[Federal Register Volume 70, Number 23 (Friday, February 4, 2005)]
[Proposed Rules]
[Pages 6306-6312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-2151]



[[Page 6305]]

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Part VII





Department of Labor





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Employee Benefits Security Administration



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29 CFR Part 2520



Annual Funding Notice for Multiemployer Defined Benefit Pension Plans; 
Proposed Rule

Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / 
Proposed Rules

[[Page 6306]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2520

RIN 1210-AB00


Annual Funding Notice for Multiemployer Defined Benefit Pension 
Plans

AGENCY: Employee Benefits Security Administration, DOL.

ACTION: Proposed rule.

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SUMMARY: This document contains a proposed regulation that, upon 
adoption, would implement the notice requirement in section 101(f) of 
the Employee Retirement Income Security Act of 1974. Section 103 of the 
Pension Funding Equity Act of 2004 (PFEA '04) amended section 101 of 
ERISA by adding a new subsection (f), which requires the administrator 
of a multiemployer defined benefit plan to provide participants, 
beneficiaries, and certain other parties, including the Pension Benefit 
Guaranty Corporation, with an annual funding notice indicating, among 
other things, whether the plan's funded current liability percentage is 
at least 100 percent. This document also contains a model notice that 
may be used by plan administrators in discharging their duties under 
section 101(f). This proposed regulation, upon adoption, will affect 
plan administrators, participants, and beneficiaries of multiemployer 
defined benefit pension plans, as well as labor organizations 
representing such participants or beneficiaries and employers that have 
an obligation to contribute under such plans.

DATES: Written comments on the proposed regulation should be received 
by the Department of Labor on or before March 7, 2005. See ``C. Request 
for Comments,'' in the SUPPLEMENTARY INFORMATION section.

ADDRESSES: Comments should be addressed to the Office of Regulations 
and Interpretations, Employee Benefits Security Administration, Room N-
5669, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attn: PFEA '04 Project. Comments also may be 
submitted electronically to <a href="/cdn-cgi/l/email-protection#e184ccaeb3a8a1858e8dcf868e97"><span class="__cf_email__" data-cfemail="b7d29af8e5fef7d3d8db99d0d8c1">[email protected]</span></a>. All comments received will 
be available for public inspection at the Public Disclosure Room, N-
1513, Employee Benefits Security Administration, 200 Constitution 
Avenue NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: 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

    Section 103(a) of the Pension Funding Equity Act of 2004, Pub. L. 
108-218 (PFEA '04), which was enacted on April 10, 2004, added section 
101(f) to the Employee Retirement Income Security Act of 1974, as 
amended (ERISA or the Act). Section 101(f) provides that the 
administrator of a defined benefit plan which is a multiemployer plan 
shall for each plan year furnish a plan funding notice to each plan 
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. Section 103(b) of PFEA '04 amended section 
502(c)(1) of ERISA to provide that any administrator who fails to meet 
the requirements of section 101(f) with respect to a participant or 
beneficiary may, in a court's discretion, be personally liable to such 
participant or beneficiary in the amount of up to $100 a day from the 
date of such failure or refusal and the court may in its discretion 
order such other relief as it deems proper. Section 103(c) of PFEA '04 
provides that the Secretary of Labor shall, not later than 1 year after 
the date of the enactment of PFEA '04, issue regulations (including a 
model notice) necessary to implement the amendments made by section 
103. Section 103(d) of PFEA '04 provides that the amendments made by 
section 103 of PFEA '04 shall apply to plan years beginning after 
December 31, 2004.

