Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 70625 

Subject 

(d) Air Transport Association of America 

(ATA) Code 53: Fuselage. 

Reason 

(e) The mandatory continuing 

airworthiness information (MCAI) states: 

The TC Holder received from operators, 

whose fleets are operated in demanding 

operating-conditions and with very frequent 

Short Take-Off and Landing (STOL) 

operations, reports of cracks located in the 

web of fuselage frame 19. On 05 February 

2007, EASA issued Airworthiness Directive 

(AD) 2007–0028 which mandated Alert 

Service Bulletin (ASB) 228–266 and required 

an inspection of the frame 19 on all Dornier 

228 aeroplanes. In addition, the TC Holder 

also initiated a flight-test campaign including 

strain measurements as well as finite element 

modelling and fatigue analyses to better 

understand the stress distribution onto the 

frame 19 and the associated structural 

components. 

The results of these investigations 

confirmed that STOL operations diminish 

extensively the fatigue life of the frame 19. 

Fuselage frame 19 supports the rear 

attachment of the Main Landing Gear (MLG). 

This condition, if not corrected, could cause 

rupture of frame 19, leading to subsequent 

collapse of a MLG. 

For the reasons described above, this new 

AD requires installation of reinforcements 

and butt straps on frame 19 at the lower part 

of the fuselage for aeroplanes used in 

operations where this frame may be subject 

to high stress and recurring inspections of 

that frame for all aeroplanes. 

Actions and Compliance 

(f) Unless already done, do the following 

actions: 

(1) For all airplanes, within 25 hours timein-service (TIS) after June 26, 2007 (the 

effective date of AD 2007–11–03), visually 

inspect the affected fuselage frame 19 using 

the instructions in Dornier 228 RUAG Alert 

Service Bulletin No. ASB–228–266, dated 

December 1, 2006. 

(2) If any crack is found during the 

inspection required in paragraph (f)(1) of this 

AD, before further flight, contact RUAG 

Aerospace Services GmbH, Dornier 228 

Customer Support, P.O. Box 1253, 82231 

Wessling, Germany; telephone: +49-(0)8153– 

30–2280; fax: +49-(0)8153–30–3030; e-mail: 

customersupport.dornier228@ruag.com for 

FAA-approved repair instructions and 

incorporate the repair on the airplane. 

(3) After accomplishment of paragraph 

(f)(1) or (f)(2) of this AD, as applicable, 

repetitively thereafter do Structural 

Significant Item (SSI) Task No. 53.37 of 

Structure Inspection Program of Dornier 228 

Time Limits/Maintenance Checks Manual, 

Temporary Revision No. 05–27, dated August 

4, 2008, at intervals not to exceed 2,400 

landings or 72 months, whichever occurs 

first. 

(g) If the number of landings is unknown, 

calculate the compliance times of landings in 

this AD by using hours TIS. Multiply the 

number of hours TIS by 0.8 to come up with 

the number of landings. For the purpose of 

this AD: 

(1) 800 landings equals 1,000 hours TIS; 

and 

(2) 1,600 landings equals 2,000 hours TIS. 

FAA AD Differences 

NOTE: This AD differs from the MCAI and/ 

or service information as follows: 

(1) The MCAI requires different 

compliance times for airplanes operated in 

different conditions. The FAA is not able to 

enforce compliance times based on airplane 

operations since there is no way of 

determining the amount of operations in 

different conditions. To ensure the unsafe 

condition is addressed adequately and 

timely, we are requiring the inspection for all 

airplanes following a guideline combining 

number of landings and life limits. 

(2) The service information allows flight 

with known cracks provided they do not 

exceed a certain limit. FAA policy does not 

allow flight with cracks in primary structure. 

Since the fuselage is considered primary 

structure, we are mandating repair before 

further flight after any crack is found. 

Other FAA AD Provisions 

(h) The following provisions also apply to 

this AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, Standards Office, 

FAA, has the authority to approve AMOCs 

for this AD, if requested using the procedures 

found in 14 CFR 39.19. Send information to 

Attn: Greg Davison, Glider Program Manager, 

FAA, Small Airplane Directorate, 901 Locust, 

Room 301, Kansas City, Missouri 64106; 

telephone: (816) 329–4130; fax: (816) 329– 

4090. Before using any approved AMOC on 

any airplane to which the AMOC applies, 

notify your appropriate principal inspector 

(PI) in the FAA Flight Standards District 

Office (FSDO), or lacking a PI, your local 

FSDO. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer or other source, use these 

actions if they are FAA-approved. Corrective 

actions are considered FAA-approved if they 

are approved by the State of Design Authority 

(or their delegated agent). You are required 

to assure the product is airworthy before it 

is returned to service. 

(3) Reporting Requirements: For any 

reporting requirement in this AD, a federal 

agency may not conduct or sponsor, and a 

person is not required to respond to, nor 

shall a person be subject to a penalty for 

failure to comply with a collection of 

information subject to the requirements of 

the Paperwork Reduction Act unless that 

collection of information displays a current 

valid OMB Control Number. The OMB 

Control Number for this information 

collection is 2120–0056. Public reporting for 

this collection of information is estimated to 

be approximately 5 minutes per response, 

including the time for reviewing instructions, 

completing and reviewing the collection of 

information. All responses to this collection 

of information are mandatory. Comments 

concerning the accuracy of this burden and 

suggestions for reducing the burden should 

be directed to the FAA at: 800 Independence 

Ave., SW., Washington, DC 20591, Attn: 

Information Collection Clearance Officer, 

AES–200. 

Related Information 

(i) Refer to MCAI European Aviation Safety 

Agency (EASA) AD No.: 2009–0085, dated 

April 14, 2009; RUAG Alert Service Bulletin 

No. ASB–228–266, dated December 1, 2006; 

and Dornier 228 Time Limits/Maintenance 

Checks Manual, Temporary Revision No. 

05–27, dated August 4, 2008, for related 

information. For service information related 

to this AD, contact RUAG Aerospace Services 

GmbH, Dornier 228 Customer Support, P.O. 

Box 1253, 82231 Wessling, Germany; 

telephone: + 49 (0) 8153–302280; fax: + 49 

(0) 8153–303030. You may review copies of 

the referenced service information at the 

FAA, Small Airplane Directorate, 901 Locust, 

Kansas City, Missouri 64106. For information 

on the availability of this material at the 

FAA, call 816–329–4148. 

Issued in Kansas City, Missouri, on 

November 10, 2010. 

Earl Lawrence, 

Manager, Small Airplane Directorate, Aircraft 

Certification Service. 

[FR Doc. 2010–29110 Filed 11–17–10; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2520 

RIN 1210–AB18 

Annual Funding Notice for Defined 

Benefit Plans 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Proposed rule. 

SUMMARY: This document contains a 

proposed regulation that, on adoption, 

would implement the annual funding 

notice requirement in the Employee 

Retirement Income Security Act of 1974 

(ERISA), as amended by the Pension 

Protection Act of 2006 (PPA) and the 

Worker, Retiree, and Employer Recovery 

Act of 2008 (WRERA). As amended, 

section 101(f) of ERISA generally 

requires the administrators of all 

defined benefit plans, not just 

multiemployer defined benefit plans, to 

furnish an annual funding notice to the 

Pension Benefit Guaranty Corporation 

(PBGC), participants, beneficiaries, and 

certain other persons. A funding notice 

must include, among other information, 

the plan’s funding target attainment 

percentage or funded percentage, as 

applicable, over a period of time, as well 

as other information relevant to the 

plan’s funded status. This document 

also contains proposed conforming 

amendments to other regulations under 

ERISA, such as the summary annual 

report regulation, which became 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
70626 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

1On January 11, 2006, the Department of Labor 

published a final regulation implementing the 

requirements of section 101(f) of ERISA as amended 

by PFEA ’04. See 29 CFR 2520.101–4. 

2Prior to the applicability date of the PPA 

amendments to section 101(f) of ERISA, a 

multiemployer plan was required to furnish a 

funding notice consistent with § 2520.101–4 (for 

plan years beginning prior to January 1, 2008). For 

plan years beginning after December 31, 2007, 

multiemployer plans must comply with section 

101(f) as amended, and when final, the regulations 

under § 2520.101–5, rather than § 2520.101–4. The 

Department will remove § 2520.101–4 from the 

Code of Federal Regulations in conjunction with the 

promulgation of a final rule. 

3FAB 2009–01 is available on the Department’s 

Web site at http://www.dol.gov/ebsa/regs/fab2009- 

1.html. 

4The annual funding notice would be of little, if 

any, value to recipients in light of the PBGC’s 

authority and responsibility under title IV of ERISA 

with respect to insolvent multiemployer plans. See 

71 FR 1904, n.1 (Jan. 11, 2006). See also 70 FR 6306, 

n.1 (Feb. 4, 2005). 

necessary when the PPA amended 

section 101(f) of ERISA. The proposed 

regulation would affect plan 

administrators and participants and 

beneficiaries of defined benefit pension 

plans, as well as labor organizations 

representing participants and 

beneficiaries and contributing 

employers of multiemployer plans. 

DATES: Written comments on the 

proposed regulation should be received 

by the Department of Labor on or before 

January 18, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN 1210–AB18, by one of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: e-ORI@dol.gov. Include RIN 

1210–AB18 in the subject line of the 

message. 

• Mail: Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, Room N–5655, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210, Attention: Annual Funding 

Notice for Defined Benefit Plans. 

Instructions: All submissions received 

must include the agency name and 

Regulation Identifier Number (RIN) for 

this rulemaking. Comments received 

will be posted without change to 

http://www.regulations.gov and http:// 

www.dol.gov/ebsa, and made available 

for public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Washington, 

DC 20210, including any personal 

information provided. Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. Comments posted on 

the Internet can be retrieved by most 

Internet search engines. Comments may 

be submitted anonymously. Persons 

submitting comments electronically are 

encouraged not to submit paper copies. 

FOR FURTHER INFORMATION CONTACT: 

Thomas M. Hindmarch or Stephanie L. 

Ward, Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, (202) 693– 

8500. This is not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Background 

In 2004, the Pension Funding Equity 

Act (PFEA ’04), Public Law 108–218, 

amended title I of the Employee 

Retirement Income Security Act of 1974 

(ERISA) by adding section 101(f), which 

required multiemployer defined benefit 

plans to furnish a plan funding notice 

annually to each participant and 

beneficiary, to each labor organization 

representing such participants or 

beneficiaries, to each employer that has 

an obligation to contribute under the 

plan, and to the Pension Benefit 

Guaranty Corporation (PBGC).1

In 2006, section 501(a) of the Pension 

Protection Act of 2006, Public Law 109– 

280 (PPA), significantly amended 

section 101(f) of ERISA. For example, 

section 101(f) of ERISA now requires 

administrators of all defined benefit 

plans that are subject to title IV of 

ERISA, not only multiemployer plans, 

to furnish annual funding notices. In 

addition, the PPA shortened the time 

frame for providing funding notices and 

enhanced the notice content 

requirements. These changes are 

discussed in detail below. Pursuant to 

section 501(d) of the PPA, the 

amendments to section 101(f) apply to 

plan years beginning after December 31, 

2007.2

On February 10, 2009, the Department 

issued Field Assistance Bulletin 2009– 

01 (FAB 2009–01) as interim guidance 

under section 101(f) of ERISA in order 

to assist plan administrators in 

discharging their obligations under the 

new annual funding notice 

requirements. FAB 2009–01 provides 

question and answer guidance on a 

number of issues under section 101(f) of 

ERISA. It also includes model funding 

notices. Much of the guidance in FAB 

2009–01 has been incorporated into the 

proposed regulation contained in this 

document. That guidance remains in 

effect until the Department adopts final 

regulations under section 101(f) of 

ERISA (or if the Department were to 

publish any other guidance under 

section 101(f) other than final 

regulations).3

B. Overview of Proposed 29 CFR 

2520.101–5—Annual Funding Notice 

for Defined Benefit Pension Plans 

1. Scope 

Paragraph (a) of the proposed 

regulation implements the requirements 

set forth in section 101(f) of ERISA. This 

section in general requires the 

administrator of a defined benefit plan 

to which title IV of ERISA applies to 

furnish annually a funding notice to the 

PBGC, to each plan participant and 

beneficiary, to each labor organization 

representing such participants or 

beneficiaries, and, in the case of a 

multiemployer plan, to each employer 

that has an obligation to contribute to 

the plan. Those persons entitled to the 

funding notice are further clarified in 

paragraph (f) of the proposed regulation. 

Paragraphs (a)(2) and (3) of the 

proposed regulation provide limited 

exceptions to the requirement to furnish 

a funding notice. 

