the pension plans for a 

total of $819 million. The level of activity for 2009 was more than the prior year. 

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. 

2010 Enrolled Actuaries Meeting Blue Book Page 32 
QUESTION 33 

Other: PBGe Administrative Decisions of Interest 

Please describe any decisions of PBGC's Appeals Board that would be of interest to 

enrolled actuaries. 

RESPONSE 

Most PBGC Appeals Board decisions are available on PBGC's Website at 

http://vvww.pbgc.gov/practitioners/law-regulations-informalguidance/contenUpage15626.html. There is a search feature that can be used to find 

decisions that address topics and issues you may be interested in. One decision of note 

is the Consolidated Appeal regarding the Retirement Income Plan for Pilots of U.S. 

Airways, issued on February 29,2008. The decision addresses several issues, including 

the treatment of 415(b) increases in priority category-3. The pilots have challenged the 

decision in the U.S. District Court for the District of Columbia. 

2010 Enrolled Actuaries Meeting Blue Book Page 33 
QUESTION 34 

Other: Litigation Issues 

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

interest to enrolled actuaries. 

RESPONSE 

Davis v. PBGC, 571 F.3d 1288 (D.C. Cir. 2009) - A group of retired participants in a terminated 

pension plan sued PBGC, contending that the agency erred in making benefit determinations and 

breached its fiduciary duty. The participants sought a preliminary injunction prohibiting PBGC from 

recouping benefit overpayments from them while the suit was pending. The district court denied 

the injunction, and the D.C. Circuit affirmed, holding that the participants had failed to demonstrate 

a substantial likelihood of success on the merits or that they would be irreparably harmed absent 

the injunction. The court held that PBGC's interpretations of ERISA are entitled to Chevron 

deference, notwithstanding the participants' contention that PBGC. as trustee of the terminated 

plan, had a conflict of interest because of its financial interest as guarantor. 

=.:..:.==-==-!..:.-''-==, 562 F.3d 154 (2d Cir. 2009), cert. denied, 2009 WL 3316342 (Dec. 14, 

2009) - The debtor filed an adversary proceeding against PBGC, seeking a declaration that the 

statutory termination premiums it incurred by terminating its pension plan were pre-petition 

bankruptcy claims that were discharged through its reorganization. The bankruptcy court agreed, 

and the parties appealed directly to the Second Circuit. The court of appeals reversed, holding that 

the "obvious purpose of [section 4006(a)(7)(B) of ERISA] is to prevent employers from evading ... 

termination premium[s] while seeking reorganization in bankruptcy." The court held that nonbankruptcy law (in this case, ERISA) determines the nature and timing of an obligation, and that 

ERISA specifically states that termination premiums for a plan terminated during reorganization do 

not apply until the debtor emerges from bankruptcy. 

Paulsen V. CNF, Inc., 559 F.3d 1061(9th Cir. 2009), cert. denied, 2010 WL 58395 (Jan. 11,2010)­

PartiCipants in a terminated pension plan brought suit against the former parent of the plan 

sponsor, the plan's administrative committee, and the plan actuary, alleging fiduciary breach under 

ERISA and actuarial malpractice under state law. The court ordered joinder of PBGC as an 

essential party. The participants alleged that PBGC committed fiduciary breach by failing to sue 

the plan actuary. The district court dismissed the complaint against PBGC, and the Ninth Circuit 

affirmed. Focusing on PBGC's unique role and varied statutory duties, the court of appeals held 

that PBGC's discretionary decision not to pursue claims for fiduciary breach is not subject to judicial 

review. The court also agreed with PBGC's view that any proceeds of a participant suit for fiduciary 

breach relating to a terminated plan would go first to PBGC, and not directly to participants. As a 

result, the participants lacked standing to bring those claims. 

Sara Lee Corp. V. American Bakers Ass'n Retirement Plan, 2009 WL 4289713 (D.D.C. Dec. 1, 

2009) - The court upheld PBGC's determination re-classifying a pension plan as a multipleemployer plan, applying the deferential "arbitrary and capricious" standard. The court held that the 

agency's determination was based on a consideration of the relevant factors and did not reflect a 

clear error of judgment. 

Montgomery v. PBGC, 601 F. Supp. 2d 139 (D.D.C. 2009) - A participant in a terminated pension 

plan sued PBGC to challenge the agency's denial of his application for benefits. The participant 

argued that PBGC should have taken into account his total hours worked, rather than his years of 

service. Granting PBGC's motion for summary jUdgment, the court held that PBGC did not abuse 

its discretion in denying benefits when, under the unambiguous terms of the plan, the participant 

failed to meet the vesting requirement. 

2010 Enrolled Actuaries Meeting Blue Book Page 34 
United Steelworkers, Int'I, AFL-CIO v. PBGC, 602 F. Supp. 2d 1115 (D. Minn. 2009) - The union 

challenged PBGC's benefit determinations under the Thunderbird Mining pension plan, alleging 

that participants were wrongly denied shutdown benefits. PBGC moved to dismiss or transfer the 

case to the District of Columbia because, under section 4003(f) of ERISA, the appropriate court for 

an action against PBGC is either where termination proceedings are taking place, where the plan 

has its principal office, or the District of Columbia. Because the pension plan had terminated and 

closed its principal office years before, the court, emphasizing its duty to follow the plain language 

of ERISA, agreed with PBGC that the District of Columbia was the only court in which the action 

could have been brought, and transferred the case there. 

