Compliance News | December 3, 2021
The PBGC is providing relief from certain filing requirements for annual financial and actuarial information (4010 filings). The relief applies to some of the information that changed because of the American Rescue Plan Act of 2021, which permits retroactive changes to certain actuarial calculations.
ERISA Section 4010 requires certain underfunded single-employer DB plans to provide the PBGC with financial and actuarial information. Generally, reporting is required if one or more plans sponsored by a member of a controlled group of sponsors has a funding ratio below 80 percent on a special funding basis using specific interest rates.
The American Rescue Plan Act includes provisions that modify how plan sponsors calculate pension liabilities and the amount of required minimum contributions. One provision extends the period for amortizing changes in the unfunded pension liability (i.e., by recognizing the impact of the change over more years). The other provision results in the actuary being able to use higher interest rates to determine pension liabilities (thereby lowering the amount of these liabilities). A plan sponsor may elect to apply these provisions to years that already passed. We discussed the provisions in our August 6, 2021 insight.
A change in actuarial information reported in a 4010 filing usually requires a revised filing. However, the PBGC is using its waiver authority to provide some relief with respect to retroactive elections under the American Rescue Plan Act.
The PBGC is waiving a 4010 filing for “information” years ending before December 31, 2021, if no filing would have been required absent the enactment of an American Rescue Plan Act election under Section V.A. of IRS Notice 2021-48 to increase the prefunding balance. The “information year” is the filing year for purposes of Section 4010 and is based on the controlled group.
Increasing the prefunding balance results in a reduction of the amount of measured assets for purposes of determining the plan’s funding ratio used for the 80 percent test. In other words, the election could result in a funding ratio that would trigger a 4010 filing even though no filing would have been required without the election.
In addition, the PBGC is waiving the need for plans to file revised actuarial information if the revision would have been required solely because of an American Rescue Plan Act election. It also provides relief instructions for 4010 filings that use the alternative actuarial valuation report filing date (which recognizes that the actuarial valuation report may not be ready when the filing is due). Those plans should file the actuarial valuation report that is available on the alternative date regardless of whether American Rescue Plan Act elections have been made or a revised actuarial valuation report reflecting those elections is available.
Plan sponsors should consult with the plan’s actuary and their legal counsel as to whether 4010 filings need to be revised and what actuarial valuation report to file.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.