[Federal Register Volume 73, Number 34 (Wednesday, February 20, 2008)]
[Proposed Rules]
[Pages 9243-9254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-3124]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4010

RIN 1212-AB01


Annual Financial and Actuarial Information Reporting; Pension 
Protection Act of 2006

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend PBGC's regulation on Annual 
Financial and Actuarial Information Reporting to implement the 
provisions of the Pension Protection Act of 2006, Public Law 109-280 
(``PPA 2006''), which changed the standards for determining which 
persons are required to report under ERISA section 4010 (Authority to 
Require Certain Information) and made other changes to the reporting 
requirements. In addition to providing proposed guidance on 
implementing the PPA 2006 changes, PBGC is proposing to waive reporting 
in certain cases for controlled groups with aggregate plan underfunding 
of $15 million or less, to modify the standards for determining which 
plans are exempted from the actuarial information requirements, to 
revise the actuarial information requirements to conform with other PPA 
2006 changes, and to provide other clarifications.

DATES: Comments must be submitted on or before April 21, 2008.

ADDRESSES: Comments may be submitted by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the Web site instructions for submitting comments.
     E-mail: [email protected].
     Fax: 202-326-4224.
     Mail or Hand Delivery: Legislative and Regulatory 
Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., 
Washington, DC 20005-4026.

All submissions must include the Regulatory Identification Number for 
this rulemaking (RIN 1212-AB01). Comments received, including personal 
information provided, will be posted to http://www.pbgc.gov. Copies of 
comments may also be obtained by writing to Disclosure Division, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street, NW., Washington, DC 20005-4026, or calling 202-326-4040 during 
normal business hours. (TTY and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)

FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, Legislative 
and Regulatory Department; or Catherine B. Klion, Manager, Regulatory 
and Policy Division, Legislative and Regulatory Department, Pension 
Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-
4026; 202-326-4024. (TTY/TDD users may call the Federal relay service 
toll-free at 1-800-877-8339 and ask to be connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION: 

Background

    Pension Benefit Guaranty Corporation (PBGC) administers the pension 
insurance programs under Title IV of the Employee Retirement Income 
Security Act of 1974 (ERISA). In order to give PBGC an opportunity to 
anticipate and attempt to minimize potential liabilities that may arise 
from the termination of significantly underfunded plans, ERISA section 
4010 requires the reporting of actuarial and financial information by 
controlled groups with pension plans that have significant funding 
problems. That information is exempt from disclosure under section 552 
of title 5, United States Code and may not be made public, except as 
may be relevant to any administrative or judicial action or proceeding.
    Pursuant to ERISA section 4010, PBGC issued its regulation on 
Annual Financial and Actuarial Information Reporting in 1995 (29 CFR 
part 4010). The regulation specifies the items of identifying, 
financial, and actuarial information that filers must submit under 
section 4010. PBGC reviews the

[[Page 9244]]

information that is filed and enters it into an electronic database for 
more detailed analysis. Computer-assisted analysis of this information 
helps PBGC to anticipate possible major demands on the pension 
insurance system and to focus PBGC resources on situations that pose 
the greatest risks to that system. Because other sources of information 
are usually not as current as the section 4010 information, the section 
4010 filing plays a major role in PBGC's ability to protect participant 
and premium-payer interests.
    In March of 2005, PBGC amended part 4010 to require electronic 
reporting and to make other less significant changes. Reporting is now 
accomplished through PBGC's secure e-4010 Web-based application.

PPA 2006 Changes

    On August 17, 2006, the President signed into law the Pension 
Protection Act of 2006, Public Law 109-280 (``PPA 2006''), which made 
numerous changes in the area of pension law, including changes to ERISA 
section 4010. Prior to its amendment by PPA 2006, ERISA section 4010(b) 
required reporting, in general, if: (1) The aggregate unfunded vested 
benefits of all plans maintained by members of the controlled group 
exceeded $50 million, disregarding plans with no unfunded vested 
benefits (the ``$50 Million Gateway Test''); (2) the conditions 
specified in ERISA section 302(f) and section 412(n) of the Internal 
Revenue Code (``Code'') for imposing a lien for missed contributions 
exceeding $1 million had been met with respect to any plan maintained 
by any member of the controlled group; or (3) the Internal Revenue 
Service had granted minimum funding waivers in excess of $1 million to 
any plan maintained by any member of the controlled group, and any 
portion of the waiver(s) was still outstanding.
    Section 505 of PPA 2006 amended ERISA section 4010(b)(1), replacing 
the $50 Million Gateway Test with a test based on the funding target 
attainment percentage of each plan in the controlled group. As amended 
by PPA 2006, ERISA section 4010(b)(1) requires reporting if:

    the funding target attainment percentage (as defined in 
subsection (d) \1\) at the end of the preceding plan year of a plan 
maintained by the contributing sponsor or any member of its 
controlled group is less than 80 percent.
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    \1\ ERISA section 4010(d)(2)(B) was added by section 505 of PPA 
2006 and provides that ``the term `funding target attainment 
percentage' has the meaning provided in section 302(d)(2) [sic].'' 
However, ERISA section 302(d)(2) contains no reference to ``funding 
target attainment percentage'' but applies to certain retroactive 
plan amendments. On the other hand, ERISA section 303(d)(2) is 
entitled ``Funding Target Attainment Percentage'' and provides a 
definition for that term. Therefore, this proposed rule presumes the 
reference should have been to ERISA section 303(d)(2).

(Current filers are reminded that PBGC regulations provide that if a 
filer for the immediately preceding information year is not required to 
file for the current information year, the filer must submit 
information, in accordance with the instructions on PBGC's Web site, 
demonstrating why a filing is not required for the current information 
year. This requirement would apply, for example, to a filer who was 
required to file for the information year ending on December 31, 2007, 
based on the $50 million Gateway Test, but who is not required to file 
for the information year ending on December 31, 2008, based on the new 
funding target attainment percentage gateway test.)
    Although PPA 2006 did not alter the substance of the other two 
triggers (found in paragraphs (b)(2) and (b)(3) of ERISA section 4010), 
it made other changes that affect these provisions. For instance, 
because PPA 2006 made changes to references in paragraph (b)(2), 
references in Sec.  4010.4(a) (which describes who must file under part 
4010) need to be amended. Similarly, PPA 2006 made changes to the 
minimum funding waiver provisions, which are referred to in part 4010.
    Finally, PPA 2006 added ERISA sections 4010(d)(1) and 4010(e). 
ERISA section 4010(d)(1) lists three items that must be included in the 
information filers submit to PBGC.\2\ ERISA section 4010(e) requires 
PBGC to submit to Congress an annual summary report of the information 
submitted to PBGC pursuant to ERISA section 4010.
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    \2\ ERISA section 4010(a), which was unaltered by PPA 2006, 
provides that filers must provide the information specified by PBGC 
in regulations.
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Summary of Proposed Rule

