Guest Article

(From the May 11, 2009 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

PBGC Grants Small Plan Reporting Relief for Missed Quarterly Contributions

On April 30, 2009, the PBGC issued Technical Update 09-3 to provide reporting relief for small plans where a required quarterly contribution for the 2009 plan year is not timely made and the failure is not motivated by financial inability. For plans with fewer than 25 participants for the prior year, the reporting requirement is waived. For plans with at least 25 but fewer than 100 participants for the prior year, only a single simplified notice must be filed with the PBGC for the 2009 plan year -- by the time the first missed-quarterly reportable event report would otherwise be due.

ERISA § 4043 generally requires plan administrators and contributing sponsors to notify the PBGC within 30 days after they know a reportable event has occurred. One reportable event is the failure to timely make a required funding contribution, including a required quarterly contribution. The notice requirement is waived, however, if the required payment is made within 30 days after its due date.

For plan years through 2008, the PBGC automatically waived, through a series of Technical Updates, the reporting requirement for certain small plan sponsors that failed to make timely quarterly contributions. In February 2009, however, the PBGC announced that, effective for plan years beginning in 2009, it would no longer grant an automatic waiver because it had observed that many of the affected plans later terminated with unfunded liabilities.

Following that announcement, practioners expressed concern to the PBGC that its new position would affect many small plan sponsors who choose not to make quarterly contributions for reasons other than financial inability; that many small plans have funding valuation schedules that make it difficult or impossible to determine the amount of the required quarterly contribution by the due date; and that the filing of reportable event reports for such sponsors would be administratively burdensome.

In response to the concerns raised, the PBGC modified its position to allow the small-plan reporting relief described above for the 2009 plan year. The Technical Update is available on the PBGC website at: www.pbgc.gov/practitioners/law-regulations-informal-guidance/content/tu16725.html.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Mark Neilio 202.378.5046, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2009, Deloitte.