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Compliance March 9, 2002
PBGC Updates Employers on Communications Requirements
September 3, 2002 (PLANSPONSOR.com) - The Pension
Benefit Guaranty Corporation (PBGC) has given employers with
underfunded pension plans some clarification in the proper
way to communicate with participants.
Reported by Nevin E. Adams
In Technical Update 02-2, the PBGC notes that plans that are required to pay a variable rate premium (VRP) generally are required to issue a participant notice under the Employee Retirement and Income Security Act (ERISA), Section 4011. This notice is intended to inform participants about the funding status of their pension plans and the applicable limits on PBGC guarantees.
“Due” Dates
According to the PBGC, the 2002 participant notice is due
two months after the due date, including extensions, for
the plan’s 2001 Form 5500. The participant notice
requirement was born in the Retirement Protection Act of
1994, and applies to certain plans that are less than 90%
funded.
Specifically, the notice indicates that the requirement to issue a 2002 participant notice applies to the plan administrator of any single-employer plan that:
pays a variable rate premium for the 2002 plan year; or
would pay a variable rate premium for the 2002 plan year
using 85% of the yield on 30-year Treasury securities for
purposes of calculating vested benefits
The technical update includes a model participant notice that plan administrators may use and a worksheet to help plan administrators determine whether they must issue a 2002 participant notice.
Future Tenses
The technical update also reflects changes made by the
Job Creation and Worker Assistance Act of 2002 (JCWAA),
including an increase in the interest rate for computing
the VRP for the 2002 plan year – eliminating the
requirement to pay the 2002 VRP premium for some plans,
according to the notice.
The Senate is now considering a House-passed bill (H.R.
3762) under which a 2002 participant notice would not have
to be issued by any plan that is not required to pay a VRP
for the 2002 plan year, according to the PBGC.
The Model Participant Notice is at http://www.pbgc.gov/laws/techupdates/tech02-2.htm
Other PBGC Technical Updates are available at http://www.pbgc.gov/laws/techupdates/techupdt.htm