    This proposed rule would amend part 4010 of PBGC's regulations to 
implement the change to ERISA section 4010(b)(1). In particular, this 
proposed rule provides guidance on how to determine whether reporting 
is required with respect to a plan based on the plan's funding target 
attainment percentage. The proposed rule would also make conforming 
changes to address the PPA 2006 changes affecting the section 4010 
reporting triggers based on the imposition of certain liens or on the 
granting of certain minimum funding waivers.
    In conjunction with these changes, PBGC also is proposing: (1) To 
waive reporting in certain cases for controlled groups with aggregate 
underfunding of $15 million or less; (2) to modify the standards for 
determining which plans are exempted from reporting actuarial 
information; (3) to modify the reporting requirements in light of the 
PPA 2006 changes; and (4) to make other clarifications (for instance, 
the proposed rule would provide guidance for reporting for multiple 
employer plans and for dealing with certain unusual timing issues with 
respect to plan years and information years).
    The proposed rule would be applicable to information years 
beginning after December 31, 2007. (In the rare case of a short 
information year beginning in 2008, such as an information year 
beginning on January 1, 2008, and ending on March 31, 2008, the 
employer should contact PBGC to request a reporting extension.) 
However, the changes made to paragraphs (a) and (b) of Sec.  4010.8 
(Plan actuarial information) are effective only for plan years 
beginning after December 31, 2007.

Discussion of Proposed Rule

Information Year

    In the original proposed rule under ERISA section 4010 (60 CFR 
35308, July 6, 1995), PBGC introduced the concept of ``information 
year'' The information year is the fiscal year, except that in the case 
of controlled group members with different fiscal years, the 
information year is the calendar year (Sec.  4011.5). In the preamble 
to that original proposed rule, PBGC explained that ``information 
year'' serves four purposes:

    First, it will help persons determine which plan years and 
fiscal years to use to identify Filers. Second, it will help Filers 
determine whether a pension plan qualifies for a filing exemption. 
Third, it is used to identify the information to be submitted by a 
Filer. Fourth, it establishes the due date for submission of 
required information by a Filer. The regulation does not require a 
Filer to change its fiscal year or the plan year of any pension 
plan. Further, the regulation does not require a Filer to report 
financial information on any accounting period other than an 
existing fiscal year or to report actuarial information for any 
period other than the existing plan year of a pension plan. 
Generally, the Information Year is the fiscal year of the Filer. If 
all members of a controlled group do not report financial 
information on the same fiscal year, the Information Year is the 
calendar year.

``Information year'' has been integral to the process of reporting 
under ERISA section 4010 and PBGC finds no indication that PPA 2006 
alters this. Therefore, under the proposed rule, reporting will 
continue to be based on the concept of ``information year.'' Under the 
proposed rule, reporting

[[Page 9245]]

would be required (unless otherwise waived) if any plan within the 
controlled group has a funding target attainment percentage of less 
than 80 percent for the plan year ending within the information year 
(the ``80% Funded Gateway Test'').
    The proposed rule also would clarify how the 4010 requirements 
apply to certain unusual situations, such as when a plan has two plan 
years that end in the information year or has no plan year that ends in 
the information year. Under the proposed rule, the last plan year 
ending on or before the end of the information year would be treated as 
the plan year that ends within the information year. In addition, in 
order to prevent circularity, the proposed rule would provide that when 
a controlled group reports on the basis of two different fiscal years, 
the determination of whether an entity is exempt is made on the basis 
of a calendar year information year.

Funding Target Attainment Percentage

    As discussed above, ERISA section 4010(b)(1), as amended by PPA 
2006, requires reporting if the funding target attainment percentage at 
the end of the preceding plan year of a plan maintained by the 
contributing sponsor or any member of its controlled group is less than 
80 percent. ERISA section 303(d)(2) provides that the ``funding target 
attainment percentage'' of a plan for a plan year is the ratio 
(expressed as a percentage) which--

    (A) the value of plan assets for the plan year (as reduced under 
subsection (f)(4)(B)), bears to
    (B) the funding target of the plan for the plan year (determined 
without regard to subsection (i)(1)).

    In accordance with ERISA section 303(g)(1), for a plan year, the 
value of plan assets and the funding target of a plan are determined as 
of the valuation date of the plan for such plan year. Under ERISA 
section 303(g)(2), the valuation date for nearly all plans subject to 
4010 reporting will be the beginning of the plan year.\3\ Thus, while 
section 4010(b)(1) refers to the funding target attainment percentage 
at the end of the preceding plan year, in nearly all cases both 
elements of the funding target attainment percentage must be calculated 
as of the beginning of the plan year. This creates an ambiguity with 
regard to the date as of which the funding target attainment percentage 
is to be calculated for purposes of section 4010(b)(1).
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    \3\ ERISA section 303(g)(2) provides that the valuation date of 
a plan for any plan year is the first day of the plan year, except 
that certain small plans may designate any date in the plan year to 
be the valuation date for the plan year and succeeding plan years. 
For this purpose, small plans are plans with 100 or fewer 
participants on each day of the plan year, when aggregated with all 
plans in the controlled group. Because PBGC proposes to exclude 
controlled groups with under $15 million in underfunding, plans that 
would be considered small plans for purposes of determining 
valuation dates would rarely be subject to reporting under part 
4010. Therefore, the valuation date for nearly all plans subject to 
4010 reporting would be the beginning of the plan year.
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    The proposed rule would resolve this ambiguity by providing that 
the funding target attainment percentage (for purposes of the 80% 
Funded Gateway Test) would be determined as of the valuation date for 
the plan year ending within the information year--generally, the first 
day of the plan year that ends within the information year. Because 
plans will need to determine the funding target attainment percentage 
as of the valuation date for other purposes, measuring the funding 
target attainment percentage as of the valuation date for the 80% 
Funded Gateway Test should be less burdensome on prospective filers 
than requiring a separate determination as of the end of the preceding 
plan year. In addition, using this measurement date will give 
controlled groups ample time to determine whether reporting is required 
pursuant to the 80% Funded Gateway Test and to prepare the section 4010 
filing (if required) by the due date.