Under the exception in paragraph 

(a)(2)(i) of the proposal, the plan 

administrator of an insolvent 

multiemployer plan that is in 

compliance with the insolvency notice 

requirements of sections 4245(e) or 

4281(d)(3) of ERISA before the due date 

of the funding notice for a plan year is 

not, for such year, required to furnish 

the funding notice to the parties 

otherwise entitled to such notice. This 

exception is effectively the same as the 

exception that currently exists in 

§ 2520.101–4(a)(2) for multiemployer 

plans receiving financial assistance from 

the PBGC. The rationale for the 

exception was articulated in the final 

regulation under § 2520.101–4.4 The 

exception in the proposal is phrased 

slightly differently than the exception in 

§ 2520.101–4 at the request of the PBGC. 

Inasmuch as this exception is 

predicated on sufficient alternative 

notification under sections 4245(e) and 

4281(d)(3), the exception would cease to 

be available with respect to a plan that 

emerges from insolvency or ceases to 

comply with the insolvency notice 

requirements under title IV of ERISA. 

Under the exception in paragraph 

(a)(2)(ii) of the proposal, the plan 

administrator of a single-employer plan 

is not required to furnish a funding 

notice for a plan year if the due date for 

such notice is on or after the date the 

PBGC is appointed trustee of the plan 

pursuant to section 4042 of ERISA, or 

the plan has distributed assets in 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 70627 

5For example, under a standard termination, 

participants are provided a notice of intent to 

terminate 60 to 90 days prior to the proposed 

termination date (29 CFR 4041.23), a notice of plan 

benefits by the time PBGC Form 500 is filed with 

the PBGC (29 CFR 4041.24), and a notice of annuity 

information in the notice of intent to terminate or, 

in certain cases, 45 days prior to the distribution 

date (29 CFR 4041.23(b)(5) and 29 CFR 4041.27). 

6See 26 CFR 1.430(d)–1(b)(3)(i); 74 FR 53004, 

53036 (Oct. 15, 2009). 

7See proposed Treasury regulation 26 CFR 

1.432(a)–1(b)(7); 73 FR 14417, 14423 (March 18, 

2008). 

satisfaction of all benefit liabilities in a 

standard termination pursuant to 

section 4041(b) or in a distress 

termination pursuant to section 

4041(c)(3)(B)(i), or of all guaranteed 

benefits in a distress termination 

pursuant to section 4041(c)(3)(B)(ii) of 

ERISA. The Department believes, 

because of the separate disclosure 

requirements applicable to such plans 

under title IV of ERISA, a funding notice 

may be unnecessary or confusing to 

participants where the PBGC is 

appointed trustee of a terminated singleemployer plan or where a terminated 

single-employer plan has already 

satisfied all benefit liabilities or all 

guaranteed benefits.5

Under the exception in paragraph 

(a)(3) of the proposal, relief is provided 

in the case of a merger or consolidation 

of two or more plans. In such 

circumstances, the plan administrator of 

the plan that has legally transferred 

control of its assets to a successor plan 

(hereafter the ‘‘non-successor plan’’) 

shall not be required to furnish a 

funding notice for its final plan year that 

ends coincident with or immediately 

prior to the merger. Thus, for example, 

if plan A were to merge with plan B in 

2010 and plan B is the successor plan 

(i.e., the plan to which control of the 

assets of plan A was legally transferred), 

then the plan administrator of plan A is 

not required to furnish a funding notice 

for plan A for its final plan year that 

ends upon the occurrence of the merger 

in 2010. However, the funding notice of 

plan B (i.e., the plan to which control 

of the assets of plan A was legally 

transferred) must satisfy the general 

content requirements in paragraph (b) of 

the proposed regulation and, in 

addition, contain a general explanation 

of the merger. The general explanation 

must include the effective date of, and 

identify each plan involved with, the 

merger or consolidation. Given that 

participants and beneficiaries will look 

to the successor plan for their pension 

benefits following the merger or 

consolidation, rather than the plan 

whose assets and liabilities were 

transferred to the successor plan, the 

Department believes that participants 

and beneficiaries would realize little, if 

any, benefit from receiving a funding 

notice from the non-successor plan. In 

addition, including an explanation of 

the merger in the funding notice of the 

successor plan should abate any 

participant confusion that might exist 

by virtue of not receiving a funding 

notice from the non-successor plan. 

2. Content Requirements 

a. Identifying Information (Proposed 

§ 2520.105–1(b)(1)) 

Paragraph (b)(1) of the proposed 

regulation provides that a funding 

notice must include the name of the 

plan and the name, address and 

telephone number of the plan 

administrator (and the name, address 

and phone number of the plan’s 

principal administrative officer if the 

principal administrative officer is 

different from the plan administrator). A 

funding notice also must include each 

plan sponsor’s name and employer 

identification number and the plan 

number. For purposes of this 

requirement, employer identification 

numbers, name of plan sponsor, and 

plan numbers are the same as those 

used in the annual report filed in 

accordance with section 104(a) of 

ERISA. 

b. Funding Percentage (Proposed 

§ 2520.105–1(b)(2)) 

Paragraph (b)(2) of the proposed 

regulation requires disclosure of a plan’s 

funding percentage. Specifically, in the 

case of a single-employer plan, 

paragraph (b)(2)(i) of the proposal 

provides that a notice must include a 

statement as to whether the plan’s 

funding target attainment percentage for 

the plan year to which the notice relates 

(the ‘‘notice year’’), and for each of the 

two preceding plan years, is at least 100 

percent (and, if not, the actual 

percentages). The term ‘‘funding target 

attainment percentage’’ is defined in 

section 303(d)(2) of ERISA, which 

corresponds to Internal Revenue Code 

(Code) section 430(d)(2). Guidance 

issued by the Department of the 

Treasury under Code section 430 also 

applies for purposes of section 303 of 

ERISA. Treasury regulations under Code 

section 430 provide that the funding 

target attainment percentage of a plan 

for a plan year is a fraction (expressed 

as a percentage), the numerator of which 

is the value of plan assets for the plan 

year (determined under the rules of 26 

CFR 1.430(g)–1) after subtraction of the 

prefunding balance and the funding 

standard carryover balance under 

section 430(f)(4)(B) of the Code and 

§ 1.430(f)–1(c) and the denominator of 

which is the funding target of the plan 

for the plan year (determined without 

regard to the at-risk rules of section 

430(i) of the Code and § 1.430(i)–1).6

Thus, this percentage for a plan year is 

calculated by dividing the value of the 

plan’s assets for that year (after 

subtracting the prefunding and funding 

standard carryover balances, if any) by 

the funding target of the plan for that 

year (disregarding the at-risk rules). 

Similarly, in the case of a 

multiemployer plan, paragraph (b)(2)(ii) 

of the proposed regulation provides that 

a notice must include a statement as to 

whether the plan’s funded percentage 

for the notice year, and for each of the 

two preceding plan years, is at least 100 

percent (and, if not, the actual 

percentages). The term ‘‘funded 

percentage’’ is defined in section 305(i) 

of ERISA, which corresponds to section 

432(i) of the Code. Guidance issued by 

the Department of the Treasury under 

section 432 of the Code also applies for 

purposes of section 305 of ERISA. 

Proposed Treasury regulations under 

Code section 432 provide that the 

funded percentage of a plan for a plan 

year is a fraction (expressed as a 

percentage), the numerator of which is 

the actuarial value of the plan’s assets 

as determined under section 431(c)(2) of 

the Code and the denominator of which 

is the accrued liability of the plan, 

determined using the actuarial 

assumptions described in section 

431(c)(3) of the Code and the unit credit 

funding method.7 Thus, this percentage 

for a plan year is calculated by dividing 

the plan’s assets for that year by the 

accrued liability of the plan for that 

year, determined using the unit credit 

funding method. 

c. Assets and Liabilities (Proposed 

§ 2520.101–5(b)(3)) 

(i) Single-Employer Plans—Assets and 

Liabilities as of the Valuation Date 

In the case of a single-employer plan, 

paragraph (b)(3)(i)(A) of the proposed 

regulation requires that a funding notice 

include a statement of the total assets 

(separately stating the prefunding 

balance and the funding standard 

carryover balance) and liabilities of the 

plan for the notice year and each of the 

two preceding plan years. Like the 

statute, under section 

101(f)(2)(B)(ii)(I)(aa), the proposed 

regulation provides that assets and 

liabilities are to be determined ‘‘in the 

same manner as under section 303’’ of 

ERISA. The Department interprets this 

reference to mean the assets and 

liabilities used to determine a plan’s 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
70628 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

8See Joint Committee on Taxation Technical 

Explanation (JCX 85–08, Dec. 11, 2008) of H.R. 

7327, the ‘‘Worker, Retiree, and Employer Recovery 

Act of 2008’’ explaining that section 105 of this Act 

amended section 101(f)(2)(B)(ii)(II) of ERISA to 

conform the asset and liability information 

provided for a multiemployer plan to the 

information that must be provided for a singleemployer plan. 

9This approach is consistent with the position 

taken by the PBGC regarding the treatment of 

subsequent contributions in determining the fair 

market value of assets under section 

4006(a)(3)(E)(iii). See page 18 of the PBGC’s 2010 

Comprehensive Premium Payment Instructions. 

funding target attainment percentage (as 

well as the plan’s ‘‘at-risk’’ liabilities 

pursuant to section 303(i) of ERISA, 

taking into account section 303(i)(5), if 

the plan is in ‘‘at-risk’’ status). This 

approach makes transparent the assets 

and liabilities used to determine the 

funding target attainment percentage of 

the plan, as well as the plan’s liabilities 

(i.e., funding target) actually used for 

funding purposes. 

(ii) Single-Employer Plans—Assets and 

Liabilities as of the Last Day of the Plan 

Year 

Section 101(f)(2)(B)(ii)(I)(bb) of ERISA 

states that a funding notice must 

include, in the case of a single-employer 

plan, ‘‘the value of the plan’s assets and 

liabilities for the plan year to which the 

notice relates as of the last day of the 

plan year to which the notice relates 

determined using the asset valuation 

under subclause (II) of section 

4006(a)(3)(E)(iii) and the interest rate 

under section 4006(a)(3)(E)(iv)[.]’’ 

Based on the foregoing, paragraph 

(b)(3)(i)(B) of the proposed regulation 

provides that a single-employer plan 

must include a statement of the value of 

the plan’s assets and liabilities 

determined as of the last day of the 

notice year. For purposes of this 

statement, plan administrators must 

report the fair market value of assets as 

of the last day of the plan year. In 

addition, a plan’s liabilities as of the last 

day of the plan year are equal to the 

present value, as of the last day of the 

plan year, of benefits accrued as of that 

same date. With the exception of the 

interest rate assumption, the present 

value should be determined using the 

assumptions used to determine the 

funding target under section 303. The 

interest rate assumption is the segment 

interest rate provided under section 

4006(a)(3)(E)(iv) of ERISA in effect for 

the last month of the notice year rather 

than the rate in effect for the month 

preceding the first month of the notice 

year. 

The Department recognizes that in 

their funding notices some plans may 

need to estimate their year-end liability 

for the notice year. In this regard, the 

statute does not specifically set forth 

any standards to govern such 

estimations. Therefore, pending further 

guidance, plan administrators may, in a 

reasonable manner, project liabilities to 

year-end using standard actuarial 

techniques. The Department, however, 

specifically invites comment on this 

issue. 

(iii) Multiemployer Plans—Assets and 

Liabilities as of the Valuation Date 

In the case of a multiemployer plan, 

paragraph (b)(3)(ii)(A) of the proposed 

regulation requires a statement of the 

value of the plan’s assets (determined in 

the same manner as under section 

304(c)(2) of ERISA) and liabilities 

(determined in the same manner as 

under section 305(i)(8) of ERISA, using 

reasonable actuarial assumptions as 

required under section 304(c)(3) of 

ERISA) for the notice year and each of 

the two plan years preceding the notice 

year. The assets and liabilities are to be 

measured as of the valuation date in 

each of these three years. These are the 

same assets and liabilities used to 

determine the plan’s funded percentage 

required to be disclosed under 

paragraph (b)(2)(ii) of the proposed 

regulation. Thus, the recipients of a 

funding notice will receive not only 

their plans’ funded percentage, pursuant 

to paragraph (b)(2)(ii) of the proposal, 

but, pursuant to paragraph (b)(3)(ii)(A), 

they also will receive the numbers 

behind that percentage. Under section 

305(i)(8) of ERISA, liabilities are 

determined using the unit credit 

funding method whether or not that 

actuarial method is used for the plan’s 

actuarial valuation in general. 

(iv) Multiemployer Plans—Assets as of 

the Last Day of the Plan Year 

In the case of a multiemployer plan, 

paragraph (b)(3)(ii)(B) of the proposed 

regulation requires a statement of the 

fair market value of plan assets as of the 

last day of the notice year, and as of the 

last day of each of the two preceding 

plan years as reported in the annual 

report filed under section 104(a) of 

ERISA for each such preceding plan 

year.8

(v) Year-End Statement of Plan Assets 

As discussed above, all funding 

notices must contain a statement of the 

fair market value of plan assets as of the 

last day of the notice year. Plans may 

receive contributions for the notice year 

after the close of that year but before the 

funding notice is sent to recipients. In 

such circumstances, these contributions 

may be included in the fair market value 

of assets. Inclusion is permissive; the 

proposed regulation does not require 

these contributions to be included in the 

year-end asset statement. If they are 

included, however, they may be 

included only if they are attributable to 

the notice year for funding purposes. 

