2007 Enrolled Actuaries Meeting 

Questions to the PBGC 

and Summary of Their Responses 

March 2007 

 i
Summary of Discussions between the Enrolled Actuaries Program Committee 

and Staff of the Pension Benefit Guaranty Corporation 

on January 22 and February 12, 2007 

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

discussions on January 22 and February 12, 2007, 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 

Curtis M. Cartolano, Hewitt Associates LLC 

Marjorie R. Martin, Aon Consulting 

John H. Moore, CCA Strategies 

Jay P. Rosenberg, Buck Consultants 

Donald J. Segal, CCA Strategies 

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: 

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

James L. Beller, Jr., Attorney, Legislative and Regulatory Department 

Kenneth Cooper, Attorney, Office of the General Counsel 

C. David Gustafson, Director, Policy, Research and Analysis Department 

John H. Hanley, Director, Legislative and Regulatory Department 

Sarah Humphrey, Attorney, Office of the General Counsel 

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

Constance Markakis, Attorney, Legislative and Regulatory Department 

Deborah C. Murphy, Attorney, Legislative and Regulatory Department 

Megan O'Donnell, Program Analyst, Legislative and Regulatory Department 

Jane D. Pacelli, Chief Research Actuary, Policy, Research and Analysis Department 

Bela Palli, Manager, Standard Termination Compliance Division 

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

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

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

Copyright © 2007, 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. 

 ii
INDEX

Subject Matter Questions

1. Premiums..............................................................................................................................1 - 5 

2. Standard Terminations......................................................................................6 – 9 (see also 5) 

3. Valuations.........................................................................................................................10 - 12 

4. Participant Notices................................................................................................................... 13 

5. Reportable Events.........................................................................................14 – 16 (see also 3) 

6. Employer Reporting .............................................................................................17 (see also 3) 

7. Other Reporting................................................................................................................18 - 22 

 iii
QUESTION 1 

Premiums: Termination Premium 

The Deficit Reduction Act of 2005 created a new “termination premium” (generally, 

$1,250 per participant per year for three years), which applies where certain distress and 

involuntary terminations occur. Assume that a plan terminates in a distress or 

involuntary termination that is subject to the termination premium. Assume also that the 

value (as of the termination date) of the PBGC’s recoveries on its claim for unfunded 

benefit liabilities (UBL claim) plus the value (as of the termination date) of the 3-year 

termination premium exceeds 100% of the amount of PBGC’s UBL claim. In such 

circumstances, would PBGC require payment of the full termination premium or would it 

limit the termination premium so that the value of the termination premium plus the value 

of the PBGC’s recoveries on its UBL claim would not exceed the amount of the PBGC’s 

UBL claim? 

RESPONSE: 

The PBGC would require payment of the full amount of the termination premium. The 

termination premium is calculated based on the number of participants in the plan 

immediately before the termination date. It is unaffected by the size of the PBGC's UBL 

claim or the value of PBGC’s recoveries on its UBL claim.

 1
QUESTION 2 

Premiums: Variable-rate premium cap for small employers

The Pension Protection Act of 2006 (PPA) established a per-participant cap on the 

variable-rate premium (VRP) for plan years beginning after 2006 equal to $5 multiplied 

by the number of participants. The cap applies only if the aggregate number of 

employees of all contributing sponsors and all members of the sponsors’ controlled 

groups is 25 or fewer. 

The following questions relate to this new provision: 

(a) If an eligible plan has 20 participants, what is the maximum VRP due? 

(b) Do all single-employer plans with 25 or fewer participants qualify for the cap? 

(c) Might a single-employer plan with more than 25 participants qualify for the cap? 

(d) On what date are employees counted for purposes of the 25-employee eligibility 

rule? 

RESPONSE: 

(a) The per-participant cap is $100 ($5 x 20), so the maximum total VRP for the plan is 

$2,000 ($100 x 20). In other words, the maximum VRP for the plan is $5 

multiplied by the square of the participant count. 

(b) No. The eligibility criterion is based on employees, not the participant count. If 

there are more than 25 employees, taking into account all employees of all 

contributing sponsors of the plan and all members of their controlled groups, the 

plan is ineligible for the cap. 