B. Overview of Proposed Regulation

    Paragraph (a) of the proposed regulation implements the 
requirements set forth in section 101(f)(1) of the Act. This section in 
general requires the administrator of a multiemployer defined benefit 
pension plan to furnish annually a notice of the plan's funded status 
to the plan's participants and beneficiaries and other specified 
interested parties (each labor organization representing such 
participants or beneficiaries, each employer that has an obligation to 
contribute under the plan, and the Pension Benefit Guaranty Corporation 
(PBGC)). Those persons entitled to the notice are further clarified in 
paragraph (f) of the proposed regulation.
    Paragraph (a)(2) provides a limited exception to the requirement to 
furnish the annual funding notice. Under the exception, the plan 
administrator of a plan receiving financial assistance from the PBGC is 
not required to furnish the annual funding notice to the parties 
otherwise entitled to such notice. The Department, after consulting 
with the PBGC, is of the view that such notice would be of little, if 
any, value to such parties in light of the PBGC's authority and 
responsibility under title IV of ERISA with respect to insolvent 
multiemployer plans.\1\
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    \1\ The provisions of title IV of ERISA that apply in the 
context of a plan's receipt of financial assistance from the PBGC 
(sections 4245(e) and 4281(d)) ensure that participants and 
beneficiaries of insolvent plans are adequately informed of, among 
other things, their plan's funding status (including for 
participants in pay status, their individual benefit levels), and 
PBGC's benefit guarantees. In addition, PBGC receives plan financial 
information before providing financial assistance. Inasmuch as the 
foregoing title IV provisions are largely duplicative of the 
requirements in section 101(f) of ERISA, an exception from the 
requirements of section 101(f) for plans receiving financial 
assistance necessarily would reduce administrative costs to these 
plans, thereby increasing the plan's available resources for benefit 
payments.
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    Paragraph (b) of the proposed regulation sets forth the content 
requirements of the notice required under section 101(f). Paragraph (b) 
requires that the identification and financial information included in 
the notice is consistent with the information included in the plan's 
Annual Return/Report filed for the plan year to which the notice 
relates.
    Specifically, paragraph (b)(1)-(4) provides that the notice shall 
include: The name of the plan; the address and phone number of the plan 
administrator and the plan's principal administrative officer (if 
different from the plan administrator); the plan sponsor's employer 
identification number (currently line 2(b) of the Annual Return/Report 
Form 5500); and the plan number (currently line 1(b) of the Annual 
Return/Report Form 5500).
    Paragraph (b)(5)-(8) further provides that the notice shall include 
information relevant to the plan's funding, including: a statement as 
to whether the plan's funded current liability percentage (calculated 
by dividing the actuarial value of the plan's assets (currently line 
1b(2) of the Schedule B of the Annual Return/Report Form 5500) by the 
current liability (currently line 2b(4), column (3), of the Schedule B 
of the Annual Return/Report Form 5500) for the plan year to which the 
notice relates is at least 100 percent (and, if not, the actual 
percentage); a statement of the market value of the plan's assets 
(currently line 1b(1) of the Schedule B of the Annual Return/Report 
Form 5500) and the valuation date, the

[[Page 6307]]