In the case of a single-employer plan, 

such contributions must be discounted 

back to the last day of the notice year 

using the effective interest rate. The 

effective interest rate is defined under 

section 303(h)(2)(A) of ERISA (section 

430(h)(2)(A) of the Code). This approach 

ensures consistency with section 

303(g)(4) of ERISA (section 430(g)(4) of 

the Code) relating to prior year 

contributions.9 For example: Plan X is a 

calendar year plan. The plan’s funding 

notice for 2011 was timely furnished in 

2012. The year-end statement of assets 

was based on December 31, 2011, fair 

market value. The plan administrator 

included the present value of 

contributions made to the plan on 

February 14, 2012, in the year-end 

statement of assets. The ‘‘effective 

interest rate’’ for the plan was five 

percent in 2011 and four percent in 

2012. The contributions would be 

discounted from February 14, 2012, to 

December 31, 2011, using a discount 

rate of five percent per annum, which 

was the ‘‘effective interest rate’’ for 2011. 

In the case of a multiemployer plan, 

section 304(c)(8) of ERISA provides that 

contributions made by an employer for 

the plan year after the last day of the 

plan year, but not later than two and 

one-half months after such day (which 

may be extended for not more than six 

months under regulations prescribed by 

the Secretary of the Treasury), shall be 

deemed made on the last day of the plan 

year. Section 304(c)(8) of ERISA 

corresponds to section 431(c)(8) of the 

Code. Section 431(c)(8) of the Code is 

the post-PPA counterpart to former 

section 412(c)(10)(B) of the Code. 

Pursuant to the Treasury regulations 

under former section 412(c)(10)(B) of 

the Code (26 CFR 11.412(c)–12), 

contributions for a plan year that are 

made within eight and one-half months 

after the end of a plan year are deemed 

to have been made on the last day of 

that plan year. Therefore, consistent 

with section 304(c)(8) of ERISA and the 

corresponding section 431(c)(8) of the 

Code, and Treasury regulations under 

the former section 412(c)(10)(B) of the 

Code, it is not necessary for a 

multiemployer plan to discount such 

contributions for interest when stating 

its year-end asset value in a funding 

notice. 


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10See, e.g., line 6(e) of the 2009 Form 5500 

Annual Return/Report (for listing the number of 

deceased participants whose beneficiaries are 

receiving or entitled to receive benefits). 

11A requisite feature of every employee benefit 

plan is a procedure for establishing a funding policy 

to carry out plan objectives. See section 402(b)(1) 

of ERISA. The maintenance by an employee benefit 

plan of a statement of investment policy is 

consistent with the fiduciary obligations set forth in 

ERISA section 404(a)(1)(A) and (B). A statement of 

investment policy is a written statement that 

provides the fiduciaries who are responsible for 

plan investments with guidelines or general 

instructions concerning various types or categories 

of investment management decisions. A statement 

of investment policy is distinguished from 

directions as to the purchase or sale of a specific 

investment at a specific time. See 29 CFR 2509.08– 

2(2) (formerly 29 CFR 2509.94–2). 

12The asset classes identified in the models do 

not include any receivables reportable on Schedule 

H of the Form 5500 (see lines 1b(1)–(3) of the 2009 

Schedule H). 

d. Demographic Information (Proposed 

§ 2520.101–5(b)(4)) 

Paragraph (b)(4) of the proposed 

regulation provides for disclosure of a 

plan’s participant population based on 

the employment status of those 

participants. Specifically, it requires a 

statement of the number of participants 

who, as of the valuation date of the 

notice year, are: (i) Retired or separated 

from service and receiving benefits; (ii) 

retired or separated and entitled to 

future benefits (but currently not 

receiving benefits); or (iii) active 

participants under the plan. Plan 

administrators must state the number of 

participants in each of these categories 

and the sum of all such participants. For 

purposes of this statement, the terms 

‘‘active’’ and ‘‘retired or separated’’ in 

relation to participants shall have the 

same meaning given to those terms in 

instructions to the latest annual report 

filed under section 104(a) of the Act 

(currently, instructions relating to lines 

5 and 6 of the 2009 Form 5500 Annual 

Return/Report). 

Neither section 101(f) of ERISA nor 

paragraph (b)(4) of the proposed 

regulation specifically address whether, 

or how, to account for deceased 

participants who have one or more 

beneficiaries who are receiving or are 

entitled to receive benefits under a plan. 

For purposes of the annual funding 

notice requirements, however, these 

participants would appear to be similar 

to retired or separated participants who 

are themselves receiving, or are entitled 

to receive, benefits under the plan in 

that the plan retains liability for benefits 

accrued by such deceased participants. 

Accordingly, the Department solicits 

comments on whether such individuals 

should be reflected in the participant 

count required under paragraph (b)(4) of 

the proposal and, if so, how. For 

example, such individuals could be 

included in the respective ‘‘retired or 

separated’’ categories under paragraph 

(b)(4) of the proposal or in a stand-alone 

category.10

The statute does not specify the date 

for counting the participants required by 

paragraph (b)(4) of the proposed 

regulation. The Department has chosen 

the valuation date of the notice year to 

provide consistency with the 

measurement date of the plan’s funding 

target attainment percentage or funded 

percentage, as applicable. The 

Department solicits comments on 

whether a different date would be more 

appropriate, such as the last day of the 

notice year. Comments should explain 

why a different date would be more 

appropriate. 

As explained above, the demographic 

information required by paragraph (b)(4) 

of the proposal is limited to the notice 

year. The Department solicits comments 

on whether, and to what extent, notice 

recipients would benefit from 

demographic information covering a 

longer period of time, such as the notice 

year and two preceding plan years. 

Commentary is requested on whether 

such information, in conjunction with 

other information required by section 

101(f) and the proposed regulation 

would assist notice recipients in fully 

understanding the financial health and 

condition of the plan. 

e. Funding and Investment Policies; 

Asset Allocation (Proposed § 2520.101– 

5(b)(5)) 

Section 101(f)(2)(B)(iv) of ERISA 

provides that a funding notice must 

include ‘‘a statement setting forth the 

funding policy of the plan and the asset 

allocation of investments under the plan 

(expressed as percentages of total assets) 

as of the end of the plan year to which 

the notice relates[.]’’ Paragraph (b)(5) of 

the proposal directly incorporates these 

requirements. See paragraphs (b)(5)(i) 

and (ii) of the proposal. Paragraph (b)(5) 

of the proposal adds the requirement 

that a notice also must set forth a 

general description of any investment 

policy of the plan as it relates to the 

funding policy and the asset allocation. 

See paragraph (b)(5)(iii) of the proposal. 

The purpose of this addition is to 

provide participants and beneficiaries 

with contextual information not 

explicitly required by section 101(f) of 

ERISA so that they may better 

understand and appreciate the plan’s 

approach to funding benefits.11 Use of 

the word ‘‘any’’ in paragraph (b)(5)(ii) 

reflects that the maintenance of a 

written statement of investment policy 

is not specifically required under 

ERISA, although the Department 

expects that it would be rare for a plan 

subject to section 101(f) of ERISA not to 

have such a policy. The Department 

specifically requests comment on the 

costs and benefits associated with the 

disclosure of such additional 

information. 

A plan administrator may satisfy the 

asset allocation requirement in 

paragraph (b)(5)(ii) of the proposal by 

using the table of asset classes set forth 

in the model notice published in the 

appendices to this proposal. The asset 

classes identified in the model are based 

on the asset classes listed in Part 1 of 

the Asset and Liability Statement of the 

latest Schedule H of the Form 5500 

Annual Return/Report (see Lines 1a, 

1c(1)–(15), 1d(1)–(2) and 1(e) of the 

2009 Schedule H).12 With respect to 

each asset class, plan administrators 

should insert an appropriate percentage. 

For this purpose, a plan administrator 

should use the same valuation and 

accounting methods as for Form 5500 

Schedule H reporting purposes. The 

master trust investment account (MTIA), 

common/collective trust (CCT), pooled 

separate account (PSA), and 103–12 

investment entity (103–12IE) investment 

categories have the same definitions as 

for the Form 5500 instructions. In 

addition, if a plan held at year-end an 

interest in one or more direct filing 

entities (DFEs), i.e., MTIAs, CCTs, PSAs, 

or 103–12IEs, the plan administrator 

should include in the model notice a 

statement apprising recipients how to 

obtain more information regarding the 

plan’s DFE investments (e.g., a plan’s 

Schedule D and R and/or the DFE’s 

schedule H). For this purpose, the 

model notice provides a statement 

immediately following the asset 

allocation table for contact information, 

which a plan administrator should 

complete and include if the plan held 

an interest in one or more DFEs, in 

order to inform participants how to get 

additional investment information. The 

Department specifically requests 

comment on whether this approach (i.e., 

based on the Schedule H) to stating the 

asset allocation of a plan’s investments 

as of the last day of the notice year 

provides sufficient information to 

participants regarding the plan’s 

investments, or whether there is a more 

effective way of communicating this 

required information in the funding 

notice, and if so, how. 

f. Endangered or Critical Status 

(Proposed § 2520.101–5(b)(6)) 

Paragraph (b)(6) of the proposed 

regulation, which is limited to 

multiemployer plans, requires that the 


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70630 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

funding notice for such plans indicate 

whether the plan was in endangered or 

critical status for the notice year. For 

this purpose, ‘‘endangered or critical 

status’’ is determined in accordance 

with section 305 of ERISA, which 

corresponds to section 432 of the Code. 

Pursuant to paragraph (b)(6)(i) of the 

proposal, if the plan was in endangered 

or critical status for the notice year, the 

funding notice must describe how a 

person may obtain a copy of the plan’s 

funding improvement or rehabilitation 

plan, as appropriate, and the actuarial 

and financial data that demonstrate any 

action taken by the plan toward fiscal 

improvement. Pursuant to paragraph 

(b)(6)(ii) of the proposal, if the plan was 

in endangered or critical status for the 

notice year, the notice must contain a 

summary of the plan’s funding 

improvement or rehabilitation plan. 

This summary is required to include, 

when applicable, a description of any 

updates or modifications to such 

funding improvement or rehabilitation 

plan adopted during the notice year. 

Paragraph (b)(6)(ii) clarifies that a 

summary is required not only for the 

notice year in which the funding 

improvement or rehabilitation plan was 

adopted, but for every plan year 

thereafter until the funding 

improvement or rehabilitation plan 

ceases to be in effect. This proposed 

clarification resolves any ambiguity in 

section 101(f)(2)(B)(v)(II) regarding 

whether a summary is only required to 

be included for the notice year in which 

the funding improvement or 

rehabilitation plan is first adopted and 

then again if subsequently modified, as 

opposed to every plan year the funding 

improvement or rehabilitation plan is in 

effect. 

g. Material Effect Events (Proposed 

§ 2520.101–5(b)(7)) 

Paragraph (b)(7) of the proposed 

regulation directly incorporates the 

requirements of section 101(f)(2)(B)(vi) 

of ERISA. That section of ERISA 

requires an explanation of any plan 

amendment, scheduled benefit increase 

or reduction, or other known event 

taking effect in the current plan year 

and having a material effect on plan 

liabilities or assets for the year, as well 

as a projection to the end of such plan 

year of the effect of the amendment, 

scheduled increase or reduction, or 

event on plan liabilities. The 

Department believes there is ambiguity 

with respect to the term ‘‘current plan 

year’’ in section 101(f)(2)(B)(vi) of 

ERISA. The question is whether this 

term refers to the notice year or the plan 

year following the notice year. The 

proposed regulation adopts the view 

that such term means the plan year 

following the notice year (i.e., the plan 

year in which the notice is due). Thus, 

for a calendar year plan that must 

furnish its 2010 annual funding notice 

no later than the 120th day of 2011, the 

‘‘notice year’’ is the 2010 plan year and 

the ‘‘current plan year’’ for purposes of 

paragraph (b)(7) of the proposal is the 

2011 plan year. It is difficult to find 

meaning in the phrase ‘‘a projection to 

the end of such year’’ if ‘‘current plan 

year’’ is interpreted to mean the notice 

year because the notice year has already 

ended. On the other hand, the 

Department is interested in ensuring 

that the proposal results in all material 

effect events being disclosed and, 

therefore, specifically requests 

comments on the approach taken in the 

proposal. 

Section 101(f)(2)(B)(vi) of ERISA also 

provides that the Department will 

define by regulations when an event 

(i.e., plan amendment, scheduled 

benefit increase or reduction, or other 

known event) has a material effect on 

plan liabilities or assets for the year. 