(c) Yes. Consider a contributing sponsor with 25 employees, all of whom are 

participants in a plan. If the plan also retains benefits for 10 former employees who 

are either terminated vested or retired, there would be 35 participants. This plan 

would qualify for the cap (assuming there are no other contributing sponsors and no 

controlled group members). 

(d) The eligibility rule is based on the number of employees on the first day of the 

premium payment year. Note that the cap itself ($5 times the square of the 

participant count) is based on the participant count on the premium snapshot date 

(generally the last day of the prior plan year). 

 2
QUESTION 3 

Premiums, Reportable Events, and Employer Reporting: Impact of new current 

liability mortality tables 

Treasury recently issued new mortality tables to be used to determine current liability for 

plan years beginning in 2007. ERISA section 4006(a)(3)(E) provides that when the new 

tables take effect, the assumptions and methods used to determine unfunded vested 

benefits (UVBs) for purposes of the variable-rate premium also change as described 

below: 

(a) The required interest rate underlying the UVB calculation increases from 85% of 

the annual rate of interest determined by the Secretary of the Treasury on amounts 

invested conservatively in long-term investment grade corporate bonds (the 

“corporate bond rate”) to 100% of that rate (See ERISA section 

4006(a)(3)(E)(iii)(II)); and 

(b) Market value of assets is used instead of actuarial value (See ERISA section 

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

How do these changes impact the calculation of UVBs for variable rate premiums and for 

other PBGC requirements such as reporting under ERISA section 4010 and 4043? When 

are the new mortality tables first reflected in the calculation of UVBs? 

RESPONSE: 

See Technical Update 07-1, Effect of Treasury Mortality Tables on PBGC Requirements

(http://www.pbgc.gov/practitioners/law-regulations-informalguidance/content/tu15995.html), which explains how the establishment by the Secretary 

of the Treasury of new mortality tables for determining current liability affects premium 

calculations and PBGC requirements under ERISA sections 4010 and 4043. 

 3
QUESTION 4 

Premiums: Electronic Filing 

Is electronic filing mandatory for an amendment to a filing to which the electronic filing 

requirement did not apply? 

RESPONSE: 

Electronic filing is required for flat- and variable-rate premium filings for plan years 

beginning after 2006. For plans that had 500 or more participants for the prior plan year, 

e-filing is also required for any filing made after June 2006 for a plan year beginning in 

2006. The e-filing requirement applies to estimated and final filings and to both original 

and amended filings. (PBGC may grant exemptions to the e-filing requirement for good 

cause in appropriate circumstances.) Whether an amended filing must be made 

electronically is determined according to these rules rather than by reference to whether 

the original filing being amended was subject to the e-filing requirement. 

Since the rules governing applicability of the e-filing requirement to amended filings are 

the same as for original filings, in most cases an amended filing will have to be e-filed if 

the original filing was required to be e-filed, and vice versa. But this need not be the 

case. For example, if a plan with 500 or more participants for the prior year made its 

final 2006 filing before July 2006 but amended it in 2007, the original filing would not 

have been subject to the e-filing requirement, but the amended filing would be. 

In summary, for an amended filing made in 2007 (or later), if the amended filing is for a 

plan year: 

• Beginning in or before 2005, it need not be made electronically. 

• Beginning in or after 2007, it must be made electronically (unless an exemption is 

granted). 

• Beginning in 2006, it must be made electronically if the plan had 500 or more 

participants for the plan year preceding the plan year for which the amended filing 

is made (unless an exemption is granted), but it need not be made electronically if 

the plan had fewer that 500 participants for the plan year preceding the plan year 

for which the amended filing is made. 

 4
QUESTION 5 

Premiums: Cessation of Coverage 

Q&A 16 of the 2000 Blue Book provides information on premium and termination 

requirements when a plan, in the normal course of administration pays out all benefits of 

all participants except substantial owners of the sponsoring company. Does that 

information apply if the plan ceases to be covered by Title IV for any reason? 

RESPONSE: 

Yes. If a plan ceases to be covered by Title IV of ERISA, the plan administrator should 

notify PBGC of this occurrence so that PBGC will know that the plan should be removed 

from the premium database. If the plan subsequently ends after it has ceased being 

covered by Title IV, no termination filing with PBGC is required. (See section 403(d)(1) 

of ERISA, which generally provides that upon termination of a plan not covered by Title 

IV, the assets of the plan must be allocated in accordance with section 4044 of ERISA.) 