amount of benefit payments for the plan year to which the notice 
relates (currently line 2e(4) of the Schedule H of the Annual Return/
Report Form 5500), and the ratio of the assets to the benefit payments 
for the plan year to which the notice relates; a summary of the rules 
governing insolvent multiemployer plans, including the limitations on 
benefit payments and any potential benefit reductions and suspensions 
(and the potential effects of such limitations, reductions, and 
suspensions on the plan); and a general description of the benefits 
under the plan that are eligible to be guaranteed by the PBGC, along 
with an explanation of the limitations on the guarantee and the 
circumstances under which such limitations apply.
    Paragraph (b)(9) of the proposed regulation permits inclusion in 
the notice of any additional information that the administrator 
determines would be helpful to understanding the information required 
to be contained in the notice.
    Paragraphs (c) and (e) of the proposed regulation, respectively, 
set forth the form and manner requirements relating to the notice. 
Paragraph (c) of the proposed regulation provides that notices shall be 
written in a manner calculated to be understood by the average plan 
participant. See 29 CFR 2520.102-2. Paragraph (e) of the proposed 
regulation provides that notices (except for notices to the PBGC) shall 
be furnished in a manner consistent with the requirements of 29 CFR 
2520.104b-1. Collectively, these requirements are intended to ensure 
that notices are written so that the average plan participant can 
understand them, and that they are provided in a form reasonably 
accessible to those individuals eligible to receive the notice. In 
addition, the Department believes that plan administrators already are 
familiar with the rules in Sec. Sec.  2520.102-2 and 2520.104b-1, 
thereby easing the burden of compliance with this regulation.
    The Department worked with the PBGC to develop model language for 
use in connection with funding notices. Such language is set forth in a 
model notice in the appendix to the regulation. Use of the model notice 
is not mandatory. However, paragraph (g) of the proposed regulation 
provides that, by using the model notice, the plan administrator will 
be deemed to satisfy its duties with respect to the requirements of 
paragraphs (b) and (c) of the proposed regulation, except with respect 
to information referenced in paragraph (b)(9) of the regulation.
    Paragraph (d) provides that notices shall be furnished within 9 
months after the close of the plan year, unless the Internal Revenue 
Service has granted an extension of time to file the annual report, in 
which case the notice shall be furnished within 2 months after the 
close of the extension period. This paragraph implements the 
requirements of section 101(f)(3) of the Act, which provides that 
annual funding notices shall be provided to recipients no later than 
two months after the deadline (including extensions) for filing the 
annual report for the plan year to which the notice relates.
    Paragraph (f) of the proposed regulation delineates the persons to 
whom funding notices required by this section must be furnished. In an 
effort to limit administrative burdens and costs attendant to 
compliance with this notice requirement, paragraph (f) of the proposal 
limits an administrator's disclosure obligation to only individuals who 
are participants on the last day of the plan year to which the notice 
relates, beneficiaries receiving benefits under the plan on the last 
day of the plan year to which the notice relates, labor organizations 
representing participants under the plan on the last day of the plan 
year to which the notice relates, and each employer that, as of the 
last day of the plan year to which the notice relates, 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. By 
focusing on a person's status on the last day of the previous plan 
year, the plan administrator is thereby relieved of additional costs of 
tracking and providing notice to individuals, labor organizations and 
employers who may no longer have an interest in the plan's funding 
condition.
    Paragraph (f)(4) provides a more detailed clarification of which 
employers are entitled to an annual funding notice. Specifically, the 
language ``is a party to the collective bargaining agreement(s) 
pursuant to which the plan is maintained'' therein is intended to cover 
not only employers that have a present obligation to contribute under 
the plan, but also those whose obligation may be temporarily suspended 
due to a funding holiday granted by the plan's board of trustees. In 
addition, the Department, through its use of the phrase ``or who 
otherwise may be subject to withdrawal liability,'' intends to make it 
clear that, in the case of plans that cover employees in the building 
and construction industry, entertainment industry, or trucking, 
household goods moving and public warehousing industries, notice is 
required for any employer that, as of the last day of the plan year to 
which the notice relates, has ceased to have an obligation to 
contribute under the plan, but has continued exposure to withdrawal 
liability pursuant to section 4203(b), (c), or (d) of ERISA. The 
clarification in paragraph (f)(4) is intended to ensure that all 
employers that have a direct financial interest in the plan's funding 
status will receive a notice.

C. Request for Comments

    The Department invites comments from interested persons on all 
aspects of the proposed regulation. Comments should be addressed to the 
Office of Regulations and Interpretations, Employee Benefits Security 
Administration, Room N-5669, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210, Attn: PFEA '04 Project. Comments also 
may be submitted electronically to <a href="/cdn-cgi/l/email-protection#3451197b667d74505b581a535b42"><span class="__cf_email__" data-cfemail="12773f5d405b52767d7e3c757d64">[email protected]</span></a>. All comments received 
will be available for public inspection at the Public Disclosure Room, 
N-1513, Employee Benefits Security Administration, 200 Constitution 
Avenue NW., Washington, DC 20210.
    The Department has limited the comment period to 30 days in order 
to issue a final regulation on the earliest possible date, taking into 
account Congress' expectation that regulations would be issued not 
later than one year from enactment of the PFEA '04, which was April 10, 
2004. The Department believes that, in light of the limited number of 
issues presented for consideration by the proposal, the provided 30-day 
comment period affords interested persons an adequate amount of time to 
analyze the proposal and submit comments.

D. Regulatory Impact Analysis

Summary

    This proposed regulation contains a model notice and other guidance 
necessary to implement the amendments made by new section 101(f) of 
ERISA, as enacted by section 103(a) of PFEA '04. The regulation, if 
adopted as proposed, will offer a model notice to administrators of 
multiemployer defined benefit plans, which is expected to mitigate 
burden and contribute to the efficiency of compliance.
    The multiemployer defined benefit plan funding notice provision of 
PFEA '04 was enacted amid concerns about persisting low interest rates 
and declines in equity values, each of which has an increasing effect 
on contribution

