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PBGC Proposes New Methods for Counting Inactive Multiemployer Plan Participants
The PBGC anticipates that providing plans with three available counting methods will allow each plan to choose the one that will be the most accurate and least burdensome.
The Pension Benefit Guaranty Corporation (PBGC) is proposing modifications to the 2020 Form 5500 Schedule R (Retirement Plan Information) and its related instructions, affecting multiemployer defined benefit plans covered by Title IV of the Employee Retirement Income Security Act (ERISA).
The agency explains that Section 103(f)(2)(C) of ERISA requires that a multiemployer defined benefit plan include in its annual report “[t]he number of participants under the plan on whose behalf no contributions were made by an employer as an employer of the participant for such plan year and for each of the 2 preceding plan years.” Line 14a of Schedule R requires the plan to report the inactive participant counts for the current plan year’s filing. Lines 14b and 14c require the plan to report the inactive participant counts for the previous two respective plan years.
The PBGC has found a majority of plans that are required to report do not provide accurate information on line 14 of Schedule R. The current instructions for line 14 require multiemployer plans to count inactive participants using the last contributing employer counting method. Under the last contributing employer method, a plan counts only those inactive participants whose last contributing employer withdrew from the plan by the beginning of the relevant plan year for which the Form 5500 relates. The plan does not count any inactive participants whose employers had not withdrawn from the plan.
The agency is proposing to modify Schedule R to provide multiemployer plans with a choice of the last contributing employer counting method and two other proposed counting methods: the alternative method and the reasonable approximation method. The PBGC anticipates that providing plans with three available counting methods will allow each plan to choose the counting method that will be most accurate and least burdensome for the plan to count its inactive participants.
Under the alternative method, a plan would count only those inactive participants whose last contributing employer and all prior contributing employers had withdrawn from the plan by the beginning of the relevant plan year. Under this method, the plan would review the list of all contributing employers (employers that had not withdrawn from the plan by the beginning of the relevant plan year), and include on Line 14 only those inactive participants who had no covered service with any of these employers.
Under the reasonable approximation method, a plan that is unable to use the other two counting methods must make a reasonable, good faith effort to count inactive participants to satisfy the requirements of section 103(f)(2)(C) of ERISA. The plan would also be required to provide an attachment that explains the plan’s approximation method, including a description of the data and a breakdown describing the number of clearly identified inactive participants and the number of estimated inactive participants.
The PBGC is also proposing that when a plan reports a number on line 14b or 14c that differs from the number it reported for the plan year immediately preceding the current plan year, it would be required to submit an attachment with an explanation of the reason for the change.
A copy of the request will be posted on PBGC’s web site at: https://www.pbgc.gov/prac/laws-and-regulations/information-collections-under-omb-review. Comments are requested.You Might Also Like:
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