If the plan continues and becomes covered again, it must begin paying premiums again. 

To notify PBGC or to request a coverage determination, the plan administrator should 

write to: 

Standard Termination Compliance Division 

Pension Benefit Guaranty Corporation 

1200 K Street, NW, Suite 930 

Washington, DC 20005-4026 

E-mail: standard@PBGC.gov 

Fax: (202) 326-4001 

 5
QUESTION 6 

Standard Terminations: Notice of Plan Benefits 

A plan is terminating in a standard termination. The plan properly provided the Notice of 

Intent to Terminate to all participants prior to the termination date. Prior to the date the 

Notice of Plan Benefits is issued, the plan provides benefits to a participant either through 

the purchase of an irrevocable commitment or in a form other than an annuity, in 

accordance with 29 CFR § 4041.22 (which sets forth the limited circumstances under 

which benefits may be provided during the pendency of the termination process) and all 

other applicable requirements under the Internal Revenue Code and ERISA. Must this 

participant receive a Notice of Plan Benefits? 

RESPONSE: 

Under 29 CFR § 4041.24(a), a Notice of Plan Benefits must be provided to every affected 

party as of the proposed termination date. However, PBGC staff interprets this regulation 

as not requiring a plan administrator to issue a Notice of Plan Benefits to a participant 

whose benefits are paid out in accordance with 29 CFR § 4041.22 on or before the due 

date for issuing the Notice of Plan Benefits. 

 6
QUESTION 7 

Standard Terminations: Selection of Plans to Audit 

In its response to Question 2 of the 2006 Blue Book, PBGC stated that it was considering 

making changes in how it selects plans for standard termination audits. (According to the 

response to Question 12 of the 2001 PBGC Blue Book, PBGC divides plans into two 

strata, selecting for audit all plans with 500 or more participants and a random sample 

from among the smaller plans.) Has PBGC made any such changes and, if so, what are 

they? 

RESPONSE: 

Shortly after the 2006 Blue Book was issued, PBGC decided to change the cutoff 

between strata. For terminating plans for which post-distribution certifications are filed 

on or after January 1, 2006, PBGC selects all plans with more than 300 participants for 

audit and a random sample of smaller plans. Plans may also be selected for audit when 

there is an indication of a problem (e.g., based on a complaint from a plan participant or 

practitioner). 

In addition, PBGC now audits all plans that distribute plan assets in satisfaction of plan 

liabilities before or without filing a standard termination notice (Form 500) in accordance 

with PBGC’s regulation (29 CFR part 4041). PBGC also reserves the right to take any 

other appropriate action in such circumstances. This initiative will not affect plans that in 

the normal course of administration pay out all benefits due all participants except 

substantial owners of the sponsoring company.

 7
QUESTION 8 

Standard Terminations: Determination of Majority Owner Status 

PBGC’s standard termination regulations provide that a majority owner (based on a 50% 

or more ownership interest taking into account the constructive ownership rules) may 

elect to forgo receipt of his or her plan benefits to the extent necessary to enable the plan 

to satisfy all other plan benefits (29 CFR §§ 4041.2, .21(b)(2)). Assume that two or more 

participants are each substantial owners, but not majority owners, and together have a 

50% or greater ownership interest. Assume further that they agree among themselves 

that they will each elect such an alternative treatment under the majority owner rules. 

May they elect the alternative treatment? 

RESPONSE: 

No. To be eligible to elect an alternative treatment under the majority owner rules, a 

participant must be a majority owner (taking into account the constructive ownership 

rules). There is no aggregation of ownership interests among participants (except to the 

extent provided under the constructive ownership rules). 

 8
QUESTION 9 

Standard Terminations: Post-Termination PPA Lump Sum Amendments 

PPA changes the interest rate and mortality table used in calculating minimum lump sum 

values, with the change statutorily exempted from the anti-cutback rules of IRC 

section 411(d)(6). An implementing amendment need not be adopted until the end of the 

2009 plan year (and perhaps even later if IRS extends the remedial amendment period). 

Assume that a plan undergoes a standard termination and seeks a determination letter 

upon termination. After the plan’s termination date, but by the end of the 2009 plan year 

(or by any later date during an extended remedial amendment period), the plan is 

amended to substitute the PPA interest and mortality assumptions for the GATT interest 

and mortality assumptions for purposes of calculating minimum lump sum values. The 

plan obtains a favorable determination letter from IRS and thereafter pays lump sums on 

the basis of the PPA assumptions (including the transition rule for distributions in the 

2008 through 2011 plan years) during the permitted distribution period in the standard 

termination. These lump sums are lower than they would have been without taking the 

PPA lump sum amendment into account. 