[[Page 6308]]

requirements and a decreasing effect on the funding levels of defined 
benefit plans. More complete and timelier disclosures were considered 
an important element of measures enacted in PFEA '04 to strengthen the 
long-term health of the defined benefit pension system. Increasing the 
transparency of information about the funding status of multiemployer 
plans for participants and beneficiaries, the labor organizations 
representing them, contributing employers, and PBGC will afford all 
parties interested in the financial viability of these plans greater 
opportunity to monitor their funding status.
    According to a March 2004 Report by the General Accounting Office 
\2\ the regulatory framework within which multiemployer plans operate 
shifts certain financial risks away from the government and by 
implication the taxpayer. Contributing employers to multiemployer plans 
share the risk of funding benefits for all participants, not just those 
in their employment, and face specific liabilities if they withdraw 
from the plans. Participants in multiemployer plans face lower benefit 
guaranties than those in single-employer plans. According to the GAO 
report, these factors create incentives for participants and employers 
to work together constructively to find solutions to plans' financial 
difficulties. These notices will provide timely disclosure of 
information concerning the funding status of these plans to support the 
effort of all interested parties to monitor their financial condition 
and take action where necessary.
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    \2\ See GAO-04-423 Private Pensions. Multiemployer Plans Face 
Short and Long-Term Challenges. U.S. General Accounting Office, 
March 2004. General Accounting Office name changed to Government 
Accountability Office effective July 7, 2004.
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    The regulation would further afford plan administrators greater 
certainty that they have discharged their notice obligation under 
section 101(f). The proposed regulation is also intended to clarify 
certain terms used in section 101(f) for the general purpose of 
delineating those persons entitled to receive the notice. The benefits 
of greater efficiency, certainty, and clarity are expected to be 
substantial, but cannot be specifically quantified.
    The cost of the multiemployer defined benefit plan notices is 
expected to amount to $777,000 in the year of implementation, and 
$644,000 in each subsequent year. The total estimated cost includes the 
one-time development of a notice by each plan, and the annual 
preparation and mailing by the administrators of all multiemployer 
defined benefit plans of the required notices to plan participants and 
beneficiaries, specified labor organizations, employers that have an 
obligation to contribute to these plans, and to the Pension Benefit 
Guaranty Corporation. The first year estimate is higher to account for 
the time required for plan administrators to adapt and review the model 
notice.
    In this proposed regulation, the Department has attempted to 
provide guidance to assist administrators to meet this objective the 
most economically efficient way possible. Because the costs of this 
proposal arise from notice provisions in PFEA '04, 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.

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 
proposed regulation is significant within the meaning of section 
3(f)(4) of the Executive Order. OMB has, therefore, reviewed this 
proposed regulation 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 proposed 
information collection request (ICR) included in the proposed 
regulation regarding the Annual Funding Notice for Defined Benefit 
Multiemployer Pension 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 information 
collection 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:
    <bullet> Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    <bullet> 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;
    <bullet> Enhance the quality, utility, and clarity of the 
information to be collected; and
    <bullet> 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. Although comments may be 
submitted through April 5, 2005, OMB requests that comments be received 
within 30 days of publication of the Notice of Proposed Rulemaking to 
ensure their consideration.
    PRA Addressee: Address requests for copies of the ICR to Gerald B. 
Lindrew, Office of Policy and Research, U.S. Department of Labor, 
Employee Benefits Security Administration, 200 Constitution Avenue, 
NW., Room N-5647, Washington, DC 20210.

[[Page 6309]]