Pursuant to this provision, paragraph 

(g)(1) of the proposed regulation 

provides that a plan amendment, 

scheduled benefit increase (or 

reduction), or other known event has a 

material effect on plan liabilities or 

assets for the current plan year if it 

results, or is projected to result, in an 

increase or decrease of five percent or 

more in the value of assets or liabilities 

from the valuation date of the notice 

year. For example, if the liabilities of a 

calendar year plan were $100 million on 

January 1, 2010, (the valuation date for 

the 2010 notice year), a scheduled 

increase in benefits taking effect in 2011 

will have a material effect if the present 

value of the increase, determined using 

the same actuarial assumptions used to 

determine the $100 million in liabilities, 

equals or exceeds $5 million. 

Alternatively, an event has a material 

effect on plan liabilities or assets for the 

current plan year if, in the judgment of 

the plan’s enrolled actuary, the event is 

material for purposes of the plan’s 

funding status under section 430 or 431 

of the Code, without regard to an 

increase or decrease of five percent or 

more in the value of assets or liabilities 

from the prior plan year. Paragraph 

(g)(3) of the proposal provides that, for 

purposes of paragraph (g)(1), assets and 

liabilities should be measured in the 

same manner that assets and liabilities 

are measured for purposes of 

establishing the plan’s funding target 

attainment percentage or funded 

percentage under paragraph (b)(2) of the 

proposal. 

Paragraph (g)(2) of the proposal 

provides guidance on the type of events 

that could constitute an ‘‘other known 

event’’ for purposes of paragraph (b)(7) 

of the regulation. Such events include, 

but are not limited to, an extension of 

coverage under the existing terms of the 

plan to a new group of employees; a 

plan merger, consolidation, or spinoff 

pursuant to regulations under section 

414(l) of the Code; a shutdown of any 

facility, plant, store, or such other 

similar corporate event that creates 

immediate eligibility for benefits that 

would not otherwise be immediately 

payable for participants separating from 

service; an offer by the plan for a 

temporary period to permit participants 

to retire at benefit levels greater than 

that to which they would otherwise be 

entitled; or a cost-of-living adjustment 

for retirees. 

In FAB 2009–01 (February 10, 2009), 

the Department provided interim 

guidance under section 101(f) of ERISA 

in the form of an enforcement policy. 

With respect to the material effect event 

provision in section 101(f)(2)(B)(vi) of 

ERISA, the Department, in addressing 

when an amendment, scheduled 

increase, or other known event would 

have a ‘‘material effect’’ on plan 

liabilities or assets, stated that ‘‘as part 

of this enforcement policy, if an 

otherwise disclosable event first 

becomes known to the plan 

administrator 120 days or less before the 

due date for furnishing the notice, such 

event is not required to be included in 

the notice.’’ See Question 12 of FAB 

2009–01. The rationale behind this 

policy is that at some close point in time 

before the due date for furnishing the 

notice, it becomes impracticable for, and 

unreasonable to expect, plan 

administrators to satisfy the detailed 

material effect provisions even though 

an otherwise disclosable event is 

known. In addition, the event’s effect on 

the plan’s assets and liabilities will in 

any event be reflected in the next 

annual funding notice. While the 

Department has not included this policy 

in the proposed regulation, the 

Department nonetheless requests 

comments on whether it or a similar 

approach should be included in the 

final regulation. 

h. Rules on Termination, Reorganization 

or Insolvency (Proposed § 2520.101– 

5(b)(8)) 

Paragraph (b)(8) of the proposed 

regulation requires a summary of the 

rules under title IV of ERISA relating to 

plan termination, reorganization, or 

insolvency, as applicable. Specifically, 

in the case of single-employer plans, the 

proposal provides that a notice shall 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 70631 

include a summary of the rules 

governing termination of singleemployer plans under subtitle C of title 

IV of ERISA. See proposed § 2520.101– 

5(b)(8)(i). In the case of multiemployer 

plans, the proposed regulation provides 

that a notice shall include a summary of 

the rules governing reorganization or 

insolvency, including limitations on 

benefit payments. See proposed 

§ 2520.101–5(b)(8)(ii). 

i. PBGC Guarantees (Proposed 

§ 2520.101–5(b)(9)) 

Paragraph (b)(9) of the proposed 

regulation requires a funding notice to 

include a general description of the 

benefits under the plan that are eligible 

to be guaranteed by the PBGC, and an 

explanation of the limitations on the 

guarantee and the circumstances under 

which such limitations apply. 

j. Annual Report Information (Proposed 

§ 2520.101–5(b)(10)) 

Paragraph (b)(10) of the proposed 

regulation provides that a funding 

notice shall include a statement that a 

person, including, in the case of a 

multiemployer plan, any labor 

organization representing plan 

participants and beneficiaries and any 

employer that has an obligation to 

contribute to the plan, may obtain a 

copy of the annual report of the plan 

filed under section 104(a) of ERISA 

upon request, through the Internet Web 

site of the Department of Labor (http://

www.efast.dol.gov), or through any 

Intranet Web site maintained by the 

applicable plan sponsor (or plan 

administrator on behalf of the plan 

sponsor). Under paragraph (b)(10), a 

plan administrator must furnish, on 

request, only copies of filed annual 

reports. Thus, for example, if, following 

the receipt of a funding notice in April 

2011 for the 2010 plan year a plan 

participant requests a copy of the plan’s 

2010 annual report, which is completed, 

but not yet filed, the plan administrator 

is not required under section 101(f) of 

ERISA to furnish the 2010 report to the 

requesting participant. Consistent with 

paragraph (b)(12) of the proposed 

regulation, plans may include language 

in a funding notice explaining that the 

annual report for the plan for the notice 

year has not yet been filed and when 

such report is expected to be filed. 

k. Information Disclosed to PBGC 

(Proposed § 2520.101–5(b)(11)) 

Paragraph (b)(11) of the proposed 

regulation, which applies only to singleemployer plans, provides that, if 

applicable, a funding notice must 

include a statement that the 

contributing sponsor of the plan, and 

each member of the contributing 

sponsor’s controlled group (other than 

an exempt entity within the meaning of 

29 CFR 4010.4(c)), was required to 

provide to the PBGC the information 

under section 4010 of ERISA for the 

notice year. However, if the contributing 

sponsor of the plan is itself an exempt 

entity within the meaning of 29 CFR 

4010.4(c), paragraph (b)(11) instead 

requires a statement that each member 

of the contributing sponsor’s controlled 

group (other than an exempt entity) was 

required to provide the information 

under section 4010 of ERISA for the 

notice year. Section 4010 of ERISA 

generally requires sponsors (and each 

member of their controlled group) of 

certain underfunded plans (e.g., a plan 

with a funding target attainment 

percentage of less than 80 percent, a 

plan with a minimum funding waiver in 

excess of $1 million any portion of 

which is still outstanding, or a plan that 

has met the conditions for imposition of 

a lien for failure to make required 

contributions (including interest) with 

an unpaid balance in excess of $1 

million) to report identifying, financial, 

and actuarial information about 

themselves and their plans to the PBGC. 

The statement required by paragraph 

(b)(11) of the proposed regulation is 

required only if there was a reporting 

obligation under section 4010 of ERISA 

for the notice year. In this regard, the 

Department specifically requests 

comment on whether, and to what 

extent, the differences in the timing 

requirements under sections 4010 and 

101(f) of ERISA present any compliance 

problems for plan administrators, e.g., 

circumstances where, because of the 

potential differences between a plan 

year and an information year, as defined 

in 29 CFR 4010.5, a plan administrator 

will not know of the plan sponsor’s 

4010 reporting obligation for a 

particular information year by the 

deadline for furnishing the annual 

funding notice for a plan year that ends 

within such information year. 

Commenters are encouraged to provide 

specific examples of any compliance 

problems presented by paragraph (b)(11) 

of the proposal, as well as suggestions 

on how to address such problems. 

l. Additional Information (Proposed 

§ 2520.101–5(b)(12)) 

Paragraph (b)(12) of the proposed 

regulation permits the plan 

administrator to include in a funding 

notice any additional information that 

the administrator determines would be 

necessary or helpful to understanding 

the information required to be contained 

in the notice. Paragraph (b)(12) of the 

proposal does not include the rule in 29 

CFR 2520.101–4(b)(9) (the Department’s 

regulation implementing the pre-PPA 

annual funding notice requirements for 

multiemployer plans, which ceased 

being effective for plan years beginning 

after December 31, 2007) that required 

additional information, even if 

necessary or helpful, to be posted at the 

end of the funding notice under the 

heading ‘‘Additional Explanation.’’ This 

rule is not being included in the 

proposed regulation because of negative 

feedback received by the Department on 

the former rule following its 

promulgation. Representatives of plans 

commented that placing additional or 

explanatory information at the end of a 

funding notice disconnects the 

information being explained from the 

explanation itself, often making it more 

difficult, instead of making it easier, for 

participants to understand the 

information being explained. These 

individuals also commented that the 

rule is being viewed by some as an 

obstruction to furnishing a funding 

notice along with, or as part of, other 

plan disclosures or communications, 

resulting in stand-alone disclosure of 

the annual funding notice and increased 

administrative expenses to the plan. 

In addition to information that is 

‘‘necessary or helpful,’’ paragraph (b)(12) 

of the proposed regulation also provides 

for inclusion of information that is 

‘‘otherwise permitted by law.’’ This 

clause reflects the fact that some plan 

administrators may elect to satisfy the 

requirements of section 101(f) and other 

disclosure requirements through a 

combined notification. For example, 

where a plan elects the waiver described 

in 29 CFR 2520.104–46 (small pension 

plan audit waiver regulation), the plan 

administrator must include specified 

information about the waiver in the 

funding notice in order to satisfy the 

requirements of § 2520.104–46. See 

section C of this preamble discussing 

§ 2520.104–46, as amended. 

3. Form and Manner Requirements 

(Proposed § 2520.101–5(c) and (e)) 

Paragraphs (c) and (e) of the proposed 

regulation, respectively, set forth the 

style and format requirements and the 

manner of furnishing requirements 

relating to the funding notice. Paragraph 

(c) of the proposed regulation provides 

that funding notices shall be written in 

a manner that is consistent with the 

style and format requirements of 29 CFR 

2520.102–2. Thus, notices shall be 

written in a manner calculated to be 

understood by the average plan 

participant and in a format that does not 

have the effect of misleading or 

misinforming recipients. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
70632 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

Paragraph (e) of the proposal relates to 

how annual funding notices must be 

furnished to recipients, with paragraph 

(e)(1) addressing how notices must be 

furnished to participants and 

beneficiaries and paragraph (e)(2) 

addressing how notices must be 

furnished to the PBGC. The Department, 

however, has decided to reserve 

paragraph (e)(1) of the proposal for the 

same reason the Department reserved 

the manner of furnishing requirements 

in the recently published final 

participant-level disclosure regulation, 

§ 2550.404a–5 (75 FR 64910, October 20, 

2010). In the preamble to the final 

participant-level disclosure regulation, 

the Department explained that, given 

the differing views on the use of and 

standards for electronic disclosure, it 

would be undertaking a review of the 

safe harbor applicable to the use of 

electronic media for furnishing 

information to plan participants and 

beneficiaries (29 CFR 2520.104b–1(c)). 

The Department further indicated that, 

in the very near future, it will be 

publishing a Federal Register notice 

requesting public comments, views, and 

data relating to the electronic 

distribution of plan information to plan 

participants and beneficiaries. 

Accordingly, as with the final 

participant-level disclosure regulation, 

pending the completion of its review 

and the issuance of further guidance, 

the general disclosure regulation at 29 

CFR 2520.104b–1 applies to annual 

funding notices required to be furnished 

to participants and beneficiaries, 

including the safe harbor for electronic 

disclosures at paragraph (c) of the 

general disclosure regulation. The 

Department anticipates that resolution 

of the issues involved with the 

electronic disclosure of plan 

information will directly affect the 

manner in which the annual funding 

notice may be furnished to participants 

and beneficiaries. Accordingly, 

interested persons are encouraged to 

participate in the Department’s 

forthcoming solicitation of comments on 

the use of electronic media for 

furnishing plan information. 

Paragraph (e)(2) of the proposal 

provides that funding notices shall be 

furnished to the PBGC consistent with 

the requirements of 29 CFR part 4000. 

The PBGC has advised the Department 

that it will accept electronic or hard 

copies of funding notices at the 

following postal and e-mail addresses: 

(1) For single-employer plans, hard 

copies of funding notices may be mailed 

to Pension Benefit Guaranty 

Corporation, ATTN: Single-Employer 

AFN Coordinator, 1200 K Street, NW., 

Suite 270, Washington, DC 20005–4026. 

Electronic copies of funding notices 

may be e-mailed to SingleemployerAFN@PBGC.gov. (2) For 

multiemployer plans, hard copies of 

funding notices may be mailed to 

Pension Benefit Guaranty Corporation, 

ATTN: Multiemployer Data 

Coordinator, 1200 K Street, NW., Suite 

930, Washington, DC 20005–4026. 