Would PBGC consider these lump sums to be correctly determined? 

RESPONSE: 

No. PBGC regulations (29 CFR § 4041.8) limit the effectiveness of amendments adopted 

after a plan’s termination date when determining plan benefits in a standard termination. 

Under this regulation, amendments adopted after the plan’s termination date generally 

may not be taken into account to the extent they decrease benefit values, as would be the 

case with the PPA lump sum amendment in the question. Although the regulation 

explicitly permits post-termination amendments to decrease benefit values “to the extent 

the decrease is necessary to meet a qualification requirement under section 401 of the 

Code”, the plan here could have met qualification requirements by adopting the PPA 

lump sum assumptions for determining minimum lump sum values while preserving the 

GATT assumptions as an alternative basis for determining lump sums. Therefore, an 

amendment simply substituting the PPA lump sum assumptions for the GATT lump sum 

assumptions is not “necessary” to meet qualification requirements and, thus, the plan may 

not rely on the PPA lump sum amendment to decrease lump sum values. Also, as noted 

in PBGC’s response to Q&A 14 of the 2001 Blue Book, PBGC is not bound by an IRS 

determination letter in determining benefit entitlements in a standard termination audit. 

 9
QUESTION 10 

Valuations: Definition of “Normal Form” for XRA Purposes 

Under 29 CFR § 4044.55(b)(1), the participant’s monthly benefit payable at unreduced 

retirement age is determined “in the normal form payable under the terms of the plan.” 

For this purpose, does “normal form” mean the automatic form of benefit payable under 

the terms of the plan absent an election otherwise, or the form of benefit in which the 

plan's formula expresses the benefit? 

RESPONSE:

PBGC generally considers "normal form" for this purpose to be the form in which the 

plan's formula expresses the benefit. 

 10
QUESTION 11 

Valuations: Social Security Supplement 

A plan provides a benefit that is not protected under the anti-cutback rules of IRC 

section 411(d)(6), such as a social security supplement that is not a qualified social 

security supplement. Must that benefit be included in benefit liabilities for purposes of 

determining whether a plan may terminate in a standard termination under section 4041 

of ERISA? 

RESPONSE: 

Yes. Unless the benefit is amended out of the plan on or before the termination date, the 

full benefit must be included in benefit liabilities for purposes of a standard termination 

under section 4041 of ERISA. (For information on post-termination amendments, see 29 

CFR § 4041.8. See also Question 9 of this 2007 Blue Book.) 

 11
QUESTION 12 

Valuations: 4044 Asset Allocation 

When performing a valuation under Part 4044, how does PBGC allocate the expense 

load? 

RESPONSE: 

PBGC determines the expense load based on the total participant count and the total 

benefit liability (through Priority Category 6), and then allocates the entire expense load 

in proportion to the liabilities in each priority category. 

 12
QUESTION 13 

Participant Notices: Elimination of Requirement under ERISA section 4011 

PPA section 501(a) expands the annual funding notice requirement that applies under 

ERISA section 101(f) to multiemployer plans, so that it applies also (with modifications) 

to single-employer plans, effective for plan years beginning after December 31, 2007, 

with the notice required to be provided within 120 days after the end of the plan year to 

which it relates (subject to an exception for small plans). PPA section 501(b) repeals the 

requirement, under ERISA section 4011, that plan administrators of certain plans issue a 

Participant Notice, effective for plan years beginning after December 31, 2006. Do these 

effective dates mean that there will be more than a two-year period during which neither 

a Participant Notice under ERISA section 4011 nor an annual funding notice under 

ERISA section 101(f) will be required for a PBGC-covered single-employer plan? 

RESPONSE: 

Yes. In the case of a calendar-year PBGC-covered single-employer plan, a Participant 

Notice under ERISA section 4011 for the 2006 plan year was required to have been 

issued within two months after the deadline (or extended deadline) for the Form 5500 for 

the 2005 plan year, i.e., in the fall of 2006. (For most non-calendar year plans, a 

Participant Notice under ERISA section 4011 for the 2006 plan year will be due in the 

2007 calendar year.) No Participant Notice under ERISA section 4011 will be required 

for the 2007 (or any later) plan year. The first annual funding notice for this plan under 

PPA section 501(a) will be the one for the 2008 plan year, which will be due within 120 

days after December 31, 2008 (subject to an exception for small plans), i.e., in the spring 

of 2009. 