Telephone (202) 693-8410; Fax: (202) 219-5333. These are not toll-free 
numbers.
    The information collection provisions of this proposed regulation 
are found in Sec.  2520.101-4. A model notice is provided in the 
Appendix to Sec. 2520.101-4 to facilitate compliance and moderate the 
burden attendant to supplying notices to participants and 
beneficiaries, labor organizations, contributing employers, and PBGC as 
required by PFEA '04 and the proposed regulation. 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. This proposed regulation is also intended to clarify 
certain of the PFEA '04 requirements as to content, style and format, 
manner of furnishing, and persons entitled to receive notice.
    In order to estimate the potential costs of the notice provisions 
of section 101(f) of ERISA and this proposed regulation, the Department 
estimated the number of multiemployer defined benefit plans, and the 
numbers of participants, beneficiaries receiving benefits, labor 
organizations representing participants, and employers that have an 
obligation to contribute to these plans. The PBGC Pension Insurance 
Data Book 2003 indicates that as of September 30, 2003, there were 
1,623 multiemployer defined benefit plans with 9.7 million participants 
and beneficiaries receiving benefits. These estimates are based on 
premium filings with PBGC for 2002, projected by PBGC to 2003, 
generally the most recent information currently available. This total 
has been adjusted to 1,595 to reflect the exception from the 
requirement to furnish a funding notice for years in which a plan is 
receiving financial assistance from PBGC.
    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 2002, 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 
entitled to receive notice is 21,000. Although this number has been 
used for purposes of this analysis, it is believed that this number is 
an upper bound for the actual number of labor organizations that will 
receive notice because it is likely that some labor organizations do 
not represent participants in defined benefit plans, or that some labor 
organizations represent only participants in single employer plans not 
subject to section 101(f).
    The Department is also 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. 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,\3\ 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 PBGC premium filing data. As 
a result, the Department has used 300,000 for its estimate of the 
number of contributing employers to whom the required notice will be 
sent.
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    \3\ Multiemployer Plans Face Short and Long-Term Challenges. 
U.S. General Accounting Office, March 2004. General Accounting 
Office name changed to Government Accountability Office effective 
July 7, 2004. See GAO-04-423 Private Pensions.
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    For purposes of its estimates of regulatory impact, then, the 
Department has assumed that each plan will develop a notice, and that 
each year the multiemployer defined benefit plan notices will be 
prepared and sent by the administrators of 1,595 plans to 9.7 million 
participants and beneficiaries, 21,000 labor organizations, and 300,000 
contributing employers, and to PBGC, for a total of about 10 million 
notices.
    It is assumed that the availability of a model notice as provided 
in paragraph (f) will lessen the time otherwise required by a plan 
administrator to draft a required notice. In developing burden 
estimates, the Department has included one hour for reviewing and 
adapting the model notice, and 30 minutes for completing the notice for 
each plan. Reviewing and adapting the notice is expected to be 
performed by service providers, specifically by legal counsel at an 
hourly rate of $83. This accounts for the estimated burden of 
developing the notice, which amounts to about $133,000 for the 1,595 
plans. Completing the notice by adding information relevant to each 
year is expected to take 30 minutes in the first year of 
implementation, as well as in subsequent years, and it is expected to 
be performed by the same professionals who are accounted for as 
preparing the Summary Annual Report (SAR) for plans, namely financial 
professionals at the rate of $68 per hour. The assumed preparation cost 
to plans to complete the notice is therefore about $55,000 per year. 
The total cost to plans to develop and complete the notice in the year 
of implementation is about $187,000.
    The estimated distribution costs for the notices are based on 
separate assumptions for participant and beneficiary notices versus the 
labor organization, contributing employer, and PBGC notices. The 
distribution cost for the notices to participants and beneficiaries is 
relatively modest compared to the number of notices because it is 
assumed that these notices will be provided at the same time and as 
part of the same mailing as the Summary Annual Report. The mailing 
costs for the SAR are already accounted for in the ICR for the SAR, 
currently approved under OMB Control Number 1210-0040. Therefore, only 
an additional materials cost is accounted for in the estimate of 
distribution costs for participant and beneficiary notices, which 
totals $292,000.
    Distribution cost estimates for the notices to labor organizations, 
employers, and PBGC include $0.40 for materials and postage, and two 
minutes at a clerical wage rate of about $17 for each notice. Total 
distribution costs to labor organizations, contributing employers, and 
PBGC, therefore, are expected to total about $316,000. Distribution 
costs for all notices are estimated at $608,000.
    In order to estimate the hour burden of preparation and 
distribution of the notices, the Department has generally relied on the 
same assumptions used for estimates of the burden of SAR preparation 
and distribution. Specifically, it is assumed that 100% of notices are 
developed by service providers, and that 90% of notices are prepared 
and distributed by service providers. Those activities are