Electronic copies of funding notices 

may be e-mailed to 

Multiemployerprogram@PBGC.gov. 

4. Timing Requirements (Proposed 

§ 2520.101–5(d)) 

Paragraph (d) of the proposed 

regulation describes when a funding 

notice must be furnished to recipients. 

Paragraph (d)(1) of the proposal 

provides that notices generally must be 

furnished not later than 120 days after 

the end of the notice year. However, 

paragraph (d)(2) of the proposal 

provides that in the case of small plans, 

notices must be furnished no later than 

the earlier of the date on which the 

annual report is filed or the latest date 

the report could be filed (with granted 

filing extensions). For this purpose, a 

plan is a small plan if it had 100 or 

fewer participants on each day during 

the plan year preceding the notice year. 

See section 101(f)(3)(B) of ERISA 

(referencing section 303(g)(2)(B) of 

ERISA). Although section 303(g)(2)(B) of 

ERISA relates to single-employer plans 

only, the Department interprets section 

101(f)(3)(B) of ERISA as applying the 

100 or fewer participant standard in 

section 303(g)(2)(B) of ERISA to both 

single-employer and multiemployer 

plans. 

5. Persons Entitled to Notice (Proposed 

§ 2520.101(5)(f)) 

Paragraph (f) of the proposed 

regulation defines a person entitled to 

receive a funding notice as: Each 

participant covered under the plan on 

the last day of the notice year, each 

beneficiary receiving benefits under the 

plan on the last day of the notice year, 

each labor organization representing 

participants under the plan on the last 

day of the notice year, the PBGC, and, 

in the case of a multiemployer plan, 

each employer that, as of the last day of 

the notice year, is a party to the 

collective bargaining agreement(s) 

pursuant to which the plan is 

maintained or who otherwise may be 

subject to withdrawal liability pursuant 

to section 4203 of ERISA. 

6. Model Notices (Proposed § 2520.101– 

5(h)) 

The appendices to § 2520.101–5 

include two model notices (one for 

single-employer plans and one for 

multiemployer plans) that may be used 

by plan administrators for section 101(f) 

of ERISA purposes. The model in 

Appendix A is for single-employer 

plans (including multiple employer 

plans) and the model in Appendix B is 

for multiemployer plans. These models 

are intended to assist plan 

administrators in discharging their 

notice obligations under section 101(f) 

of ERISA and the regulation. Use of a 

model notice is not mandatory. 

However, the proposed regulation 

provides that use of a model notice will 

be deemed to satisfy the content 

requirements in paragraph (b) of the 

regulation, as well as the style and 

format requirements in paragraph (c) of 

the regulation. To the extent a plan 

administrator elects to include in a 

model notice additional information 

described in paragraph (b)(12) of the 

proposed regulation, such additional 

information must be consistent with the 

style and format requirements in 

paragraph (c) of the proposed 

regulation. Thus, such additional 

information should not have the effect 

of misleading or misinforming 

recipients. 

In drafting the models, the 

Department attempted to develop and 

organize the models in a manner that 

will help the average plan participant 

understand and comprehend the 

information mandated by section 101(f) 

of ERISA, some of which is technical in 

nature. Nonetheless, the Department 

solicits comments on whether, and if so, 

how, the organization of the proposed 

models could be improved to enhance 

understandability and 

comprehensibility. For example, if a 

plan’s funding percentage is the most 

important information for participants, 

does the chart format of the model 

adequately highlight this information or 

could other presentation techniques 

more effectively highlight this 

information? 

7. Limited Alternative Method of 

Compliance for Furnishing Notice to 

PBGC (Proposed § 2520.101–5(i)) 

Section 101(f)(1) of ERISA provides 

that a plan administrator of a defined 

benefit plan to which title IV of ERISA 

applies shall, for each plan year, 

provide a funding notice to the PBGC, 

to each plan participant and beneficiary, 

to each labor organization representing 

such participants or beneficiaries, and, 

in the case of a multiemployer plan, to 

each employer with an obligation to 

contribute to the plan. Pursuant to 

section 110 of ERISA, paragraph (i) of 

the proposed regulation includes an 

alternative method of compliance 

pertaining to the requirement to furnish 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 70633 

13Section 202(b) of the Preservation of Access to 

Care for Medicare Beneficiaries and Pension Relief 

Act of 2010, Public Law 111–192, amended section 

104 of the Pension Protection Act of 2006, Public 

Law 109–280, by expanding the group of plans that 

is eligible for a deferred effective date under section 

104 to include eligible charity plans. 

notice to the PBGC. Under this 

alternative, the plan administrator of a 

single-employer plan with liabilities 

that do not exceed plan assets by more 

than $50 million is not required to 

furnish a funding notice to the PBGC 

provided that the administrator 

furnishes the latest available funding 

notice to the PBGC within 30 days of 

receiving a written request from the 

PBGC. In determining whether a plan’s 

liabilities exceed its assets by more than 

$50 million, the proposed regulation 

provides that plan administrators 

should subtract the plan’s total assets 

from its liabilities, using the assets and 

liabilities disclosed in the funding 

notice in accordance with paragraph 

(b)(3)(i)(A) of this proposed regulation. 

The Department has created this 

alternative method of compliance after 

consulting with the PBGC. The PBGC 

has determined that, in light of the 

extended funding notice due date for 

small plans, it will have electronic 

access to the information included on 

the funding notice for most singleemployer plans as a result of ERISA’s 

annual reporting requirement under 

section 104(a) on or around the time it 

would receive a copy of a funding 

notice under section 101(f) of ERISA 

and the proposed regulation. In 

addition, under the PBGC’s Reportable 

Events regulation (29 CFR part 4043), 

the PBGC typically would receive 

information about certain events that 

might indicate increased exposure or 

risk before it would receive information 

under either ERISA section 101(f) or 

104(a). Also, the Department believes 

the alternative method of compliance 

will reduce administrative burden for 

plans that meet the conditions of 

paragraph (i) of the proposed regulation. 

At the request of the PBGC, the 

Department has limited the scope of the 

alternative method of compliance to 

single-employer plans. Because 

multiemployer plans are not subject to 

ERISA section 4043 and because very 

few multiemployer plans will qualify 

for the extended annual funding notice 

due date, the annual funding notice will 

provide a useful and non-duplicative 

source of information to the PBGC. The 

alternative method of compliance does 

not have any effect on the plan 

administrator’s obligation to furnish 

notices to parties other than the PBGC. 

Section 110 of ERISA permits the 

Department to prescribe alternative 

methods of complying with any of the 

reporting and disclosure requirements 

of ERISA if it finds: (1) That the use of 

the alternative is consistent with the 

purposes of ERISA and that it provides 

adequate disclosure to plan participants 

and beneficiaries and to the Department; 

(2) that application of the statutory 

reporting and disclosure requirements 

would increase the costs to the plan or 

impose unreasonable administrative 

burdens with respect to the operation of 

the plan; and (3) that the application of 

the statutory reporting and disclosure 

requirements would be adverse to the 

interests of plan participants in the 

aggregate. Based on the discussion 

above, the Department finds these three 

conditions to be satisfied in this context. 

8. Plans Not Immediately Subject to 

New Funding Rules or to Which Special 

Funding Rules Apply 

Sections 104, 105, and 106 of the PPA 

defer the effective date of the 

amendments made by title I of the PPA 

for certain plans described in those 

sections, i.e. certain plans of 

cooperatives, plans affected by 

settlement agreements with the PBGC, 

and plans of government contractors.13

Section 402 of the PPA applies special 

funding rules to certain plans of 

commercial passenger airlines and 

airline caterers. Section 402 of the PPA 

was amended by the U.S. Troop 

Readiness, Veterans’ Care, Katrina 

Recovery, and Iraq Accountability 

Appropriations Act, 2007, Public Law 

110–28. None of these provisions affects 

the applicability of the PPA 

amendments to section 101(f) of ERISA. 

Accordingly, the funding notice 

requirements of section 101(f) of ERISA 

apply to these plans for plan years 

beginning on or after January 1, 2008. 

These plans should disclose their 

funding target attainment percentage 

(and related asset and liability 

information) in accordance with 

guidance provided by the Secretary of 

the Treasury. For example, for a plan 

described in section 104, 105, or 106 of 

the PPA, the funding target attainment 

percentage of such plan is determined 

in accordance with paragraph (b)(2)(i) of 

the proposed regulation, except that the 

value of plan assets is determined 

without subtraction of the funding 

standard carryover balance or 

prefunding balance (credit balance 

under the funding standard account). 

See 26 CFR 1.430(d)–1(b)(3)(ii). The 

model in Appendix A is available to 

such plans, but the portions of the 

model entitled ‘‘Credit Balances’’ and 

‘‘At-Risk Status’’ should be deleted from 

the model before use for notice years 

beginning prior to the delayed effective 

date. 

The Department requests comment on 

whether, and to what extent, these plans 

would need special rules under section 

101(f) of ERISA, if applicable, to reflect 

the delayed effective dates (in sections 

104, 105, or 106 of the PPA) or special 

funding rules (in section 402 of the 

PPA). Comments on this issue should 

explain why the delayed effective dates 

or special funding rules under the PPA 

necessitate a special rule or rules under 

section 101(f) of ERISA and the 

regulation being adopted herein, and 

whether, and how, the model notices in 

the appendices to the regulation could 

be modified for use by these plans. 

9. Multiemployer Plans Terminated by 

Mass Withdrawal 

The proposed regulation does not 

provide an exemption or other relief for 

multiemployer plans that terminate by 

mass withdrawal pursuant to section 

4041A(a)(2) of ERISA. Section 

4041A(a)(2) provides that the 

termination of a multiemployer plan 

occurs as a result of the withdrawal of 

every employer from the plan or the 

cessation of the obligation of all 

employers to contribute under the plan. 

Plans that terminate in this fashion 

typically continue to pay benefits from 

a declining trust as payments come due 

and have no new contributions other 

than withdrawal liability payments. 

Therefore, the Department recognizes 

that some information required by the 

regulation may not be relevant (e.g., the 

plan’s funded percentages) for plans 

that have terminated by mass 

withdrawal. Other mandated 

information, such as PBGC benefit 

guarantee levels, assets and liabilities, 

numbers and status of participants, and 

insolvency information, however, may 

be very important to participants and 

beneficiaries receiving benefits from 

such plans. Accordingly, the 

Department solicits comment on 

whether the final regulation should 

provide special rules for such plans. 

Comments should be specific regarding 

what, if any, information otherwise 

required by the regulation should not be 

included in the funding notice, and 

why, and what, if any, alternative 

information might be disclosed in its 

place. Comments should provide any 

data that would demonstrate cost 

savings to such plans as a result of 

alternative reporting under special 

rules. 

10. Code Section 412(e)(3) Insurance 

Contract Plans 

The proposed regulation does not 

provide an exemption or any other relief 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
70634 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

14See the Instructions to the latest Form 5500 

Annual Return/Report of Employee Benefit Plan. 

15The repeal is effective for plan years beginning 

after December 31, 2007. 

for certain insurance contract plans to 

which section 412(e)(3) of the Code 

applies. ‘‘Code section 412(e)(3) 

insurance contracts’’ are contracts that 

provide retirement benefits under a plan 

that are guaranteed by an insurance 

carrier. In general, such contracts must 

provide for level premium payments 

over the individual’s period of 

participation in the plan (to retirement 

age), premiums must be timely paid as 

currently required under the contract, 

no rights under the contract may be 

subject to a security interest, and no 

policy loans may be outstanding. If a 

plan is funded exclusively by the 

purchase of such contracts, the 

otherwise applicable minimum funding 

requirements of section 412 of the Code 

and section 302 of ERISA do not apply 

for the year and neither the Schedule 

MB nor the Schedule SB is required to 

be filed.14

Therefore, the Department recognizes 

that information regarding a plan’s 

funded status required in the proposed 

regulation (e.g., the plan’s funding target 

attainment percentage or funded 

percentage) may not be applicable to 

certain of these plans. Other required 

information, such as PBGC benefit 

guarantee levels, termination rules, fair 

market value of assets, and numbers and 

status of participants, however, may be 

important to participants and 

beneficiaries receiving benefits from 

such plans. Other information not 

required by section 101(f) of ERISA and 

this proposed regulation could be 

important to persons receiving the 

funding notice of these plans. 

Accordingly, the Department solicits 

comment on whether the final 

regulation should provide special rules 

for such plans. Comments should be 

specific regarding what information 

otherwise required by the proposed 

regulation should not be included in the 

funding notice, and why, and what, if 

any, alternative information might be 

disclosed in its place. Comments should 

explain the benefit to plan participants 

and provide any data that would 

demonstrate cost savings to such plans 

as a result of alternative reporting under 

special rules. 