Reduction of Assets Based on Carryover and Prefunding Balances

    ERISA section 303(d)(2) provides that in determining the funding 
target attainment percentage of a plan for a plan year, plan assets are 
reduced by the amount of the prefunding balance and the funding 
standard carryover balance. Plan sponsors are permitted under ERISA 
section 303(f) to make certain elections to use, increase, or reduce a 
prefunding balance or a funding standard carryover balance effective at 
the beginning of the plan year. Under PPA 2006, the Department of the 
Treasury (``Treasury'') is to provide guidance on the timing and manner 
of these elections. On August 31, 2007, Treasury published a proposed 
rule (Benefit Restrictions for Underfunded Pension Plans) in the 
Federal Register at 72 FR 50544, which would provide guidance on such 
elections. That rule would require any such election to satisfy certain 
timing rules. As proposed, those Treasury rules would require an 
election that affects the funding target attainment percentage for a 
plan year to be made well before the due date for the section 4010 
filing. Therefore, PBGC's proposed rule assumes that filers will have 
no difficulty including these elections in determinations made for 
purposes of section 4010. However, if under final Treasury regulations 
it is possible for a plan sponsor to make such an election after the 
due date for the section 4010 filing, the PBGC would expect controlled 
groups to anticipate any such election when determining the funding 
target attainment percentage, regardless of when the election is made.

Certain Plans to Which Special Funding Rules Apply

    Sections 104, 105, and 106 of PPA 2006 defer the effective date of 
the funding amendments for certain plans described in those sections, 
which in general deal with plans of cooperatives, plans affected by 
settlement agreements with PBGC, and plans of government contractors. 
Section 402 of PPA 2006 applies special funding rules to certain plans 
of commercial passenger airlines and airline caterers. Section 402 of 
PPA was amended by the U.S. Troop Readiness, Veterans' Care, Katrina 
Recovery, and Iraq Accountability Appropriations Act, 2007, Public Law 
110-28. None of these provisions affects the applicability of the 
amendments to ERISA section 4010. The proposed rule provides explicitly 
that plans in this small group must apply part 4010 in the same manner 
as all other plans (i.e., without regard to these sections of PPA). 
However, for purposes of Sec.  4010.8(a)(9) (which specifies what 
information must be contained in the actuarial valuation report), the 
filer must provide details of any such funding rules that are 
applicable to the plan. Where the different funding rules for this 
small group affect an item described in Sec.  4010.8(a)(9), PBGC would 
expect that filers could, in consultation with PBGC, provide 
appropriately modified information.

Minimum Funding Waivers

    ERISA section 4010(b) requires 4010 reporting if the Internal 
Revenue Service has granted minimum funding waivers in excess of $1 
million to any plan maintained by any member of the controlled group 
and as of the end of the plan year ending within the information year 
there is an outstanding balance on the waiver.
    In general, the waiver will continue to be included for all five 
years of the amortization period, unless the waiver amortization bases 
are reduced to zero pursuant to ERISA section 303(e)(5) or Code section 
430(e)(5). PBGC notes that there is some uncertainty as to the effect 
of PPA 2006 on the carryover balances for funding waivers granted 
before 2008. The proposed rule makes clear that the statutory 
amortization period will not be deemed to have ended merely because

[[Page 9246]]

the funding waivers granted with respect to plan years beginning before 
2008 are not carried over as a separate amortization base for the post-
2007 plan years.
    To simplify the regulation, the proposed rule would eliminate the 
provision in the current regulation that provides that a minimum 
funding waiver is not outstanding under certain circumstances where an 
agreement requires the maintenance of a specific credit balance. PBGC 
found that this occurred infrequently. In those cases where it does 
occur, PBGC will consider waiving the 4010 reporting requirement on a 
case-by-case basis under Sec.  4010.11.

Reporting Requirements

    In addition to the requirements described in ERISA section 4010(a), 
which provides that filers must submit certain financial and actuarial 
information as prescribed by PBGC in regulations, ERISA section 
4010(d), as amended by PPA 2006, specifies three items that are 
required to be filed with PBGC. That section provides that information 
filed under section 4010 must include:

    (1) The amount of benefit liabilities under the plan determined 
using the assumptions used by the corporation [PBGC] in determining 
liabilities;
    (2) The funding target of the plan determined as if the plan has 
been in at-risk status for at least 5 plan years; and
    (3) The funding target attainment percentage of the plan.