[[Page 6310]]

appropriately accounted for as cost burden, for which plans pay service 
providers. The remaining 10% of notices prepared and distributed in 
house by plan administrators are appropriately accounted for as hour 
burden. Materials and mailing costs are considered direct cost burden, 
as well. The Department has not accounted here for reductions in 
mailing and material costs that might arise from the electronic 
distribution of some notices. Although such distribution may be deemed 
to satisfy the requirements of section 2520.104b-1(b)(1) with respect 
to fulfilling the disclosure obligation if conditions of section 
2520.104b-1(c) are satisfied, it is assumed for purposes of these 
estimates that these funding notices are less likely to be provided 
electronically due to the nature of the industries involved and the 
relationships of the parties affected by this requirement since the 
active workers affected often do not have access to e-mail at their 
workplaces. The resulting hour and cost burden estimates are shown 
below. The Department requests comments on the data, assumptions, and 
methodology used in arriving at these estimates of economic impact and 
PRA 95 burden.
    Type of Review: New.
    Agency: Department of Labor, Employee Benefits Security 
Association.
    Title: Multiemployer Defined Benefit Plan Funding Notice.
    OMB Number: 1210-NEW.
    Affected Public: Individuals or households; Business or other for-
profit; Not-for-profit institutions.
    Respondents: 1,595.
    Frequency of Response: Annual.
    Responses: 10,048,000.
    Estimated Total Burden Hours: 1,155.
    Total Annualized Capital/Startup Costs: $133,000.
    Total Annual Cost (Operating and Maintenance): $644,000.
    Total Annualized Cost: $777,000.
    OMB will consider comments submitted in response to this request in 
its review of the request for approval of the ICR; these comments will 
also become a matter of public record.

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 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. Small entities include small businesses, organizations and 
governmental jurisdictions.
    For purposes of analysis under the RFA, the Employee Benefits 
Security Administration (EBSA) proposes to continue to consider a small 
entity to be an employee benefit plan with fewer than 100 participants. 
The basis of this definition is found in section 104(a)(2) of ERISA, 
which permits the Secretary of Labor to prescribe simplified annual 
reports for pension plans that cover fewer than 100 participants. Under 
section 104(a)(3), the Secretary may also provide for exemptions or 
simplified annual reporting and disclosure for welfare benefit plans. 
Pursuant to the authority of section 104(a)(3), the Department has 
previously issued at 29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 
2520.104-46 and 2520.104b-10 certain simplified reporting provisions 
and limited exemptions from reporting and disclosure requirements for 
small plans, including unfunded or insured welfare plans covering fewer 
than 100 participants and which satisfy certain other requirements.
    Further, while some large employers may have small plans, in 
general small employers maintain most small plans. Thus, EBSA 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.). EBSA therefore requests comments on the appropriateness of the 
size standard used in evaluating the impact of this proposed rule on 
small entities. The Department does not expect that the plans 
potentially impacted by this proposal will be small entities. However, 
the Department requests comments on the potential impact of proposal on 
small entities, and on ways in which any burdens on small entities 
might be minimized.
    EBSA has preliminarily determined that this rule will not have a 
significant economic impact on a substantial number of small entities. 
In support of this determination, EBSA has prepared the following 
initial regulatory flexibility analysis.
    Section 103(c) of PFEA '04 provides that the Secretary of Labor 
shall issue regulations (including a model notice) necessary to 
implement the amendments made by new section 101(f) of ERISA, as 
enacted by section 103(a) of PFEA '04. Section 101(f) of ERISA requires 
the administrator of a multiemployer defined benefit pension plan to 
furnish annually a notice of the plan's funded status to the plan's 
participants and beneficiaries and other specified interested parties 
(each labor organization representing such participants and 
beneficiaries, each employer that has an obligation to contribute under 
the plan, and the PBGC).
    The conditions set forth in this proposed regulation are intended 
to satisfy the PFEA '04 requirement that the Secretary prescribe 
regulations (including a model notice) necessary to implement the 
amendments made by section 103.
    The proposed rule would impact small plans that are multiemployer 
defined benefit pension plans. It is expected that the proposal will 
affect approximately 10 small plans, and 800 participants in small 
plans.
    The initial cost of the funding notice for small plans is expected 
to be about $82 per plan. Preparation of this information is in most 
cases accomplished by professionals that provide services to employee 
benefit plans.
    The benefits of greater certainty afforded fiduciaries by the model 
notice are substantial but cannot be specifically quantified.
    To the Department's knowledge, there are no federal regulations 
that might duplicate, overlap, or conflict with the proposed regulation 
for multiemployer defined benefit pension plan funding notices under 
section 101(f) of ERISA.