PBGC v. Boury, Inc., 2009 WL 3334924 (N.D. W. Va. Oct. 14,2009) - PBGC sued the sponsor of 

a terminated pension plan and its controlled group members to enforce the agency's lien under 

section 4068(a) of ERISA. The court dismissed the case after entering a consent judgment in 

PBGC's favor, under which the plan sponsor and its controlled group members were ordered to sell 

real property within a time certain and pay PBGC a portion of the sale proceeds. The sale did not 

occur within the time certain and PBGC was not paid; instead, a local land commissioner sold the 

property to a third party in a "tax sale" under West Virginia law. After granting PBGC's motion to 

reopen the case, the court held that PBGC's lien survived the "tax sale" because section 4068(b) of 

ERISA, which states that a lien continues until the liability is satisfied or becomes unenforceable by 

reason of lapse of time, preempts state law. The court also held that the provisions of the Internal 

Revenue Code governing the discharge of certain federal tax liens do not apply to federal liens 

arising under ERISA. 

Carstens v. Michigan Dep't of Treasury, 2009 WL 2581504 (W.o. Mich. Aug. 18,2009) - The 

former sponsor of a terminated pension plan sued the state of Michigan and PBGC in Michigan 

state court for a declaratory judgment regarding ownership of unclaimed property. PBGC removed 

the case to federal district court. PBGC then moved to dismiss or transfer the case to the District of 

Columbia because, under section 4003(f) of ERISA, the appropriate court for an action against 

PBGC is either where termination proceedings are taking place, where the plan has its principal 

office, or the District of Columbia. Because the pension plan had terminated and closed its 

principal office years before, the court agreed with PBGC that the District of Columbia was the only 

court in which the action could have been brought, and transferred the case there. 

In re Wolverine Proctor & Schwartz, 2009 WL 1271953 (Bankr. D. Mass. May 5, 2009), appeal 

docketed, No.1 :09-cv-11038 (D. Mass. Jun. 15,2009) - PBGC settled its claims for termination 

liability with the liquidating trustee of the former plan sponsor. A creditor objected to the settlement 

on grounds that the so-called "prudent investor" rate should have been used to calculate PBGC's 

claim for the plan's unfunded benefit liabilities, and that PBGC was precluded from recovering more 

than what it set forth in its original proof of claim. Following Raleigh v. Illinois Dep't of Rev., the 

court held that the substantive non-bankruptcy law controlled the amount of liability. Here, the 

substantive law is ERISA's definition of unfunded benefit liabilities, which includes PBGC's 

regulatory assumptions. And citing PBGC's amended claim, and that PBGC had reserved its right 

to "amend, modify and supplement [its original] proof of claim and/or to file additional proofs of 

claim," the court held that the amount of PBGC's original proof of claim was immaterial. 

Accordingly, the court overruled the creditor's objection. 

2010 Enrolled Actuaries Meeting Blue Book Page 35 
QUESTION 35 

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 

Information about frozen plans is now reported as part of the annual comprehensive premium filing. 

so we have more detailed information to share than we did in prior years. But. because it's the first 

year this data has been collected. it's too soon to comment on trends. A summary of the data 

reported for plan years beginning in 2008 follows: 

Frozen plans 

As of the beginning of the 2008 plan year. 10.5% of participants in DB plans were in plans for 

which accruals had ceased completely (Le.• "hard freeze for all"). These plans represent 21 % 

of the covered DB plans. They are mostly small plans. For example. of the "hard frozen for 

all" plans. 60% have fewer than 100 participants and 83% have fewer than 500 participants. 

Another 7% of participants in DB plans were in plans for which accruals have ceased for 

some. but not all. participants. We do not have data to determine the extent to which these 

plans are "hard frozen". For example. in some cases. the freeze might apply to participants 

who work in a certain location and in others it might apply to all but certain grandfathered 

participants. It's important to note that the 7% number noted above represents all participants 

in the plan. not just those for whom accruals have ceased. So. it would be an overstatement 

to simply add this number to the "hard frozen for all participants" number. 

Another 3.5% of the participants in DB plans are in plans for which there is some other sort of 

freeze in effect either for all or some of the participants (e.g .• a plan for which the only 

accruals are salary upticks in the final average pay plan.) 

Please note - PBGC's 2008 premium database is not yet 100% complete. It includes all plans with 

100 or more participants and most small plans. However, the due date for 2008 premiums for 

small plans with plan years that begin late in the year has not yet passed, so data for those plans is 

outstanding. We estimate that about 2.500-3,000 small plans fall into that category out of a total of 

about 28,000 single-employer plans. 

Hybrid plans 

Data about the prevalence of hybrid plans comes from Form 5500. Data from Form 5500 are two 

years old and do not provide a particularly insightful look at current trends in the pension world, but 

they are our primary source of plan characteristic data. 

Preliminary data for PBGC-insured single-employer plans from the 2007 Form 5500 indicates that. 

as of the end of 2007, hybrid plans represented about 10% of single-employer DB plans (the 

corresponding percentage for the prior year was 8.3%.) Although the total percentage of plans that 

are hybrid plans has increased, the percentage of participants in hybrid plans has remained fairly 

constant. This indicates that the incidence of recent conversions to hybrid plans is more prevalent 

among small plans. That said, hybrids plans are still much more prevalent among large plans. For 

example, although hybrid plans represent about 10% of single-employer DB plans, if you consider 

only plans with more than 5,000 participants that number increases to 33%. 

Termination of frozen plans 

The termination of frozen plans has appeared to be relatively constant, with approximately 20% of 

frozen plans being terminated in any given year. 

2010 Enrolled Actuaries Meeting Blue Book Page 36