11. Multiple Employer Pension Plans 

After the Department issued FAB 

2009–01, a number of plan 

administrators of multiple employer 

plans raised questions regarding 

whether, and how, the new annual 

funding notice requirements apply to 

such plans. The central question was 

whether all participants in such a plan 

must receive the same funding notice 

containing funding data at the plan level 

or whether each participant must 

receive a notice that reflects funding 

information relevant to his employer. It 

is the view of the Department that if all 

assets of the multiple employer pension 

plan are, on an ongoing basis, available 

to pay benefits to all plan participants 

and beneficiaries covered under the 

plan, then the information in the 

funding notice should be reflective of 

the plan as a whole. The plan 

administrator need not create a separate 

funding notice for the employees of 

each participating employer in the 

multiple employer plan containing the 

funding information (assets, liabilities, 

etc.) pertaining to that employer in the 

case of a multiple employer plan to 

which section 413(c)(4)(A) of the Code 

applies. Based on the foregoing, the 

proposal does not contain any special 

rules for multiple employer pension 

plans. Nonetheless, comments are 

requested on whether funding notices 

for such plans should alert participants 

to the fact that some funding rules 

under the Code, e.g., benefit restrictions 

under Code section 436, may apply on 

an employer-by-employer basis. Thus, a 

participant in a multiple employer 

pension plan could have his benefits 

restricted even though the plan as a 

whole has a funding target attainment 

percentage well above what one would 

consider to be close to a percentage that 

would trigger a benefit restriction under 

Code section 436. 

C. Overview of Amendments to 29 CFR 

2520.104–46—Waiver of Examination 

and Report of an Independent Qualified 

Public Accountant for Employee Benefit 

Plans With Fewer Than 100 

Participants 

Department of Labor regulation 29 

CFR 2520.104–46 governs the 

circumstances under which small 

pension plans (plans with fewer than 

100 participants at the beginning of the 

plan year) are exempt from the 

requirements to engage an independent 

qualified public accountant (IQPA) and 

to include a report of the accountant as 

part of the plan’s annual report under 

title I of ERISA. The waiver of the 

requirement to engage an accountant is 

conditioned on, among other things, the 

disclosure of certain information to 

participants and beneficiaries. A 

requirement of § 2520.104–46 is that 

such disclosure must be included in the 

summary annual report (SAR) of a plan 

electing the waiver. However, section 

503(c) of the PPA amended section 

104(b)(3) of ERISA by repealing the SAR 

requirement for defined benefit plans to 

which the annual funding notice 

requirements of section 101(f) of ERISA 

apply.15 Therefore, in conjunction with 

the annual funding notice regulation (29 

CFR 2520.101–5), discussed in section B 

of this preamble, above, the Department 

is adopting conforming amendments to 

§ 2520.104–46 to enable plans subject to 

section 101(f) of ERISA to elect to use 

the waiver provision in § 2520.104–46. 

Under § 2520.104–46, as amended, a 

plan subject to section 101(f) of ERISA 

must include the information in 

§ 2520.104–46(b)(1)(i)(B)(1)–(4) in the 

plan’s annual funding notice. Model 

language is included in the Appendix to 

§ 2520.104–46 and provided on the 

Department’s Web site at http:// 

www.dol.gov/ebsa/faqs/ 

faq_auditwaiver.html. 

D. Overview of Amendments to 29 CFR 

2520.104b–10—Summary Annual 

Report 

As discussed in section C of this 

preamble, the PPA repealed the 

summary annual report (SAR) 

requirement for plans subject to section 

101(f) of ERISA, effective for plan years 

beginning after December 31, 2007. The 

Department, therefore, is making 

technical conforming amendments to 

the SAR regulation (§ 2520.104b–10) to 

give effect to the repeal. Specifically, a 

new paragraph (g)(9) is being added to 

provide that an SAR is not required to 

be furnished with respect to a plan to 

which title IV of ERISA applies. In this 

rulemaking, the Department is not 

making conforming changes to the form 

prescribed in paragraph (d)(3) of 

§ 2520.104b–10, or to the appendix of 

the regulation, to reflect paragraph 

(g)(9), because such form and appendix 

continue to be applicable for plans not 

subject to title IV of ERISA. 

Nonetheless, the Department recognizes 

that some items and language in the 

form and appendix became irrelevant on 

and after the effective date of the repeal 

and, therefore, is requesting comments 

on how best to revise the form and 

appendix to eliminate unnecessary 

information. 

E. Regulatory Impact Analysis 

Summary 

The proposed rule contains a model 

notice and other guidance necessary to 

implement section 101(f) of ERISA as 

amended by PPA and WRERA. Section 

101(f) and the proposed rule increase 

the transparency of information about 

the funding status of plans, affording all 

parties interested in the financial 

viability of these plans with a greater 

opportunity to monitor their funding 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 70635 

16All numbers used in this Regulatory Impact 

Analysis have been rounded to the nearest 

thousand. 

17As discussed earlier in this preamble, this 

proposed regulation, when finalized, will 

implement the statutory requirement for defined 

benefit pension plan administrators to provide an 

annual funding notice that meets the requirements 

of ERISA section 101(f). Because plans were 

required to comply with ERISA section 101(f) 

before the issuance of implementing regulations, 

and taking into account guidance previously issued 

by the Department in Field Assistance Bulletin 

2009–01, this regulatory impact analysis includes a 

small initial cost for plans to make adjustments that 

would be necessary to ensure compliance with 

implementing regulations. These estimates then 

take into account the ongoing annual costs for plan 

administrators to create and send the annual 

funding notices. 

18The total hour burden is estimated to be about 

1,046,000 hours in the year of implementation and 

1,003,000 hours in each subsequent year. 

status and take action where necessary. 

In addition, the rule offers a model 

notice to administrators of singleemployer and multiemployer defined 

benefit pension plans, which is 

expected to mitigate burden and 

contribute to the efficiency of 

compliance. Another benefit is that the 

rule would afford plan administrators 

greater certainty that they have 

discharged their notice obligation under 

section 101(f) by clarifying certain terms 

used in the statute. The Department has 

concluded that the benefits of the rule 

justify their costs. These benefits— 

increased transparency, greater 

efficiency, certainty, and clarity—are 

expected to be substantial, but cannot be 

specifically quantified. 

The cost of the proposed rule is 

expected to amount to $57.2 million in 

the year of implementation, and $52.8 

million in each subsequent year.16 The 

total estimated cost includes the onetime development of a notice by each 

plan and the annual preparation and 

mailing of the notices to the required 

recipients.17 The first year estimate is 

higher to account for the time required 

for plan administrators to adapt and 

review the model notice. The 

Department also makes the following 

additional estimates regarding the cost 

of the proposal: 

—The total mailing costs are estimated 

to be about $20.0 million annually in 

the first three years; 

—In addition to the mailing costs, the 

Department estimates that firms will 

spend about $37.2 million in the year 

of implementation and $32.9 million 

in subsequent years on labor costs.18

The Department has attempted to 

provide guidance in the proposed rule 

to assist administrators in meeting their 

responsibilities in the most 

economically efficient manner possible. 

Because the costs of the rule arise only 

from notice provisions in PPA, the data 

and methodology used in developing 

these estimates are more fully described 

in the Paperwork Reduction Act section 

of this analysis of regulatory impact. 

The cost estimates of the proposal are 

based on the informational content 

requirements in paragraph (b) of the 

proposal. The Department is accepting 

comment on whether there is 

information or indicators, not already 

included in paragraph (b) of the 

proposal, that help explain a plan’s 

financial condition and that may be 

helpful to notice recipients, e.g., the 

ratio of plan assets to the present value 

of retired participants’ benefits. 

Comments should be specific as to what 

other information or indicators could be 

included in the funding notice, the 

reasons why, and a cost/benefit 

analysis. 

Executive Order 12866 

Under Executive Order 12866 (58 FR 

51735), the Department must determine 

whether a regulatory action is 

‘‘significant’’ and therefore subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of the 

Executive Order defines a ‘‘significant 

regulatory action’’ as an action that is 

likely to result in a rule (1) having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or Tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. It has been determined that this 

action is significant under section 3(f)(4) 

of the Executive Order; therefore, OMB 

has reviewed this regulatory action 

pursuant to the Executive Order. 

Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA 

95) (44 U.S.C. 3506(c)(2)(A)). This helps 

to ensure that requested data can be 

provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

Currently, EBSA is soliciting 

comments concerning the information 

collection request (ICR) included in the 

Proposed Rule on the Annual Funding 

Notice for Defined Benefit Plans. A copy 

of the ICR may be obtained by 

contacting the PRA addressee shown 

below. 

The Department has submitted a copy 

of the proposed rule to OMB in 

accordance with 44 U.S.C. 3507(d) for 

review of its information collections. 

The Department and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Comments should be sent to the Office 

of Information and Regulatory Affairs, 

Office of Management and Budget, 

Room 10235, New Executive Office 

Building, Washington, DC 20503; 

Attention: Desk Officer for the 

Employee Benefits Security 

Administration. OMB requests that 

comments be received within 30 days of 

publication of the proposed rule to 

ensure their consideration. 

PRA Addressee: Address requests for 

copies of the ICR to G. Christopher 

Cosby, Office of Policy and Research, 

U.S. Department of Labor, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Room 

N–5718, Washington, DC 20210. 

Telephone (202) 693–8410; Fax: (202) 

219–5333. These are not toll-free 

numbers. ICRs submitted to OMB also 

are available at http://www.RegInfo.gov. 

The proposed rule implements the 

disclosure requirements of section 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
70636 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

19According to the PBGC Pension Insurance Data 

Book 2008, there were 1,513 multiemployer defined 

benefit plans in 2006. This number was reduced by 

42 in order to account for the 42 plans that received 

financial assistance. 

20See GAO–04–423 Private Pensions: 

Multiemployer Plans Face Short- and Long-Term 

Challenges. U.S. General Accounting Office, March 

2004. The General Accounting Office’s name 

changed to the Government Accountability Office 

effective July 7, 2004. 

21The Department assumes that 38 percent of 

notices are sent electronically and result in only a 

de minimis cost. 

101(f) of ERISA, as amended by section 

501 of the PPA. As described earlier in 

the preamble, section 101(f) of ERISA 

requires the administrator of a defined 

benefit plan to which title IV of ERISA 

applies to furnish an annual funding 

notice to the PBGC, each participant and 

beneficiary, each labor organization 

representing participants and 

beneficiaries, and for multiemployer 

plans only, each employer with an 

obligation to contribute to the plan. 

The information collection provisions 

of the proposed rule are found in 

section 2520.101–5(b). Model notices 

are provided in the appendices to the 

rule to facilitate compliance and 

moderate the burden attendant to 

supplying notices to participants and 

beneficiaries, labor organizations, 

contributing employers, and PBGC. Use 

of the model notice is not mandatory; 

however, use of the model will be 

deemed to satisfy the requirements for 

content, style, and format of the notice, 

except with respect to any other 

information the plan administrator 

elects to include. The proposed rule also 

is intended to clarify several statutory 

requirements with respect to content, 

style and format, manner of furnishing, 

and persons entitled to receive the 

annual funding notice. Increasing the 

transparency of information about the 

funding status of defined benefit plans 

for participants and beneficiaries, labor 

organizations, contributing employers, 

and the PBGC will afford all parties 

interested in the financial viability of 

these plans greater opportunity to 

monitor their funding status. 

In order to estimate the potential costs 

of the notice provisions of section 101(f) 

of ERISA and the proposed rule, the 

Department estimated the number of 

single-employer and multiemployer 

defined benefit plans, and the numbers 

of participants, beneficiaries receiving 

benefits, labor organizations 

representing participants, and 

employers with an obligation to 

contribute to these plans. 

The PBGC Pension Insurance Data 

Book 2008 indicates that there are about 

1,500 multiemployer defined benefit 

plans with approximately 10.1 million 

participants and beneficiaries receiving 

benefits. These estimates are based on 

premium filings with PBGC for 2007, 

projected by PBGC to 2008, generally 

the most recent information currently 

available. This total has been adjusted 

slightly to reflect the exception from the 

requirement to furnish annual funding 

notices to plans that are receiving 

financial assistance from PBGC.19 The 

PBGC Pension Insurance Data Book 

2008 also indicates that there are 

approximately 28,000 single-employer 

defined benefit plans with 

approximately 33.8 million participants. 

The Department is not aware of a 

direct source of information as to the 

number of labor organizations that 

represent participants of multiemployer 

defined benefit plans and that would be 

entitled to receive notice under section 

101(f). As a proxy for this number, the 

Department has relied on information 

supplied by the Department’s 

Employment Standards Administration, 

Office of Labor Management Standards, 

as to the number of labor organizations 

that filed required annual reports for 

their most recent fiscal year, generally 

2008, at this time. The Department 

adjusted the number provided by 

excluding labor organizations that 

appeared to represent only State, local, 

and Federal governmental employees to 

account for the fact that such employees 

are generally unlikely to be participants 

in plans covered under title I of ERISA. 