    The proposed rule provides detailed guidance on how to determine 
benefit liabilities as described in item (1), i.e., how to determine 
benefit liabilities for ongoing plans using the assumptions used by 
PBGC in determining liabilities. This determination would be similar to 
that set forth in the current regulation under Sec.  4010.8(d)(2). As 
with the current regulation, the proposed rule would require filers to 
use the assumptions prescribed by Sec. Sec.  4044.51 through 4044.57. 
However, as explained below, in two respects the proposed regulation 
would modify or expand upon previous guidance (including informal 
guidance) given by PBGC or PBGC staff relating to certain assumptions 
not specified in Sec. Sec.  4044.51 through 4044.57.
    First, the proposed rule provides that solely for purposes of 
determining the earliest retirement age (ERA) at valuation date and the 
unreduced retirement age (URA) to be used when determining expected 
retirement age (XRA), an active participant would be treated as 
continuing in service after the end of the plan year. This provision 
would modify informal guidance provided by PBGC that future expected 
service should be disregarded when determining XRAs for 4010 liability 
calculations.\4\ This modification would eliminate an inconsistency 
between how filers compute benefit liabilities for 4010 purposes and 
how PBGC calculates benefit liabilities as part of its plan monitoring 
functions. The main impact of this change on 4010 filers would be that 
they would need to make a one-time modification of their computer 
programs. The proposed rule includes examples demonstrating how XRA 
would be calculated and applied in determining benefit liabilities.
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    \4\ Q&A 17 in the 2001 Blue Book and Q&A 19 in the 2002 Blue 
Book, available at www.pbgc.gov. Blue Books are summaries of the 
questions and answers discussed at meetings between PBGC staff and 
representatives of the Enrolled Actuaries Program Committee in 
preparation for the annual Enrolled Actuaries Meetings. The 
summaries reflect the views of individual staff members and do not 
represent the official position of PBGC.
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    Second, the proposed rule provides that a 4010 filer would be 
permitted to use pre-retirement assumptions other than mortality (such 
as turnover and disability assumptions) as long as the filer uses the 
same pre-retirement assumptions used to determine minimum required 
contributions. This provision would expand informal guidance provided 
by PBGC that it is permissible for 4010 purposes to use pre-retirement 
assumptions other than mortality.\5\ The informal guidance was silent 
on which pre-retirement assumptions could be used. In PBGC's 
experience, most actuaries who choose to use pre-retirement assumptions 
for 4010 purposes use those same pre-retirement assumptions to 
determine minimum required contributions. Because the actuary certifies 
that the funding assumptions represent his best estimate of future 
experience, this practice is entirely reasonable, and the proposed rule 
would codify it for consistency.
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    \5\ Q&A 25 in the 2000 Blue Book.
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    The proposed rule also would clarify that, with the exception of 
pre-retirement assumptions, any other assumptions used to determine the 
minimum required contribution that are not overridden by Sec. Sec.  
4044.51 through 4044.57 must be used when determining benefit 
liabilities.
    In addition to providing detailed guidance on how to determine 
benefit liabilities, the proposed rule reflects new requirements (under 
PPA 2006) to provide the funding target of the plan determined as if 
the plan has been in at-risk status for at least 5 plan years, and the 
funding target attainment percentage of the plan. Finally, for each 
plan (other than an exempt plan), the proposed rule would require 
filers to report whether the plan, at any time during the plan year, 
was subject to any of the limitations described in ERISA section 206(g) 
and, if so, which limitations applied, when such limitations applied, 
and when they were lifted (if applicable).
    As with the current rule, the proposed rule would require 
submission of the actuarial valuation report for the plan year ending 
within the filer's information year and would specify what information 
must be included in or attached to the report. PBGC is proposing to 
modify the required items of information to better suit the new funding 
structure instituted by PPA 2006. The required information is 
information that PBGC expects most actuaries would include in valuation 
reports once PPA 2006 takes effect (e.g., target normal cost, 
information on shortfall amortization bases, information on funding 
assumptions, an age/service scatter). However, because the funding 
rules have changed so dramatically as a result of PPA 2006, and because 
Treasury regulations implementing the new funding rules are not yet 
final, the list of required items may exclude some relevant actuarial 
information. To allow PBGC to expand the list of required items as it 
gains more experience with the new funding requirements under PPA 2006, 
the proposed rule would provide that the online instructions to PBGC's 
secure e-4010 web-based application may require that additional items 
be included in (or attached to) the valuation report. PBGC expects that 
any additional items would be items typically required to be reported 
on the Form 5500 schedule for defined benefit plan actuarial 
information (Schedule SB).
    Because the new actuarial reporting requirements are geared to the 
new funding rules, which generally are applicable to plan years 
beginning after December 31, 2007, the changes made to the actuarial 
information requirements under Sec.  4010.8(a) and (b) would not apply 
to plan years beginning before 2008. Information for such plan years 
would be based upon the prior regulation. (Note that the other 
paragraphs of Sec.  4010.8 (as proposed), such as the new rules for 
determining which plans would be exempt from actuarial reporting 
requirements (Sec.  4010.8(c)) and the determination of liabilities 
(Sec.  4010.8(d)) would apply to all plan years ending within an 
information year that begins on or after January 1, 2008.)

[[Page 9247]]

Waiver for Controlled Groups With Plan Underfunding Not Exceeding $15 
Million

    The Technical Explanation of PPA 2006 prepared by the Staff of the 
Joint Committee on Taxation states: ``It is intended that the PBGC may 
waive the requirement [for reporting under ERISA section 4010 based 
upon the 80% Funded Gateway Test] in appropriate circumstances, such as 
in the case of small plans.'' Moreover, PBGC seeks to balance the 
benefit it derives from annual reporting of financial and actuarial 
information with the burden reporting imposes on filers. As the total 
underfunding in a filer's controlled group becomes smaller, the benefit 
PBGC derives from reporting lessens, while the burden on the filer 
tends to increase relative to the filer's resources. Based on its 
experience, PBGC has determined that controlled groups with aggregate 
plan underfunding of $15 million or less present a level of risk and 
exposure to PBGC that is sufficiently low to warrant the waiver of 
reporting based on the 80% Funded Gateway Test.
    Therefore, PBGC is proposing to waive reporting for a controlled 
group if the aggregate plan underfunding does not exceed $15 million 
(disregarding those plans with no underfunding); however, the waiver 
would not apply if reporting is required for any reason other than 
having a funding target attainment percentage below 80 percent. For 
this purpose, plan underfunding would equal the ``4010 funding 
shortfall.'' The proposed rule would define the 4010 funding shortfall 
as the funding shortfall defined in ERISA section 303(c)(4), but 
determined without regard to the credit balance reduction under ERISA 
section 303(f)(4)(B).

Exempt Plans

    Section 4010.8(c) of PBGC's current regulation provides that 
reporting actuarial information is not required for plans with fewer 
than 500 participants. (It also provides an exemption for overfunded 
plans.) Through means other than reporting under part 4010, such as 
through PBGC's early warning program (see Technical Update 00-3, 
available at www.pbgc.gov) and reportable events notices, PBGC has 
discovered that a number of plans with fewer than 500 participants have 
significant underfunding and thereby represent significant financial 
exposure for PBGC. In such cases, PBGC needs actuarial information on 
these plans to properly evaluate its risk and exposure for the entire 
controlled group. Therefore, PBGC is proposing to modify the exemption 
from reporting actuarial information. Under the proposed rule, 
actuarial information would not be required if (1) the plan has fewer 
than 500 participants, and (2) the plan's 4010 funding shortfall does 
not exceed $15 million. For this purpose, the 4010 funding shortfall 
would be determined as of the valuation date for the plan year ending 
within the information year and would be based upon the same 
methodology prescribed for purposes of determining whether the $15 
million controlled-group waiver would apply.
    The proposed rule retains the exemption from providing actuarial 
information for plans that have no unfunded benefits. For this purpose, 
unfunded benefits would be determined in the same manner as they would 
be determined for purposes of ERISA section 4010(d)(1), which requires 
the reporting of benefit liabilities using the assumptions used by 
PBGC. The only difference is that the filer would be allowed to use the 
retirement age assumptions used by the plan for that plan year for 
purposes of section 303 of ERISA (without regard to the at-risk 
assumptions of section 303(i) of ERISA) instead of the retirement age 
assumptions in Sec.  4044.8(d)(2).
    Note that, as under the current regulation, these exemptions from 
reporting actuarial information do not apply if the plan has a funding 
waiver or has been more than 10 days late with minimum funding 
contributions.