Note that the Title IV Participant Notice “for” a plan year is generally issued “in” that 

plan year, whereas the Title I annual funding notice “for” a plan year will be required to 

be issued “in” the following plan year. Note also that while the Title IV Participant 

Notice is under the jurisdiction of the Pension Benefit Guaranty Corporation, the Title I 

annual funding notice is under the jurisdiction of the Department of Labor. 

. 

. 

 13
QUESTION 14 

Reportable Event Notices: Quarterly Contributions Due Before Merger 

Plans A and B are calendar-year single-employer plans that merged effective May 10, 

2007, with Plan A designated as the continuing plan. Quarterly contributions of 

$100,000 each would have been due for 2007 for Plan A. Quarterly contributions of $0 

each would have been due for 2007 for Plan B. Plan B has a $5,000,000 credit balance in 

the Funding Standard Account (FSA) as of January 1, 2007 before reflecting any 

contributions for 2006. No contributions were made to either plan or the combined plan 

for 2007. Q-12 of IRS Notice 89-52 says that FSA credit balances can be used to 

meet/cure quarterly contributions required to the extent the contributions reflected in the 

FSA have been made. Since the FSA credit balance was available by the 30th day 

following the April 15, 2007 due date for the first 2007 quarterly contribution, does the 

plan need to report late quarterly contributions to PBGC under 29 CFR § 4043.25(c)? 

RESPONSE: 

Section 4043.25(c) provides that for the event of failure to make a required minimum 

funding contribution, notice is waived if the required minimum funding contribution is 

made by the 30th day after its due date. Provided that the merger was adopted and 

effective by the 30th day following the April 15, 2007 due date for the first quarterly 

contribution, then under the facts given above, PBGC would deem this waiver to apply. 

(We note that there is no such waiver for PBGC Form 200, Notice of Failure to Make 

Required Contributions. Thus, had the missed contribution been such that a Form 200 

would have been required, reporting would not be waived even if the merger had been 

adopted and effective by the 10th day after the missed contribution’s due date.) 

 14
QUESTION 15 

Reportable Events: Mortality Assumptions for “Optional” Reporting Waiver 

In its response to Question 15(b) of the 2006 Blue Book, PBGC stated that its new 

mortality assumptions (a version of GAM-94), rather than its old mortality assumptions 

(a version of GAM-83), must be used as part of the 4010 Optional Assumptions under its 

reportable events regulation where the plan year that contains the “testing date” for the 

event year ends on or after January 1, 2006. However, PBGC’s reportable events 

instructions, which were updated after PBGC’s new mortality assumptions became 

effective, appear to require (at p. 14) the use of the old mortality assumptions regardless 

of when the plan year containing the “testing date” for the event year ends. Is the 

guidance in the 2006 Blue Book correct, or are the reportable events instructions correct? 

RESPONSE: 

The guidance in the 2006 Blue Book is correct. PBGC will revise its reportable events 

instructions to reflect this guidance. Also see Technical Update 07-1, Effect of Treasury 

Mortality Tables on PBGC Requirements (http://www.pbgc.gov/practitioners/lawregulations-informal-guidance/content/tu15995.html), which explains how Treasury’s 

issuance of new mortality tables for determining current liability affects the use of the 

4010 Optional Assumptions for certain reportable events waivers. 

 15
QUESTION 16 

Reportable Events: Effect of Pending Distress Termination 

Assume that a plan has filed for a distress termination with PBGC with a proposed 

termination date of July 1, 2006; that PBGC has neither approved nor disapproved the 

distress termination; that all required installments and other contributions required under 

section 412 of the IRC have been made to the plan assuming that the plan terminates as 

of July 1, 2006; and that one or more such required contributions have not been made to 

the plan assuming that the plan remains ongoing. Is there a requirement to report (on 

Form 10 or Form 200, as applicable) that these contributions were not made? If so, and if 

a Form 200 is required, would PBGC consider a lien to have arisen and, if so, under what 

circumstances, if any, would PBGC perfect it? 