Congressional Review Act

    The rules being issued here are 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 sent to 
Congress and the Comptroller General for review. The 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

[[Page 6311]]

on competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based 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, this proposed regulation does 
not include any Federal mandate that may result in expenditures by 
State, local, or tribal governments, and does not impose an annual 
burden exceeding $100 million on the private sector.

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, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. This final 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 are not pertinent here, 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 implemented in this final 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, 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. 
Section 2520.101-4 also issued under sec. 103 of Pub. L. 108-218.

    2. Add the following new section and related appendix to subpart A:


Sec.  2520.101-4  Annual funding notice for multiemployer defined 
benefit pension plans.

    (a) In general. (1) Except as provided in paragraph (a)(2) of this 
section, pursuant to section 101(f) of the Act, the administrator of a 
defined benefit, multiemployer pension plan 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 for any plan year for which the plan is receiving financial 
assistance from the Pension Benefit Guaranty Corporation pursuant to 
section 4261 of ERISA.
    (b) Content of notice. A funding notice shall, consistent with the 
information included in the plan's Annual Return/Report Form 5500 filed 
for the plan year to which the funding notice relates, include the 
following information:
    (1) The name of the plan;
    (2) The address and phone number of the plan administrator and the 
plan's principal administrative officer (if different from the plan 
administrator);
    (3) The plan sponsor's employer identification number;
    (4) The plan number;
    (5) A statement as to whether the plan's funded current liability 
percentage (as defined in section 302(d)(8)(B)) for the plan year to 
which the notice relates is at least 100 percent (and, if not, the 
actual percentage);
    (6) A statement of the market value of the plan's assets (and 
valuation date), the amount of benefit payments, and the ratio of the 
assets to the payments for the plan year to which the notice relates;
    (7) A summary of the rules governing insolvent multiemployer plans, 
including the limitations on benefit payments and any potential benefit 
reductions and suspensions (and the potential effects of such 
limitations, reductions, and suspensions on the plan);
    (8) 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; and
    (9) 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.
    (c) Style and format of notice. Funding notices shall be written in 
a manner calculated to be understood by the average plan participant.
    (d) When to furnish notice. A funding notice shall be furnished 
within 9 months after the close of the plan year, unless the Internal 
Revenue Service has granted an extension of time to file the annual 
report, in which case such furnishing shall take place within 2 months 
after the close of the extension period.
    (e) Manner of furnishing notice. (1) Except as provided in 
paragraph (e)(2) of this section, funding notices shall be furnished in 
any manner consistent with the requirements of Sec.  2520.104b-1 of 
this chapter, including paragraph (c) of that section relating to the 
use of electronic media.
    (2) Notice shall be furnished to the Pension Benefit Guaranty 
Corporation in a manner consistent with the requirements of part 4000 
of this title.
    (f) Persons entitled to notice. Persons entitled to notice under 
this section include:
    (1) Each participant covered under the plan on the last day of the 
plan year to which the notice relates;
    (2) Each beneficiary receiving benefits under the plan on the last 
day of the plan year to which the notice relates;
    (3) Each labor organization representing participants under the 
plan on the last day of the plan year to which the notice relates;
    (4) Each employer that, as of the last day of the plan year to 
which the notice relates, 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) Model notice. The appendix to this section contains a model 
notice that is intended to assist plan administrators in

[[Page 6312]]

discharging their notice obligations under this section. Use of the 
model notice is not mandatory. However, use of the model notice will be 
deemed to satisfy the requirements of paragraphs (b) and (c) of this 
section, except with respect to information referenced in paragraph 
(b)(9) of this section.

Appendix to Sec.  2520.101-4--Annual Funding Notice for [Insert name of 
pension plan]

Introduction

    This notice, which federal law requires all multiemployer plans 
to send annually, includes important information about the funding 
level of [insert name, number, and EIN of plan] (Plan). This notice 
also includes information about rules governing insolvent plans and 
benefit payments guaranteed by the Pension Benefit Guaranty 
Corporation (PBGC), a federal agency. This notice is for the plan 
year beginning [insert beginning date] and ending [insert ending 
date] (Plan Year).

Plan's Funding Level

    The Plan's ``funded current liability percentage'' for the Plan 
Year was [insert percentage--see instructions below]. In general, 
the higher the percentage, the better funded the plan. The funded 
current liability percentage, however, is not indicative of how well 
a plan will be funded in the future or if it terminates.
    (Instructions: For purposes of computing the ``funded current 
liability percentage,'' insert ratio of actuarial value of assets to 
current liability, expressed as a percentage. If the percentage is 
equal to or greater than 100 percent, you may insert ``at least 100 
percent.'')

