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DOL Issues Model Defined Benefit Plan Annual Funding Notices

    Client Alerts
  • April 10, 2009

The Pension Protection Act (“PPA”) requires administrators of all defined benefit plans that are subject to title IV of ERISA to provide an annual funding notice (“Notice”) with respect to plan years beginning on and after January 1, 2008.  Plans with over 100 participants must furnish the Notice no later than 120 days after the end of each plan year, or by April 30 for calendar year plans.  Small plans (fewer than 100 participants) that are eligible for the extended Form 5500 filing deadlines have until the Form 5500 is filed.

Recently, the Department of Labor (“DOL”) issued model notices for single-employer defined benefit plans and for multiemployer defined benefit plans.  These model notices are meant to serve as a guide for plan administrators.  Plans are not required to use these models when drafting their Notices.  However, our understanding is that most actuaries are recommending use of the applicable model notice for the Notice due at the end of this month.

The Notice must include, among other things:

  • The plan’s funding percentage,
  • A statement of the value of the plan’s assets and liabilities,
  • A description of how the plan’s assets are invested as of specific dates,
  • A description of the benefits under the plan that are guaranteed by the Pension Benefit Guaranty Corporation (“PBGC”),
  • A statement setting forth the funding policy of the plan and asset allocation of plan investments as of the end of the plan year to which the Notice relates, 
  • An explanation of a plan amendment, scheduled benefit increase or reduction, or other known event that has a material effect on plan liabilities or assets for the current plan year, and 
  • A statement of the number of participants who are:  active, retired or separated from service and receiving benefits, and retired or separated from service and entitled to receive future benefits. 

Plan administrators must send the Notice to:  the PBGC; each plan participant and beneficiary; each labor organization representing participants; and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan.  Plan administrators may include any additional explanatory information (so long as it is not inconsistent with DOL regulations) and furnish other notices required by ERISA along with the Notice.  Finally, plan administrators may provide the notice in written, electronic, or other appropriate form of delivery.  Electronic delivery should follow the DOL’s electronic delivery guidelines.

The penalty for late distribution of the Notice is $110 per day per participant.  Until further guidance is issued by the DOL, a plan is temporarily exempt from DOL penalties if it is:

  • A single-employer plan with liabilities that do not exceed plan assets by more than $50 million, and it provides the latest available funding notice to the PBGC within 30 days of receiving a written request from the PBGC, or
  • A multiemployer plan that is insolvent and that, as of the due date of the Notice, is in compliance with insolvency notice requirements mandated by the PBGC.  Once the plan emerges from insolvency, it must comply with the Notice requirements.