RESPONSE: 

PBGC will decide on a case-by-case basis what action, if any, to take in the 

circumstances described in the question. Until a pension plan is terminated in accordance 

with ERISA, it remains ongoing. Contributions are due for all periods up to a plan’s 

termination date, and the pendency of a distress termination application with a proposed 

termination date does not serve to cut off the requirement to make contributions. 

Therefore, the person responsible for making a Form 10 or Form 200 filing should do so 

unless PBGC has advised that person that such a filing is not required under the 

circumstances of a particular case. 

Although whether a lien has arisen in such circumstances is an issue within the 

jurisdiction of the IRS, PBGC also plays a role in connection with determinations 

regarding liens under IRC § 412(n). If the amount of the missed contributions exceeds $1 

million, even if no such contributions would be owed if the plan terminated as of the date 

of plan termination proposed in the distress NOIT, a statutory lien under IRC § 412(n) 

arises by operation of law. PBGC can perfect that lien against all of the real and personal 

assets of the plan sponsor and its controlled group. Whether PBGC will perfect the 

412(n) lien depends on the facts and circumstances of each case. If the distress 

termination is subsequently approved and based on the date of plan termination (whether 

it is the date proposed in the NOIT or some other date) no contributions are owed to the 

plan, any lien that had been perfected would be withdrawn and any excess contributions 

would be pro-rated to the date of plan termination. 

 16
QUESTION 17

Employer Reporting: Recognition of Future Service in Calculation of Benefit 

Liabilities 

Under 29 CFR § 4010.8, benefit liabilities must be reported to PBGC for certain plans. 

For this calculation, benefit liabilities are to be determined using ERISA section 4044 

assumptions, including the expected retirement age (XRA) assumption for each 

participant. As noted in Q&A 17 of the 2001 Blue Book and Q&A 19 of the 2002 Blue 

Book, future service is not reflected when determining a participant’s “earliest retirement 

age” (ERA) and “unreduced retirement age” (URA) for looking up the XRA in the XRA 

tables. How, if at all, is future service reflected for determining whether a participant is 

expected to “grow into” eligibility for certain subsidies? 

RESPONSE: 

Future service is reflected to the extent a participant is expected to “grow into” eligibility 

for certain subsidies by continuing in covered employment until the XRA so determined. 

For example, assume a plan has a normal retirement age of 65 and provides reduced early 

retirement benefits to participants age 55 with 10 years of vesting service. The plan also 

provides unreduced early retirement benefits to participants with 30 years of vesting 

service. For a participant age 45 with 20 years of vesting service, the ERA would be 55 

and the URA would be 65. If the “medium” XRA table is applicable, the participant’s 

XRA would be age 60. If the participant continues to work until his XRA of 60, he will 

have 35 years of vesting service. Thus, the benefit liability would reflect the unreduced 

benefit payable at 60 because the participant would have “grown into” the subsidy at that 

point. 

 17
QUESTION 18 

Other Reporting: Terminated Plan 

Plan A and several other plans are maintained by members of Controlled Group X. The 

Information Year (as defined in 29 CFR § 4010.5) for Controlled Group X is the calendar 

year. Plan A, which has a plan year beginning April 1 and ending March 31, is 

undergoing a standard termination with a proposed termination date of July 1, 2006. For 

purposes of the $50 Million Gateway Test and for purposes of reporting benefit liabilities 

to PBGC under ERISA section 4010, must Plan A be included? Does it matter whether 

the distribution of benefit liabilities was completed, or the post-distribution certification 

filed, on or before the gateway testing date (March 31, 2006), the end of the Information 

Year (December 31, 2006), or the 4010 reporting deadline (April 16, 2007)? 

RESPONSE:

Plan A may be excluded for both purposes described above if all of the plan’s assets 

(other than excess assets) are distributed pursuant to the termination on or before the last 

day of the Information Year, in this case December 31, 2006. 

 18
QUESTION 19 

Other Reporting: Substantial Cessation of Operations 

Section 4062(e) of ERISA provides special rules that apply when ‘‘an employer ceases 

operations at a facility in any location and, as a result of such cessation of operations, 

more than 20 percent of the total number of his employees who are participants under a 

plan established and maintained by him are separated from employment’’ (a ‘‘section 

4062(e) event’’). Is the “more than 20%” test determined on a plan-by-plan basis or by 

considering all plans maintained by the controlled group in the aggregate? 