Multiple Employer Plans

    Over the last decade, PBGC has received a number of inquiries on 
the application of ERISA section 4010 to contributing sponsors of 
multiple employer plans. The proposed rule would provide for reduced 
reporting for certain multiple employer plans. In general, only 
information on employers that are among the 10 largest employers in 
terms of participants (for hourly plans) or contributions (for salaried 
plans) would need to be provided. Of course, PBGC could request 
additional information pursuant to Sec.  4010.6(b). In addition, the 
proposed rule would allow a filer to provide the actuarial information 
on a multiple employer plan by reference if that information (for the 
same plan year) has been provided by another filer. The proposed rule 
would clarify that the entire underfunding (i.e., funding shortfall) of 
a multiple employer plan is counted when determining whether the $15 
million controlled-group waiver applies to an employer that is a 
contributing sponsor of the multiple employer plan. It also would 
clarify that filers are not required to provide identifying or 
financial information for another contributing sponsor of the multiple 
employer plan if that other contributing sponsor is not a member of the 
filer's controlled group.

Applicability

    Section 505(e) of PPA 2006 provides that the amendments made by 
section 505 apply with respect to ``years beginning after 2007.'' We 
note that this applicability provision of PPA 2006 uses the term 
``year'' rather than ``plan year,'' although the term ``plan year'' 
appears in other applicability provisions in PPA 2006. PBGC interprets 
this section of PPA to mean the amendments apply to any information 
year beginning after 2007. Therefore, these rules, if adopted, would 
apply to information years beginning after 2007. In the rare case of a 
short information year beginning in 2008 (for example, an information 
year beginning on January 1, 2008, and ending on March 31, 2008), the 
employer should contact PBGC to obtain a reporting extension. However, 
the changes made to paragraphs (a) and (b) of Sec.  4010.8 (Plan 
actuarial information) are effective only for plan years beginning 
after December 31, 2007.

Transition Rules

    Under the proposed rule, a number of valuation determinations (for 
instance, the 80% Funded Gateway Test, the $15 million controlled-group 
waiver, and the $15 million small-plan exemption from reporting 
actuarial information) would be made as of the valuation date for the 
plan year ending within the information year. For these purposes, the 
valuation determination is based on either the funding target 
attainment percentage or the 4010 funding shortfall as of the valuation 
date. The provisions of PPA 2006 defining funding target attainment 
percentage and funding shortfall apply only to plan years beginning 
after 2007. Therefore, for plan years beginning in 2007 but ending in 
information years that begin after 2007 (and thus covered by these 
proposed rules), the funding target attainment percentage and funding 
shortfall are not prescribed by statute. As a result, this proposed 
rule would require employers to use a surrogate for determining the 
funding target attainment percentage and funding shortfall for plan 
years beginning before January 1, 2008. PBGC's proposed surrogate would 
be similar to a rule proposed by Treasury in its proposed benefit 
restrictions rule. Section 1.436-1(j)(2)(iii) of Treasury's proposed 
rule provides that, for benefit restriction purposes, the funding 
target

[[Page 9248]]

attainment percentage for a pre-effective plan year is determined as a 
fraction (expressed as a percentage), the numerator of which is the 
value of net plan assets, and the denominator of which is the plan's 
current liability on the valuation date for the last plan year that 
begins before 2008 (the 2007 plan year). For this purpose, the value of 
plan assets is determined under Code section 412(c)(2) as in effect for 
the 2007 plan year, except that the value of plan assets prior to 
subtraction of the plan's funding standard account credit balance 
described below can neither be less than 90 percent of the fair market 
value of plan assets nor greater than 110 percent of the fair market 
value of plan assets on the valuation date for that plan year. In 
addition, if a plan has a funding standard account credit balance as of 
the valuation date for the 2007 plan year, that balance must be 
subtracted from the asset value described above as of that date unless 
the value of plan assets is greater than or equal to 90 percent of the 
plan's current liability determined under Code section 412(l)(7) on the 
valuation date for the 2007 plan year. Finally, if the employer makes 
an election to reduce some or all of the funding standard carryover 
balance as of the first day of the first plan year beginning in 2008 in 
accordance with Sec.  1.430(f)-1(e) of Treasury's proposed rule, then 
the present value (determined as of the valuation date for the prior 
year using the valuation interest rate for that prior year) of the 
amount so reduced is not treated as part of the funding standard 
account credit balance when that balance is subtracted from the value 
of net plan assets.
    PBGC's proposed rule would provide that the funding target 
attainment percentage for section 4010 purposes for plan years 
beginning before 2008 would equal the funding target attainment 
percentage as determined under Treasury's proposed special rule (Sec.  
1.436-1(j)(2)(iii) of the regulation as proposed), except that: (1) 
Current liability would be determined by using the highest allowable 
interest rate for the plan year; and (2) there would be no special rule 
providing that if the value of plan assets is greater than or equal to 
90 percent of the plan's current liability determined under Code 
section 412(l)(7) on the valuation date for the 2007 plan year, the 
value of assets is not reduced by the credit balance.
    The surrogate for 4010 funding shortfall would equal the excess, if 
any, of the plan's current liability over the value of plan assets. For 
this purpose, both current liability and plan assets would be 
determined in the same manner as determined for purposes of PBGC's 
transition rule for determining funding target attainment percentage, 
except that assets would not be reduced by the credit balance in the 
funding standard account (i.e., there would be no reduction as 
described in 26 CFR 1.436-1(j)(2)(iii)(B)(2) and (3) (as proposed)).
    The following example demonstrates how the transition rules would 
work.

    Example. Assume Company X, which reports based on a calendar 
year information year, maintains Plan A, which has a plan year 
beginning on October 1 and ending on September 30 and an October 1 
valuation date. The October 1, 2007 valuation results were as 
follows: actuarial value of assets of $115 million, market value of 
assets of $100 million and current liability of $135 million. In 
addition, assume the funding standard account credit balance as of 
September 30, 2007, was $20 million and that the employer does not 
elect to reduce the October 1, 2008, carryover balance at all.
    For the section 4010 report due on April 15, 2009, the proposed 
rule prescribes that the 80% Funded Gateway Test is based on the 
plan's funding target attainment percentage as of October 1, 2007. 
However, because funding target attainment percentage for purposes 
of ERISA section 303 applies to plan years beginning after 2007, the 
funding target attainment percentage is determined using a surrogate 
prescribed in Sec.  4010.4(b)(3) of the proposed rule.
    The surrogate funding target attainment percentage is calculated 
as follows: First, because the 2007 actuarial value of assets is 
more than 10% above the market value of assets, assets are reduced 
to $110 million. Next, assets are reduced by the credit balance 
resulting in an asset value for the Funding Target Attainment 
Percentage of $90 million ($110 million minus $20 million). The 
surrogate Funding Target Attainment Percentage is the ratio of $90 
million to the plan's current liability using the highest permitted 
rate ($135 million). So, the surrogate Funding Target Attainment 
Percentage is 67% ($90/$135). Since this is less than 80%, a section 
4010 filing is required (unless the aggregate 4010 funding shortfall 
is less than $15 million).
    (Note that if the employer elects to reduce some, or all, of the 
October 1, 2008, carryover balance in accordance with the election 
procedures provided in 26 CFR 1.430(f)-1(e) (as proposed), the 
discounted value of the waived amount would be subtracted from the 
$20 million credit balance before the $20 million credit balance is 
subtracted from the $110 million adjusted asset value.)
    The surrogate 4010 funding shortfall is determined under Sec.  
4010.11(c)(2) and equals the excess, if any, of liability using the 
highest permitted rate ($135 million) over assets (after any 
adjustments to bring the asset value within 10% of market value). 
For this calculation, assets are not reduced by the credit balance. 
Therefore, the 4010 funding shortfall is the excess of $135 million 
over $110 million, or $25 million.

