DOL Offers Guidance on Annual Funding Notice Requirements

The Department of Labor issued on April 3 a field assistance bulletin to clarify for the administrators of defined benefit pension plans how to furnish annual funding notices to participants, beneficiaries and the Pension Benefit Guaranty Corporation and remain in compliance.

The guidance, Field Assistance Bulletin 2025-02 from the Employee Benefits Security Administration, “provides instruction to EBSA’s national and regional offices of enforcement (Offices of Enforcement) on how retirement plans in this position may comply with the new law pending additional guidance or revisions to [ERISA] 29 CFR 2520.101-5.”

According to the bulletin, confusion arose from amendments to ERISA Section 101(f) made by Section 343 of the SECURE 2.0 Act of 2022. Those amendments modified annual funding notice requirements for plan years beginning after December 31, 2023.

In the bulletin, the DOL “acknowledges that this bulletin does not address all SECURE 2.0-related issues that may arise with respect to annual funding notices.” For clarity, it continues, if plan administrators file funding notices in “compliance with the guidance in this bulletin,” the DOL will treat such action “as a reasonable, good faith interpretation of the annual funding notice disclosure requirements of section 101(f) of ERISA with respect to the issues discussed in this bulletin.”

Acknowledging that some defined benefit plans may have already prepared and begun distributing funding notices to participants, the DOL wrote that it expects plan administrators “to consider the guidance in this bulletin in evaluating whether the disclosures were consistent with a reasonable, good faith interpretation of section 101(f), as amended, and to take appropriate corrective action to the extent the plan administrator concludes that the disclosures did not meet that standard.”

The bulletin is clear that administrators of single-employer plans can no longer rely on the model funding notice provided by the DOL in Appendix A of 29 CFR 2520.101-5. Instead, the DOL directs administrators of most single-employer plans to the model notice in Appendix 1 of this bulletin.

Similarly, administrators of multiemployer plans are advised that they should rely on the model notice in Appendix 2 of the current bulletin, not the model notice in Appendix B of 29 CFR 2520.101-5.

The new bulletin also provides model wording that plan administrators can use to explain that the PBGC may pay “vested benefits greater than the guaranteed level of benefits if the terminating single-employer plan has sufficient assets.”

The bulletin offers a detailed series of 12 questions and answers as detailed guidance for plan administrators. The questions cover a range of topics, including:

• When plan administrators must first comply with the SECURE 2.0 modifications to annual funding notices;
• That administrators of single employers of “at-risk” plans, starting with the 2024 notice year, “do not disclose ‘at-risk’ liabilities or otherwise take the ‘at-risk’ rule of section 303(i) into account in determining the plan’s year-end liabilities and the percentage of liabilities funded”;
• How plan administrators may report the required demographic information for plans, referring them, respectively, to the model language in the single-employer plan and multiemployer model notices in Appendixes 1 and 2 of this bulletin;
• How to determine and disclose “average return on assets” for the notice year of both single-employer and multiemployer plans, referring administrators to Method 1 and Method 2 described in the bulletin;
• That an annual funding notice for a cooperative and small employer charity plan needs to include the new demographic and average return on assets disclosures; and
• That the standard has not changed for disclosing known events that will take effect at some point in the current year and are expected to have a material effect on the plan funding.