PBGC Issues Guidance on Participant Notice of Underfunding

According to Technical Update 05-1: 2005 Participant Notice, these sponsors must report annually to participants the plan’s funding status and the limits of the PBGC’s guarantee, according to ERISA section 4011.

The guidance includes a Model Participant Notice that administrators can use to meet the requirements of section 4011.   The PBGC, according to the update, provides a Model Participant Notice to administrators each year.

The update includes the rules governing the participant notification requirement as well as a worksheet to help administrators determine if they must issue the Participant Notice.   The current update also includes an explanation of how the interest rate changes enacted by the Job Creation and Worker Assistance Act of 2002 (“JCWAA”) and the Pension Funding Equity Act of 2004 (“PFEA”) can affect the requirement to issue a 2005 Participant Notice or the plan funding information required to be disclosed in a 2005 Participant Notice.

The 2005 Participant Notice is due two months after a company’s due date for the 2004 Form 5500.   The update said plan administrators of most new and newly covered plans are exempt from the Participant Notice requirement.  Plan administrators of small plans are not exempt from the Participant Notice requirement, but there are special rules that allow plan administrators of small plans to avoid doing additional calculations by using numbers already reported on Schedule B to the Form 5500.  The notice also said a plan administrator may issue a Participant Notice even if it is not required .

The technical update is  here .