Plan's Financial Information

    The market value of the Plan's assets as of [insert valuation 
date] was [insert amount]. The total amount of benefit payments for 
the Plan Year was [enter amount]. The ratio of assets to benefit 
payments is [enter amount calculated by dividing the value of plan 
assets by the total benefit payments]. This ratio suggests that the 
Plan's assets could provide for approximately [enter amount 
calculated above] years of benefit payments in annual amounts equal 
to what was paid out in the Plan Year. However, the ratio does not 
take into account future changes in total benefit payments or plan 
assets.

Rules Governing Insolvent Plans

    The law has special rules governing insolvent multiemployer 
pension plans. A plan is insolvent for a plan year if its available 
financial resources are not sufficient to pay benefits when due for 
the plan year.
    An insolvent plan must reduce benefit payments to the highest 
level that can be paid from the plan's available financial 
resources. If such resources are not enough to pay benefits at a 
level specified by law (see Benefit Payments Guaranteed by the PBGC, 
below), the plan must apply to the PBGC for financial assistance. 
The PBGC, by law, will loan the plan the amount necessary to pay 
benefits at the guaranteed level. Reduced benefits may be restored 
if the plan's financial condition improves.
    A plan that becomes insolvent must provide prompt notification 
of the insolvency to participants and beneficiaries, contributing 
employers, labor unions representing participants, and PBGC. In 
addition, participants and beneficiaries also must receive 
information regarding whether, and how, their benefits will be 
reduced or affected as a result of the insolvency, including loss of 
a lump sum option. This information will be provided for each year 
the plan is insolvent.

Benefit Payments Guaranteed by the PBGC

    The PBGC guarantees only vested benefits. Specifically, it 
guarantees a monthly benefit payment equal to 100 percent of the 
first $11 of the Plan's monthly benefit accrual rate, plus 75 
percent of the next $33 of the accrual rate, times each year of 
credited service. The maximum guaranteed payment for a vested 
retiree, therefore, is $35.75 per month times each year of credited 
service.

    Example 1: If a participant with 10 years of credited service 
has an accrued monthly benefit of $500, the accrual rate for 
purposes of determining the PBGC guarantee would be determined by 
dividing the monthly benefit by the participant's years of service 
($500/10), which equals $50. The guaranteed amount for a $50 monthly 
accrual rate is equal to the sum of $11 plus $24.75 (.75 x $33), or 
$35.75. Thus, the participant's guaranteed monthly benefit is 
$357.50 ($35.75 x 10).
    Example 2: If the participant in Example 1 has an accrued 
monthly benefit of $200, the accrual rate for purposes of 
determining the guarantee would be $20 (or $200/10). The guaranteed 
amount for a $20 monthly accrual rate is equal to the sum of $11 
plus $6.75 (.75 x $9), or $17.75. Thus, the participant's guaranteed 
monthly benefit would be $177.50 ($17.75 x 10).
    In calculating a person's monthly payment, the PBGC will 
disregard any benefit increases that were made under the plan within 
60 months before insolvency. Similarly, the PBGC does not guarantee 
pre-retirement death benefits to a spouse or beneficiary (e.g., a 
qualified pre-retirement survivor annuity), benefits above the 
normal retirement benefit, disability benefits not in pay status, or 
non-pension benefits, such as health insurance, life insurance, 
death benefits, vacation pay, or severance pay.

Where To Get More Information

    For more information about this notice, you may contact [enter 
name of plan administrator and, if applicable, principal 
administrative officer], at [enter phone number and address]. For 
more information about the PBGC and multiemployer benefit 
guarantees, go to PBGC's Web site, http://www.pbgc.gov, or call PBGC 
toll-free at 1-800-400-7242 (TTY/TDD users may call the Federal 
relay service toll free at 1-800-877-8339 and ask to be connected to 
1-800-400-7242).

    Signed at Washington, DC, this 31st day of January, 2005.
Ann L. Combs,
Assistant Secretary, , Employee Benefits Security Administration, 
Department of Labor.

[FR Doc. 05-2151 Filed 2-3-05; 8:45 am]
BILLING CODE 4150-29-P


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