Compliance With Rulemaking Guidelines

    PBGC has determined that this proposed rule is a ``significant 
regulatory action'' under Executive Order 12866. The Office of 
Management and Budget has therefore reviewed the proposed rule under 
Executive Order 12866.
    Pursuant to section 1(b)(1) of E.O. 12866 (as amended by Executive 
Order 13422), PBGC has determined that regulatory action is required in 
this area. Principally, this regulatory action is necessary to 
implement the changes made to ERISA section 4010 by PPA 2006. The 
proposed rule would provide guidance without which plan sponsors would 
have significant difficulty determining whether reporting is required. 
Moreover, ERISA section 4010 specifically provides that the actuarial 
and financial information to be reported, as well as the deadline for 
reporting, are as specified by PBGC in regulations. Finally, the 
proposed rule would provide exemptions, waivers, and reporting 
simplifications that reduce reporting burden for numerous plan 
sponsors.
    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act that the amendments in this proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
This proposed rule would implement statutory changes made by Congress. 
It provides guidance on how to determine whether reporting under ERISA 
section 4010 is required and what to report. Furthermore, PBGC is 
providing an exemption for controlled groups that have total plan 
underfunding of $15 million or less. Accordingly, as provided in 
section 605 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
sections 603 and 604 do not apply.
    The information requirements relating to reporting under ERISA 
section 4010 have been approved by the Office of Management and Budget 
under the Paperwork Reduction Act (OMB control number 1212-0049, 
expires February 29, 2008).
    PBGC is submitting the information requirements relating to these 
amendments to the Office of Management and Budget for review and 
approval under the Paperwork Reduction Act. (This submission also 
includes the information requirements relating to the current 
collection of 4010 information.) Copies of PBGC's request may be 
obtained free of charge by contacting the Disclosure Division of the 
Office of the General Counsel of PBGC,

[[Page 9249]]

1200 K Street, NW., Washington, DC 20005, 202-326-4040.
    PBGC expects that once the new rules take effect it will receive 
section 4010 filings from about 300 contributing sponsors or controlled 
group members annually and that the total annual burden of the 
collection of information will be about 2,600 hours and $5,167,500. 
(Detailed information on these burden estimates is included in PBGC's 
request.)
    Comments on the paperwork provisions under this proposed rule 
should be mailed to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for Pension 
Benefit Guaranty Corporation, via electronic mail at [email protected] or by fax to (202) 395-6974. Although comments may 
be submitted through April 21, 2008, the Office of Management and 
Budget requests that comments be received on or before March 21, 2008 
to ensure their consideration. Comments may address (among other 
things)--
     Whether the proposed collection of information is needed 
for the proper performance of PBGC's functions and will have practical 
utility;
     The accuracy of PBGC's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
     Enhancement of the quality, utility, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.

List of Subjects in 29 CFR Part 4010

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

    For the reasons given above, PBGC proposes to amend 29 CFR parts 
4010 as follows.

PART 4010--ANNUAL FINANCIAL AND ACTUARIAL REPORTING

    1. The authority citation for part 4010 continues to read as 
follows:

    Authority: 29 U.S.C. 1302(b)(3), 1310.


Sec.  4010.1  [Amended]

    2. Section 4010.1 is amended by removing the words ``the PBGC under 
section 4010 of ERISA'' and adding in their place the words ``PBGC 
under ERISA section 4010''; and by removing the last sentence of the 
section (beginning with the words ``This part applies * * *'').
    3. In Sec.  4010.2:
    a. The words ``of this part'' are removed from the definitions of 
``exempt entity,'' ``exempt plan,'' ``filer,'' and ``information 
year.''
    b. The definition of ``exempt entity'' is amended by removing the 
figures ``4010.4(d)'' and adding in their place the figures 
``4010.4(c)''.
    c. The definition of ``information year'' is amended by removing 
the words ``the year'' and adding in their place the words ``the 
information year''.
    d. The definition of ``fair market value of the plan's assets'' is 
revised, and five new definitions are added, to read as follows:


Sec.  4010.2  Definitions.

* * * * *
    4010 funding shortfall means, with respect to a plan for a plan 
year, the 4010 funding shortfall as determined under Sec.  4010.11(c).
    At-risk status means, with respect to a plan for a plan year, at-
risk status as defined in ERISA section 303(i)(4).
* * * * *
    Fair market value of the plan's assets means the fair market value 
of the plan's assets determined without regard to any contributions 
receivable (i.e., contributions made after the date as of which the 
fair market value of the plan's assets is determined are not included).
* * * * *
    Funding target means, with respect to a plan for a plan year, the 
funding target as provided under ERISA section 303(d)(1) determined as 
of the valuation date for the plan year.
    Funding target attainment percentage means, with respect to a plan 
for a plan year, the funding target attainment percentage as determined 
under Sec.  4010.4(b) for the plan year.
* * * * *
    Valuation date means, with respect to a plan for a plan year, the 
valuation date as determined under ERISA section 303(g)(2).