The resulting estimate of labor 

organizations that could be entitled to 

receive notice is almost 18,500. 

The Department also is unaware of a 

source of information for the current 

number of employers obligated to 

contribute to multiemployer defined 

benefit plans. PBGC assisted with 

development of an estimate of this 

number by providing the Department 

with a tabulation on their 1987 

premium filings of the number of 

employers contributing to 

multiemployer defined benefit plans at 

that time. This was the last year this 

data element was required to be 

reported on the Form 5500. The 

Department has attempted to validate 

that 1987 figure by dividing the number 

of participants in multiemployer 

defined benefit plans in the industries 

in which these plans are most 

concentrated, such as construction, 

trucking, and retail food sales,20 by the 

average number of employees per firm 

in those industries based on data 

published by the Office of Advocacy, 

U.S. Small Business Administration for 

2001. This computation resulted in a 

figure that was similar in magnitude, 

but somewhat higher than the 277,600 

employers reported in the 1987 PBGC 

premium filing data. As a result, the 

Department has used 300,000 for its 

conservative estimate of the number of 

contributing employers to whom the 

required notice will be sent. 

For purposes of its estimates of 

regulatory impact, the Department has 

assumed that each plan will develop a 

notice, and that each year 

approximately 44.3 million notices will 

be prepared and sent. The 44.3 million 

estimate breaks down as follows: 10.1 

million notices to participants and 

beneficiaries of close to 1,500 

multiemployer defined benefit plans; 

33.8 million notices to participants and 

beneficiaries of close to 28,000 single 

employer plans; 39,000 notices to labor 

organizations; 300,000 notices to 

contributing employers of 

multiemployer plans; and 30,000 

notices to the PBGC. 

Estimates of notice preparations are 

based on the assumption that plan 

service providers, actuaries, lawyers, 

and financial professionals will produce 

the notices. It is assumed that the 

availability of a model notice will lessen 

the time otherwise required by a plan 

administrator to draft a required notice. 

The Department has made the following 

estimate regarding preparation of the 

notice: Actuaries will spend three hours 

in the first year and two hours in each 

succeeding year for single-employer 

plans and two hours in the first year and 

one hour in each succeeding year for 

multiemployer plans making specific 

calculations for information that must 

be provided in the notice; legal 

professionals will spend one hour in the 

first year and 0.5 hours in each 

succeeding year reviewing the notice; 

and financial professionals will spend 

one hour in the first year and thereafter 

drafting the notice for single-employer 

plans and two hours per year for 

multiemployer plans. The final 

preparation and distribution of the 

notice will be done by a clerical 

professional using an estimated two 

minutes per notice mailed. The 

Department welcomes comments 

regarding these estimates. 

Assuming 44.3 million notices are 

distributed,21 the burden hours for that 

initial year of implementation are 

87,000 actuarial hours, 31,000 financial 

professional hours, and 29,000 legal 

professional hours. Total clerical 

professional hours are calculated based 

on the total number of notices mailed 

and the preparation time of 2 minutes 

per notice resulting in 915,000 hours. 

The total hour burden for the year of 

implementation is 1,061,000 hours. 


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22The average Total Annual Burden Hours over 

the first three years is 1,032,000. 

23EBSA estimates of labor rates include wages, 

other benefits, and overhead. 

24The basis for this definition is found in section 

104(a)(2) of the Act, which permits the Secretary of 

Labor to prescribe simplified annual reports for 

pension plans that cover fewer than 100 

participants. 

Each subsequent year requires 57,000 

actuarial hours, 915,000 clerical hours, 

31,000 financial professional hours, and 

15,000 legal professional hours for a 

total of 1,018,000 hours.22

Hourly labor rates were calculated 

using the rates based on the Bureau of 

Labor Statistics, National Occupational 

Employment Survey (May 2008) and the 

Bureau of Labor Statistics, Employment 

Cost Index (June 2009).23 Calculations 

of the 2010 hourly labor costs were 

$26.14 for a clerical professional, $62.81 

for a financial professional, $91.56 for 

an actuary, and $119.03 for plan legal 

counsel. 

Based on the foregoing, the total 

equivalent cost for the initial year is 

estimated at approximately $7,937,000 

for actuarial services, $23,915,000 for 

clerical services, $1,942,000 for 

financial professional services, and 

$3,409,000 for legal professional 

services. The total equivalent cost is 

approximately $37,203,000 in the initial 

year. 

The total equivalent cost in each 

subsequent year is estimated at 

approximately $5,245,000 for actuarial 

services, $23,915,000 for clerical 

services, $1,942,000 for financial 

professional services, and $1,750,000 for 

legal professional services. The total 

equivalent cost is estimated at 

approximately $32,852,000 in each 

subsequent year. 

The cost of mailing the notices was 

based on the assumption that each 

notice would be six pages for singleemployer plans and five pages for 

multiemployer plans, with printing 

costs of 5 cents per page and postage of 

44 cents resulting in an estimated 74 

cent cost per paper notice for singleemployer plans and a 69 cent cost per 

paper notice for multiemployer plans. It 

was further assumed that 38 percent of 

notices would be sent electronically. 

The Department has not estimated any 

additional burden for preparation or 

distribution of notices via electronic 

means because the Department assumes 

that plans will utilize pre-existing 

electronic communications systems and 

e-mail lists for these purposes and the 

process of preparation and distribution 

involves only a de minimis additional 

effort, e.g., a few computer key strokes 

or the equivalent. This assumption will 

result in a total of approximately 16.8 

million notices being sent electronically 

by multiemployer and single-employer 

plans. Single-employer plans will mail 

out approximately 21.0 million paper 

notices and multiemployer plans will 

mail out approximately 6.5 million 

paper notices. Total annual paper 

mailing costs are estimated to be 

approximately $20.0 million. 

These paperwork burden estimates 

are summarized as follows: 

Type of Review: Revised collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Title: Annual Funding Notice for 

Defined Benefit Plans. 

OMB Control Number: 1210–0126. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Respondents: 29,000. 

Responses: 44,269,000. 

Frequency of Response: Annually. 

Estimated Total Annual Burden 

Hours: 1,032,000 (average over first 

three years); 1,061,000 (first year) 

(1,018,000 subsequent years). 

Estimated Total Annual Burden Cost: 

$19,988,000 (first year and subsequent 

years). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

which are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless the 

head of an agency certifies that a 

proposed rule is not likely to have a 

significant economic impact on a 

substantial number of small entities, 

section 603 of the RFA requires that the 

agency present an initial regulatory 

flexibility analysis at the time of the 

publication of the notice of proposed 

rulemaking describing the impact of the 

rule on small entities and seeking public 

comment on such impact. 

For purposes of the RFA, the 

Department continues to consider a 

small entity to be an employee benefit 

plan with fewer than 100 participants.24

Further, while some large employers 

may have small plans, in general small 

employers maintain most small plans. 

Thus, the Department believes that 

assessing the impact of this proposed 

rule on small plans is an appropriate 

substitute for evaluating the effect on 

small entities. The definition of small 

entity considered appropriate for this 

purpose differs, however, from a 

definition of small business that is 

based on size standards promulgated by 

the Small Business Administration 

(SBA) (13 CFR 121.201) pursuant to the 

Small Business Act (15 U.S.C. 631 et 

seq.). The Department therefore requests 

comments on the appropriateness of the 

size standard used in evaluating the 

impact of this proposed rule on small 

entities. 

By this standard, data from the 2007 

Form 5500 (the latest available data) 

indicates that for over 88 percent of 

small affected plans, the average per 

plan compliance cost would be $1,265 

($37 million/29,400 plans) plus plan 

specific mailing cost (74 cents per 

participant, which cannot exceed $74 

per plan because small plans have less 

than 100 participants). This amount is 

less than one percent of plan assets. 

Based on the foregoing, the 

Department has preliminarily 

determined that while the rule is likely 

to impact a substantial number of small 

entities, the economic impact on such 

entities will not be significant. 

Therefore, pursuant to section 605(b) of 

RFA, the Assistant Secretary of the 

Employee Benefits Security 

Administration hereby certifies that the 

proposed rule, if promulgated, will not 

have a significant economic impact on 

a substantial number of small entities. 

The Department invites comments on 

this certification and the potential 

impact of the rule on small entities. 

Congressional Review Act 

The proposed rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and, if finalized, will 

be transmitted to Congress and the 

Comptroller General for review. The 

proposed rule is not a ‘‘major rule’’ as 

that term is defined in 5 U.S.C. 804, 

because it is not likely to result in 

(1) an annual effect on the economy of 

$100 million or more; (2) a major 

increase in costs or prices for 

consumers, individual industries, or 

Federal, State, or local government 

agencies, or geographic regions; or (3) 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of United States-based 

enterprises to compete with foreignbased enterprises in domestic and 

export markets. 

Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), as well as Executive Order 

12875, the proposed rule does not 

include any Federal mandate that may 

result in expenditures by State, local, or 

Tribal governments in the aggregate of 


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more than $100 million, adjusted for 

inflation, or increase expenditures by 

the private sector of more than $100 

million, adjusted for inflation. 

Federalism Statement 

Executive Order 13132 (August 4, 

1999) outlines fundamental principles 

of federalism, and requires the 

adherence to specific criteria by Federal 

agencies in the process of their 

formulation and implementation of 

policies that have substantial direct 

effects on the States, the relationship 

between the national government and 

States, or on the distribution of power 

and responsibilities among the various 

levels of government. The proposed rule 

does not have federalism implications 

because it has no substantial direct 

effect on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. Section 

514 of ERISA provides, with certain 

exceptions specifically enumerated, that 

the provisions of titles I and IV of ERISA 

supersede any and all laws of the States 

as they relate to any employee benefit 

plan covered under ERISA. The 

requirements that would be 

implemented in the proposed rule do 

not alter the fundamental reporting and 

disclosure requirements of the statute 

with respect to employee benefit plans, 

and as such have no implications for the 

States or the relationship or distribution 

of power between the national 

government and the States. 

List of Subjects in 29 CFR Part 2520 

Accounting, Employee benefit plans, 

Employee Retirement Income Security 

Act, Pensions, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Department of Labor 

proposes to amend 29 CFR part 2520 as 

follows: 

PART 2520—RULES AND 

REGULATIONS FOR REPORTING AND 

DISCLOSURE 

1. The Authority citation for part 2520 

is revised to read as follows: 

Authority: 29 U.S.C. 1021–1025, 1027, 

1029–31, 1059, 1134 and 1135; and Secretary 

of Labor’s Order 1–2003, 68 FR 5374 (Feb. 3, 

2003). Sec. 2520.101–2 also issued under 29 

U.S.C. 1132, 1181–1183, 1181 note, 1185, 

1185a–b, 1191, and 1191a–c. Secs. 2520.102– 

3, 2520.104b–1 and 2520.104b–3 also issued 

under 29 U.S.C. 1003, 1181–1183, 1181 note, 

1185, 1185a–b, 1191, and 1191a–c. Secs. 

2520.104b–1 and 2520.107 also issued under 

26 U.S.C. 401 note, 111 Stat. 788. Sec. 

2520.101–4 also issued under sec. 103 of 

Pub. L. 108–218, 118 Stat. 596. Sec. 

2520.101–5 also issued under sec. 503 of 

Pub. L. 109–280, 120 Stat. 780 and sec. 

105(a), Pub. L. 110–458, 122 Stat. 5104. 

2. Add § 2520.101–5 to subpart A to 

read as follows: 

§ 2520.101–5 Annual funding notice for 

defined benefit pension plans. 

(a) In general. (1) Except as provided 

in paragraphs (a)(2) and (3) of this 

section, pursuant to section 101(f) of the 

Act, the administrator of a defined 

benefit plan to which title IV of the Act 

applies shall furnish annually to each 

person specified in paragraph (f) of this 

section a funding notice that conforms 

to the requirements of this section. 

(2) A plan administrator shall not be 

required to furnish a funding notice— 

(i) In the case of a multiemployer 

plan, for a plan year if the due date for 

such notice is on or after the date the 

plan complies with the insolvency 

notice requirements of section 4245(e) 

or 4281(d)(3) of the Act and regulations 

thereunder. 

(ii) In the case of a single-employer 

plan, for a plan year if the due date for 

such notice is on or after the date: 

(A) The Pension Benefit Guaranty 

Corporation is appointed as trustee of 

the plan pursuant to section 4042 of the 

Act; or 

(B) The plan has distributed assets in 

satisfaction of all benefit liabilities in a 

standard termination pursuant to 

section 4041(b) or in a distress 

termination pursuant to section 

4041(c)(3)(B)(i) or of all guaranteed 

benefits in a distress termination 

pursuant to section 4041(c)(3)(B)(ii) of 

the Act. 

(3) In the case of a merger or 

consolidation of two or more plans— 

(i) The plan administrator of a nonsuccessor plan shall not be required to 

furnish a funding notice for the plan 

year in which the merger occurred, and 

(ii) The funding notice of the 

successor plan, for the plan year in 

which the merger occurred, must, in 

addition to the requirements of 

paragraph (b) of this section, contain a 

general explanation, including the 

effective date, of the merger and an 

identification of each plan (e.g., name 

and plan number) involved in the 

merger or consolidation. 