RESPONSE: 

For purposes of determining whether a section 4062(e) event has occurred, the “more 

than 20%” test is determined on a plan-by-plan basis. 

 19
QUESTION 20 

Other Reporting: Substantial Cessation of Operations 

In the response to Question 21(b) of the 2006 Blue Book, PBGC noted—in the context of 

an event that constitutes both an “active participant reduction” reportable event and a 

section 4062(e) event—that the reportable events filing requirement is separate from the 

filing requirement (under ERISA section 4063(a)) for a section 4062(e) event. May the 

two notices be combined by including the notice of the section 4062(e) event as part of 

the reportable events notice? 

RESPONSE: 

Yes, provided that: (1) the filing states that there has been a section 4062(e) event and 

includes a request for a liability determination; and (2) the filer alerts PBGC by clearly 

noting that the filing includes a notice of the section 4062(e) event (such as by indicating 

in a cover letter for the form that the filing also serves as notice of the section 4062(e) 

event). 

Note that the due dates for the two types of notices will generally differ. Section 4043 

reporting is due within 30 days after the plan administrator (or contributing sponsor) 

knows or has reason to know the event has occurred, while reporting under section 

4063(a) is due within 60 days after the section 4062(e) event. Moreover, the section 

4062(e) event and the active participant reduction event may not occur on the same date. 

Thus, in order to be timely, a combined notice will have to be submitted on or before the 

earlier of the two due dates. 

Note also that the reportable events regulation provides a number of filing extensions for 

reporting an active participant reduction, none of which serves to extend the deadline for 

filing a notice of the section 4062(e) event. The filer, therefore, may have to submit the 

reportable events notice well before it is due to ensure the timeliness of a combined 

filing. 

 20
QUESTION 21 

Other Reporting: Substantial Cessation of Operations 

If a section 4062(e) event occurs, is reporting required under ERISA section 4063(a) 

regardless of the size of the plan? 

RESPONSE: 

Yes. Although PBGC has waived the requirement to report an active participant 

reduction under § 4043.23 for certain small plans, there is no such waiver of the 

requirement to report a section 4062(e) event under ERISA section 4063(a). In response 

to a comment asking for an exemption for small plans, PBGC, in the preamble to the 

section 4062(e) final rule published on June 16, 2006 (71 FR 34829), said that it would 

consider this request as it formulates additional guidance in this area. 

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QUESTION 22 

Other Reporting: Spinoff to substantial employer (multiple-employer plan)

Assume a portion of a multiple-employer plan is spun off to a substantial employer of the 

multiple-employer plan under IRC section 414(l), and as a result, that employer ceases 

contributing to the multiple-employer plan. Has a withdrawal which needs to be reported 

under ERISA section 4063(a) occurred? If so, what actions might PBGC take? (In Q&A 

19 of the 2005 Blue Book, which involved splitting a multiple employer plan between 

two employers, the answer stated that there “may have been a withdrawal of a substantial 

employer.”) 

RESPONSE: 

Yes. This situation constitutes a withdrawal of a substantial employer (See Q&A 19 of 

the 2005 Blue Book). Therefore, the plan administrator must notify PBGC of the 

withdrawal pursuant to ERISA section 4063(a) (see Q&A 22 of the 2006 Blue Book for 

the manner of reporting). 

In the event of such withdrawal, PBGC may seek a bond or escrow under ERISA 

section 4063(b) and (c); in unusual circumstances may pursue a partition of the plan 

under section 4063(d) and treat a portion of the plan as a terminated plan and the 

remainder as a separate plan (see Opinion Letter 81-14); may accept an appropriate 

indemnity agreement among employers under section 4063(e); or may reach a negotiated 

arrangement under section 4067. In an appropriate case, PBGC may also consider 

initiating termination under section 4042(a) and assessing liability under sections 4062 

and 4064. PBGC's Department of Insurance Supervision and Compliance and Office of 

the Chief Counsel may be consulted for further guidance. 

(The difference between this question and question 19 of the 2005 Blue Book is that in 

this case the employer is assumed to be a substantial employer. In the 2005 question, it 

was not stated whether either employer was a substantial employer and therefore the 

answer said that there “may have been a withdrawal of a substantial employer.”) 

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