Sec.  4010.3  [Amended]

    4. In Sec.  4010.3, paragraph (a) is amended by revising the 
paragraph heading to read ``General.''; by removing the words ``exempt 
plans) and except'' and adding in their place the words ``exempt 
plans), and except'' (with a comma after the closing parenthesis); by 
removing the words ``waivers have been granted under Sec.  4010.11'' 
and adding in their place the words ``one or more waivers under Sec.  
4010.11 apply''; by removing the words ``plans maintained by members of 
a controlled group'' and adding in their place the words ``plans 
maintained by members of the controlled group''; by removing the words 
``the PBGC'' (where they appear twice in the paragraph) and adding in 
their place each time the word ``PBGC''; and by removing the words 
``the PBGC's'' and adding in their place the word ``PBGC's''.
    5. In Sec.  4010.4:
    a. Paragraph (a) introductory text is amended by removing the words 
``paragraph (d)'' and adding in their place the words ``paragraph 
(c)''.
    b. Paragraph (a)(1) is amended by removing the words ``The 
aggregate unfunded vested benefits of all plans'' and adding in their 
place the words ``For any plan''; by removing the words ``any exempt 
plans'' and adding in their place the words ``an exempt plan''; and by 
removing the words ``group exceed $50 million (disregarding those plans 
with no unfunded vested benefits)'' and adding in their place the words 
``group, the funding target attainment percentage for the plan year 
ending within the information year is less than 80 percent''.
    c. Paragraph (a)(2) is amended by removing the words ``a controlled 
group'' and adding in their place the words ``the controlled group''; 
and by removing the words ``section 302(f)(1)(A) and (B) of ERISA or 
section 412(n)(1)(A) and (B) of the Code'' and adding in their place 
the words ``ERISA section 303(k) or Code section 430(k)''.
    d. Paragraph (a)(3) is amended by removing the words ``a controlled 
group'' and adding in their place the words ``the controlled group''; 
by removing the words ``section 303 of ERISA or section 412(d) of the 
Code'' and adding in their place the words ``ERISA section 302(c) or 
Code section 412(c)''; and by removing the words ``(determined in 
according with paragraph (c) of this section)''.
    e. Paragraph (c) is removed.
    f. Paragraph (d) is redesignated as paragraph (c).
    g. Paragraph (b) is revised, and new paragraphs (d), (e), and (f) 
are added, to read as follows:


Sec.  4010.4  Filers.

* * * * *
    (b) Funding target attainment percentage--(1) General. Except as 
provided in paragraph (b)(3) of this section, the funding target 
attainment percentage for a plan for a plan year equals the funding 
target attainment percentage as provided under ERISA section 303(d)(2) 
determined as of the valuation date for the plan year.

[[Page 9250]]

    (2) Prefunding balance and funding standard carryover balance 
elections. For purposes of determining the funding target attainment 
percentage for a plan for a plan year, prefunding balances and funding 
standard carryover balances must reflect any elections (or deemed 
elections) under ERISA section 303(f) or Code section 430(f) for the 
plan year, regardless of when the elections (or deemed elections) are 
made.
    (3) Transition rule for plan years beginning before 2008. For plan 
years beginning before 2008, the funding target attainment percentage 
for a plan for a plan year equals the funding target attainment 
percentage as determined under 26 CFR 1.436-1(j)(2)(iii), except--
    (i) Current liability is determined using the highest rate of 
interest allowable under Code section 412(l)(7) (as in effect for plan 
years beginning before 2008) for that plan year, regardless of whether 
that rate was actually used to determine current liability for the plan 
year; and
    (ii) The value of net plan assets is determined without regard to 
the second sentence of 26 CFR 1.436-1(j)(2)(iii)(B)(2) (i.e., for this 
purpose, there is no special rule that provides that assets are not 
reduced by the credit balance if the value of plan assets is greater 
than or equal to 90 percent of the plan's current liability).
* * * * *
    (d) Transition rule; failure to make required contribution; minimum 
funding waiver. For plan years beginning before 2008, the reference in 
paragraph (a)(2) of this section to ``ERISA section 303(k) or Code 
section 430(k)'' is replaced by a reference to ``ERISA section 
302(f)(1)(A) and (B) or Code section 412(n)(1)(A) and (B)'', and the 
reference in paragraph (a)(3) of this section to ``ERISA section 302(c) 
or Code section 412(c)'' is replaced by a reference to ``ERISA section 
303 or Code section 412(d)'' as those provisions are in effect for plan 
years beginning before 2008.
    (e) Minimum funding waiver--(1) General. For purposes of Sec.  
4010.4(a)(3), a portion of the minimum funding waiver for a plan is 
considered outstanding unless prior to the plan year ending within the 
information year the statutory amortization period has ended or, as of 
the valuation date for the plan year ending within the information 
year, the amortization bases are deemed to be reduced to zero pursuant 
to ERISA section 303(e)(5) and Code section 430(e)(5). However, the 
statutory amortization period will not be deemed to have ended merely 
because the funding waivers granted with respect to plan years 
beginning before 2008 are not carried over as a separate amortization 
base for the post-2007 plan years.
    (2) Example. Company A sponsors Plan X, which received a minimum 
funding waiver of $700,000 for the plan year ending December 31, 2004, 
and another waiver of $500,000 for the plan year ending December 31, 
2008. Assume that the amortization bases of the waivers are not reduced 
to zero pursuant to ERISA section 303(e)(5) and Code section 430(e)(5), 
and the waivers are therefore outstanding for the full five-year 
statutory amortization period. Also, assume Company A has a calendar 
information year. For the 2009 information year, Company A must report 
under ERISA section 4010. However, for the 2010 information year, 
Company A, assuming no other obligation to report under ERISA section 
4010, is not required to report.
    (f) Certain plans to which special funding rules apply. Except as 
described in Sec.  4010.8(a)(9)(xiii), the provisions of sections 104, 
105, 106, and 402 (as amended by U.S. Troop Readiness, Veterans' Care, 
Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, 
Pub. L. 110-28) of PPA 2006 are disregarded for purposes of this part.
    6. In Sec.  4010.5:
    a. Paragraph (c)(1) is amended by adding to the end of the 
paragraph the words ``(If any two members of the controlled group 
report financial information on the basis of different fiscal years, 
the determination of whether an entity is an exempt entity is based on 
a calendar year information year for purposes of this paragraph (c)(1) 
and Sec.  4010.4(c).)''.
    b. Paragraph (c)(2) is revised and new paragraph (d) is added to 
read as follows:


Sec.  4010.5  Information year.

