6306 Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 

1The 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.

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.

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 e-ORI@dol.gov. 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

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 

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

§§ 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 eORI@dol.gov. 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 

6308 Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 

2See 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.

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.

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: 

• 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; 

• 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. 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. 

Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 6309

3Multiemployer 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.

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 

§ 2520.101–4. A model notice is 

provided in the Appendix to 

§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.

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 

6310 Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 

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 

Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 6311

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, 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:

§ 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 § 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 

6312 Federal Register / Vol. 70, No. 23 / Friday, February 4, 2005 / Proposed Rules 

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 § 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 ×

$33), or $35.75. Thus, the participant’s 

guaranteed monthly benefit is $357.50 

($35.75 × 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 

× $9), or $17.75. Thus, the participant’s 

guaranteed monthly benefit would be 

$177.50 ($17.75 × 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 nonpension 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