Guest Article

(From the December 19, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

PBGC Updates: Expected Retirement Age and Reportable Events in 2012

The PBGC announced that the expected retirement table for plans undergoing a distress or involuntary termination will be updated for valuation dates occurring in 2012, while the existing guidance on reportable events will continue.

New Expected Retirement Ages Table

A new table is effective for determining the expected retirement age of participants in pension plans undergoing a distress or involuntary termination with valuation dates occurring in calendar year 2012.

The table, which is updated annually to reflect changes in the cost of living, is used to compute the value of early retirement benefits under the plan. It determines whether a participant has a low, medium or high probability of retiring early, based on how old the participant will be when he or she is first eligible for an unreduced benefit and the amount of the benefit.

Reportable Events

The PBGC is again extending its existing guidance on reporting missed quarterly contributions and on funding-related determinations for purposes of waivers, extensions and advance reporting. Under Technical Update 11-1, the PBGC's earlier guidance in Technical Update 10-4 will continue to apply until the PBGC's amendment to the reportable events regulation becomes effective. Technical Update 11-1 addresses:

This means that for funding-related determinations a plan's unfunded vested benefits and the value of its assets and vested benefits will, for plan years beginning in 2012, be determined in the same manner as for variable rate premiums for the preceding plan year. For example, a calendar-year plan with a January 1 valuation date will use the variable rate premium values determined as of January 1, 2011 for purposes of applying the $50 million advance-reporting threshold test for reportable events that become effective in 2012. For missed quarterly contributions for the 2012 plan year, if the failure is not motivated by financial inability, the post-event reporting requirement will be waived if the plan has fewer than 25 participants for whom flat-rate premiums were payable for the 2011 plan year. If the plan has at least 25 but less than 100 participants for whom flat-rate premiums were payable for the 2011 plan year, the post-event reporting requirement will be treated as satisfied if financial inability was not the reason for the missed contribution and a simplified notice is filed with the PBGC by the time the first missed quarterly reportable event report for the 2012 plan year would otherwise be due.

In November 2009, the PBGC proposed more rigorous reportable events requirements, observing that the current regime deprives it of needed "early warning" signs that a plan is in financial distress. The PBGC's proposal would eliminate most automatic waivers and extensions and would require reporting of missed quarterly contributions regardless of the plan's size or motivation for the missed contribution. Public comment on the proposal was generally negative, and the PBGC plans to issue a new proposal that will more effectively target troubled plans and sponsors while reducing the burden on those that are financially sound.

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 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.