(b) Content of notice. A funding notice 

shall include the following information: 

(1) Identifying information. The name 

of the plan, the name, address, and 

phone number of the plan administrator 

and the plan’s principal administrative 

officer (if different than the plan 

administrator), each plan sponsor’s 

name and employer identification 

number, and the plan number. 

(2) Funding percentage. (i) Singleemployer plans. For single-employer 

plans, a statement as to whether the 

plan’s funding target attainment 

percentage (as defined in section 

303(d)(2) of the Act) for the notice year, 

and for each of the two preceding plan 

years, is at least 100 percent (and, if not, 

the actual percentages). 

(ii) Multiemployer plans. For 

multiemployer plans, a statement as to 

whether the plan’s funded percentage 

(as defined in section 305(i) of the Act) 

for the notice year, and for each of the 

two preceding plan years, is at least 100 

percent (and, if not, the actual 

percentages). 

(3) Assets and liabilities. (i) Singleemployer plans. For single-employer 

plans— 

(A) A statement of the total assets 

(separately stating the prefunding 

balance and the funding standard 

carryover balance) and liabilities of the 

plan, determined in the same manner as 

under section 303 of the Act as of the 

valuation date of the notice year and for 

each of the two preceding plan years, as 

reported in the annual report filed 

under section 104 of the Act for each 

such preceding plan year, and 

(B) A statement of the value of the 

plan’s assets and liabilities determined 

as of the last day of the notice year. For 

purposes of this statement, the value of 

the plan’s assets is the fair market value 

of plan assets. Plan liabilities are equal 

to the present value of benefits accrued 

through the last day of the notice year 

determined in the same manner as 

liabilities are calculated under section 

303 of the Act (including actuarial 

assumptions and methods), but using 

the interest rate under section 

4006(a)(3)(E)(iv) of the Act in effect for 

the last month of the notice year. 

(ii) Multiemployer plans. For 

multiemployer plans— 

(A) A statement of the value of the 

plan’s assets (determined in the same 

manner as under section 304(c)(2) of the 

Act) and liabilities (determined in the 

same manner as under section 305(i)(8) 

of the Act, using reasonable actuarial 

assumptions as required under section 

304(c)(3) of the Act) as of the valuation 

date of the notice year and each of the 

two preceding plan years, and 

(B) A statement of the fair market 

value of plan assets as of the last day of 

the notice year, and as of the last day 

of each of the two preceding plan years 

as reported in the annual report filed 

under section 104(a) of the Act for each 

such preceding plan year. 

(4) Demographic information. A 

statement of the number of participants 

who, as of the valuation date of the 

notice year, are: retired or separated 

from service and receiving benefits; 

retired or separated from service and 


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entitled to future benefits (but currently 

not receiving benefits); and active 

participants under the plan. The 

statement shall indicate the number of 

participants in each such category and 

the sum of all such participants. The 

terms ‘‘active’’ and ‘‘retired or separated’’ 

shall have the same meaning given to 

those terms in instructions to the annual 

report filed under section 104(a) of the 

Act. 

(5) Funding policy. A statement 

setting forth— 

(i) The funding policy of the plan; 

(ii) The asset allocation of 

investments under the plan (expressed 

as percentages of total assets) as of the 

end of the notice year; and 

(iii) A general description of any 

investment policy of the plan as it 

relates to the funding policy in 

paragraph (b)(5)(i) of this section and 

the asset allocation of investments 

under paragraph (b)(5)(ii) of this section. 

(6) Endangered or critical status. In 

the case of a multiemployer plan, a 

statement whether the plan was in 

endangered or critical status under 

section 305 of the Act for the notice year 

and, if so— 

(i) A statement describing how a 

person may obtain a copy of the plan’s 

funding improvement plan or 

rehabilitation plan, as appropriate, 

adopted under section 305 of the Act 

and the actuarial and financial data that 

demonstrate any action taken by the 

plan toward fiscal improvement, and 

(ii) A summary of the plan’s funding 

improvement plan or rehabilitation 

plan, including any update or 

modification of such funding 

improvement or rehabilitation plan 

adopted under section 305 of the Act 

during the notice year. 

(7) Events having a material effects on 

liabilities or assets. In the case of any 

plan amendment, scheduled benefit 

increase or reduction, or other known 

event taking effect in the current plan 

year and having a material effect on 

plan liabilities or assets for the year (as 

defined in paragraph (g) of this section), 

an explanation of the amendment, 

scheduled increase or reduction, or 

event, and a projection to the end of 

such plan year of the effect of the 

amendment, scheduled increase or 

reduction, or event on plan liabilities. 

(8) Rules on termination, 

reorganization or insolvency. (i) Singleemployer plans. In the case of a singleemployer plan, a summary of the rules 

governing termination of singleemployer plans under subtitle C of title 

IV of the Act. 

(ii) Multiemployer plans. In the case 

of a multiemployer plan, a summary of 

the rules governing reorganization or 

insolvency, including the limitations on 

benefit payments. 

(9) PBGC guarantees. A general 

description of the benefits under the 

plan which are eligible to be guaranteed 

by the Pension Benefit Guaranty 

Corporation, along with an explanation 

of the limitations on the guarantee and 

the circumstances under which such 

limitations apply. 

(10) Annual report information. A 

statement that a person entitled to 

notice under paragraph (f) of this 

section may obtain a copy of the annual 

report of the plan filed under section 

104(a) of the Act upon request, through 

the Internet Web site of the Department 

of Labor, or through any Intranet Web 

site maintained by the applicable plan 

sponsor (or plan administrator on behalf 

of the plan sponsor). 

(11) Information disclosed to PBGC. 

In the case of a single-employer plan, if 

applicable, a statement that the 

contributing sponsor of the plan, and 

each member of the contributing 

sponsor’s controlled group (other than 

an exempt entity within the meaning of 

29 CFR 4010.4(c)), was required to 

provide the information under section 

4010 of the Act for the notice year. If the 

contributing sponsor of the plan is itself 

an exempt entity within the meaning of 

29 CFR 4010.4(c), in lieu of the 

preceding sentence, a statement that 

each member of the contributing 

sponsor’s controlled group (other than 

an exempt entity within the meaning of 

29 CFR 4010.4(c)) was required to 

provide the information under section 

4010 of the Act for the notice year. 

(12) Additional information. Any 

additional information that the plan 

administrator elects to include, 

provided that such information is 

necessary or helpful to understanding 

the mandatory information in the 

notice, or is otherwise permitted by law. 

(c) Style and format of notice. 

Funding notices shall be written in a 

manner that is consistent with the style 

and format requirements of § 2520.102– 

2 of this chapter. 

(d) When to furnish notice. (1) Except 

as provided in paragraph (d)(2) of this 

section, a funding notice shall be 

provided not later than 120 days after 

the end of the notice year. 

(2) In the case of a small plan, a 

funding notice shall be provided not 

later than the earlier of the date on 

which the annual report is filed under 

section 104(a) of the Act or the latest 

date the annual report must be filed 

under that section (including 

extensions). For this purpose, a singleemployer plan is a small plan if it meets 

the exception in section 303(g)(2)(B) of 

the Act, and a multiemployer plan is a 

small plan if it had 100 or fewer 

participants on each day during the plan 

year preceding the notice year. 

(e) Manner of furnishing notice. (1) 

[Reserved]. 

(2) A funding notice must be 

furnished to the Pension Benefit 

Guaranty Corporation in a manner 

consistent with the requirements of part 

4000 of this title. The date that the 

notice is furnished to the Pension 

Benefit Guaranty Corporation is 

determined consistent with that part. 

(f) Persons entitled to notice. Persons 

entitled to a funding notice under this 

section are: 

(1) Each participant covered under the 

plan on the last day of the notice year; 

(2) Each beneficiary receiving benefits 

under the plan on the last day of the 

notice year; 

(3) Each labor organization 

representing participants under the plan 

on the last day of the notice year; 

(4) In the case of a multiemployer 

plan, each employer that, as of the last 

day of the notice year, is a party to the 

collective bargaining agreement(s) 

pursuant to which the plan is 

maintained or who otherwise may be 

subject to withdrawal liability pursuant 

to section 4203 of the Act; and 

(5) The Pension Benefit Guaranty 

Corporation. 

(g) Material effect definition. (1) For 

purposes of paragraph (b)(7) of this 

section, a plan amendment, scheduled 

benefit increase (or reduction), or other 

known event has a material effect on 

plan liabilities or assets for the current 

plan year (i.e., plan year following the 

notice year) if such amendment, benefit 

increase (or reduction), or event— 

(i) Results, or is projected to result, in 

an increase or decrease of five percent 

or more in the value of assets or 

liabilities from the valuation date of the 

notice year; or 

(ii) In the judgment of the plan’s 

enrolled actuary, is material for 

purposes of the plan’s funding status 

under section 430 or 431, as applicable, 

of the Internal Revenue Code, without 

regard to paragraph (g)(1)(i) of this 

section. 

(2) For purposes of paragraph (b)(7) of 

this section, the term ‘‘other known 

event’’ includes, but is not limited to— 

(i) An extension of coverage under the 

existing terms of the plan to a new 

group of employees; 

(ii) A plan merger, consolidation, or 

spinoff pursuant to regulations under 

section 414(l) of the Internal Revenue 

Code; 

(iii) A shutdown of any facility, plant, 

store, or such other similar corporate 

event that creates immediate eligibility 

for benefits that would not otherwise be 


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70640 Federal Register / Vol. 75, No. 222 / Thursday, November 18, 2010 / Proposed Rules 

immediately payable for participants 

separating from service; 

(iv) An offer by the plan for a 

temporary period to permit participants 

to retire at benefit levels greater than 

that to which they would otherwise be 

entitled; or 

(v) A cost-of-living adjustment for 

retirees. 

(3) For purposes of paragraph (g)(1)(i) 

of this section, calculate assets and 

liabilities in the same manner as under 

paragraph (b)(2) of this section. 

(h) Model notices. (1) The appendices 

to this section contain a model notice 

for single-employer plans and a model 

notice for multiemployer plans. These 

models are intended to assist plan 

administrators in discharging their 

notice obligations under this section. 

Use of a model notice is not mandatory. 

However, subject to paragraph (h)(2) of 

this section, use of a model notice will 

be deemed to satisfy the requirements of 

paragraphs (b)(1) through (11) and 

paragraph (c) of this section. 

(2) To the extent a plan administrator 

elects to include in a model notice 

information described in paragraph 

(b)(12) of this section, such additional 

information must be consistent with the 

style and format requirements in 

paragraph (c) of this section. 

(i) Limited alternative method of 

compliance for furnishing notice to 

PBGC. Notwithstanding any other 

provision of this section, the plan 

administrator of a single-employer plan 

is not required to furnish a notice to the 

Pension Benefit Guaranty Corporation 

annually if, based on the data described 

in paragraph (b)(3)(i)(A) of this section 

for the notice year, plan liabilities do 

not exceed total plan assets by more 

than $50 million, provided that the plan 

administrator furnishes the latest 

available funding notice to the Pension 

Benefit Guaranty Corporation within 30 

days of a written request. 

(j) Notice year. For purposes of this 

section, the term ‘‘notice year’’ means 

the plan year to which the notice 

relates. For example, for a calendar year 

plan that must furnish its 2010 funding 

notice no later than the 120th day of 

2011, the ‘‘notice year’’ is the 2010 plan 

year. 

BILLING CODE 4510–29–P 


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BILLING CODE 4510–29–C 

3. Amend § 2520.104–46 by revising 

paragraph (b)(1)(i)(B) introductory text 

to read as follows: 

§ 2520.104–46 Waiver of examination and 

report of an independent qualified public 

accountant for employee benefit plans with 

fewer than 100 participants. 

* * * * * 

(b) * * * 

(1) * * * 

(i) * * * 

(B) The summary annual report 

(described in § 2520.104b–10) or, in the 

case of plans subject to section 101(f) of 

the Act, the annual funding notice 

(described in § 2520.101–5), includes, in 

addition to any other required 

information: 

* * * * * 

4. Amend § 2520.104b–10, by revising 

paragraphs (g)(7) and (g)(8) and adding 

paragraph (g)(9) to read as follows: 

§ 2520.104b–10 Summary Annual Report. 

* * * * * 

(g) * * * 

(7) A dues financed welfare plan 

which meets the requirements of 29 CFR 

2520.104–26; 

(8) A dues financed pension plan 

which meets the requirements of 29 CFR 

2520.104–27; and 

(9) A plan to which title IV of the Act 

applies. 

* * * * * 

Signed at Washington, DC, on November 8, 

2010. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2010–28890 Filed 11–17–10; 8:45 am] 

BILLING CODE 4510–29–P 


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