Compliance August 8, 2023

Some 4010 Pension Filers May Qualify for Reporting Waiver

Due to unusual market conditions, many 4010 filers will struggle to determine if they are required to file, so the PBGC is providing a limited one-time waiver to certain defined benefit plans

Reported by

Paul Mulholland

The Pension Benefit Guaranty Corporation has issued a one-time waiver for certain pension sponsors for 4010 filings.

Scott Hittner, a partner in and the chief actuary at October Three Consulting, says that Section 4010 of the Employee Retirement Income Security Act requires companies with a pension plan with less than 80% funding to report additional financial and actuarial information to the PBGC. Waivers will be issued for smaller plans, such as those with fewer than 500 participants or whose aggregate underfunding does not exceed $15 million.

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According to a release from the PBGC, sponsors who have a valuation date between October 1, 2022, and March 1, 2023, might be eligible for a one-time waiver if certain conditions are met.

If a sponsor with an applicable valuation date meets the following criteria, they are eligible:

They did not need to file under 4010 for the previous five years;
Either none of the plans had a market-based funding level below 85% or the market-based shortfall is less than $15 million; and
Every plan below 80% has a value date in the eligible time period.

Hittner explains that in calculating funding under Section 4010, pension funds use a two-year average for interest rates. The two-year average was much lower than the actual interest rates for the time period covered by the waiver, which would have caused many plans with no history of being underfunded to become technically underfunded because of the way interest rates are used in the calculation. The total reduction in liabilities for the plan is not captured by the two-year average, which leads to false positives.

Hittner adds that many plan sponsors with no history of being underfunded would have been swept up, absent a waiver. Some sponsors were “looking to make extra contributions to avoid a filing” when “they were likely to only file for one year only.”

Plans that fall just outside the time range will still have to file, Hittner says, even if they have never been below 80% funding before. However, the waiver “will pick up a majority of affected plans.”