* * * * *
    (c) Controlled group members with different fiscal years.
* * * * *
    (2) Examples. (i) Companies A and B are the only members of the 
same controlled group, and both are contributing sponsors to nonexempt 
plans. Company A has a July 1 fiscal year, and Company B has an October 
1 fiscal year. The information year is the calendar year. Company A's 
financial information with respect to its fiscal year ending June 30, 
2009, and Company B's financial information with respect to its fiscal 
year ending September 30, 2009, must be submitted to PBGC following the 
end of the 2009 calendar year information year.
    (ii) The facts are the same as in example (i) except that Company B 
is not a contributing sponsor of a plan and would be an exempt entity 
using the calendar year as the information year. Because Company B is 
an exempt entity based on a calendar information year, it is excluded 
when determining the information year. Thus, the information year is 
the July 1 fiscal year. Note that Company B is an exempt entity even if 
it would not be exempt based on the July 1 information year.
    (iii) The facts are the same as in example (i) except that Company 
B would not be an exempt entity using the calendar year information 
year but would be exempt based on an information year that is the July 
1 fiscal year. Since Company B is not exempt based on a calendar year 
information year, it may not be excluded when determining the 
information year. Therefore, the information year is the calendar year 
and Company B is not an exempt entity.
    (d) Special rules for certain plan years. If a plan maintained by 
the members of the contributing sponsor's controlled group has two plan 
years that end in the information year or has no plan year that ends in 
the information year, the last plan year ending on or immediately 
before the end of the information year is deemed to be the plan year 
ending within the information year.


Sec.  4010.6  [Amended]

    7. In Sec.  4010.6:
    a. Paragraphs (a)(1) and (a)(2) are amended by removing the words 
``the PBGC's website'' (which appear once in each paragraph) and adding 
in their place the words ``PBGC's Web site''.
    b. Paragraphs (b) and (c) are amended by removing the words ``the 
PBGC'' (which appear once in each paragraph) and adding in their place 
the word ``PBGC''.
    8. In Sec.  4010.7:
    a. Paragraphs (a) introductory text and (b) introductory text are 
amended by removing the words ``the PBGC's website'' (which appear once 
in each paragraph) and adding in their place the words ``PBGC's Web 
site''.
    b. Paragraph (b)(2) is amended by removing the words ``maintaining 
the plan'' and adding in their place the words ``maintaining the plan 
(if applicable)''; and by removing the words ``paragraph (b)(1)'' and 
adding in their place the words ``paragraph (b)(1) of this section''.
    c. New paragraph (c) is added to read as follows:


Sec.  4010.7  Identifying information.

* * * * *
    (c) Multiple employer plans. A filer that is a contributing sponsor 
of a

[[Page 9251]]

multiple employer plan need not provide identifying information for 
another contributing sponsor of the multiple employer plan if that 
other contributing sponsor is not a member of the filer's controlled 
group, and need not provide identifying information for another plan if 
neither the filer nor any member of the filer's controlled group is a 
contributing sponsor of that other plan.
    9. In Sec.  4010.8:
    a. Introductory text is added to the section.
    b. Paragraph (a) introductory text is amended by removing the words 
``For each plan'' and adding in their place the words ``Except as 
provided elsewhere in this part, for each plan''; by removing the words 
``the PBGC's website'' and adding in their place the words ``PBGC's Web 
site''; and by removing the words ``actuarial information'' and adding 
in their place the words ``actuarial information (except as specified 
below, determined as of the end of the plan year ending within the 
filer's information year)''.
    c. Paragraph (a)(3) is amended by removing the words ``value of the 
plan's benefit liabilities'' and adding in their place the words 
``amount of benefit liabilities under the plan''; by removing the words 
``setting forth separately the value'' and adding in their place the 
words ``setting forth separately the amount''; and by removing the 
words ``participants, determined (in accordance with paragraph (d) of 
this section) at the end of the plan year ending within the filer's 
information year'' and adding in their place the words ``participants 
(for this purpose, the amount of benefit liabilities equals the value 
of benefit liabilities determined in accordance with paragraph (d) of 
this section)''.
    d. Paragraph (a)(4) is amended by removing the words ``for interest 
(i.e., the specific interest rate(s), such as 5%), mortality, 
retirement age, and loading for administrative expenses, as''; and by 
removing the word ``and'' after the semi-colon at the end of the 
paragraph.
    e. Paragraphs (a)(5) and (a)(6) are redesignated as paragraphs 
(a)(9) and (a)(10) respectively.
    f. The introductory text of redesignated paragraph (a)(9) is 
amended by removing the word ``information'' and adding in its place 
the words ``information for that plan year''.
    g. Paragraph (v) of redesignated paragraph (a)(9) is redesignated 
as paragraph (xii) of redesignated paragraph (a)(9).
    h. Redesignated paragraph (a)(9)(xii) is amended by removing the 
words ``retirement factors'' and adding in their place the words 
``retirement factors; in the case of a plan that provides lump sums, 
other than de minimis lump sums, the summary must include information 
on how annuity benefits are converted to lump sum amounts (for example, 
whether early retirement subsidies are reflected)''.
    i. Paragraph (b) introductory text is amended by removing the 
figures ``(a)(5)'' and adding in their place the figures ``(a)(9)''.
    j. Paragraphs (b)(1) and (b)(2) are amended by removing the words 
``the PBGC'' (which appear once in each paragraph) and adding in their 
place the word ``PBGC''.
    k. Paragraph (b)(2) is further amended by removing the figures 
``(a)(6)'' and adding in their place the figures ``(a)(10)''.
    l. Paragraphs (c)(1) and (c)(2) are redesignated as paragraphs 
(c)(2) and (c)(3) respectively.
    m. Redesignated paragraph (c)(2) is amended by removing the words 
``Has received'' and adding in their place the words ``The plan has 
received''; and by removing the words ``section 302 of ERISA or section 
412 of the Code'' and adding in their pace the words ``ERISA sections 
302 and 303 and Code sections 412 and 430''.
    n. Redesignated paragraph (c)(3) is amended by removing the words 
``Has no'' and adding in their place the words ``The plan has no''; and 
by removing the words ``Sec.  4010.4(e) of this part'' and adding in 
their place the figures ``Sec.  4010.4(a)(3)''.
    o. Paragraph (d)(3) is amended by removing the words ``section 
302(d) of ERISA or section 412(l) of the Code'' and adding in their 
place the words ``section 303 of ERISA (without regard to the at-risk 
assumption of section 303(i) of ERISA)''.
    p. Paragraphs (i), (ii), (iii), (iv), (vi), (vii), and (viii) of 
redesignated paragraph (a)(9), paragraph (c) introductory text, and 
paragraph (d)(2) are revised, and a new introductory note before 
paragraph (a), new paragraphs (5), (6), (7), and (8) of paragraph (a), 
new paragraphs (v), (ix), (x), (xi), (xiii), and (xiv) of redesignated 
paragraph (a)(9), new paragraph (c)(1), and new paragraphs (e), (f), 
and (g) are added, to read as follows:


Sec.  4010.8  Plan actuarial information.

    The requirements described in paragraphs (a) and (b) of Sec.  
4010.8 prior to their amendment to comply with the changes made to 
ERISA section 4010 by the Pension Protection Act of 2006 (rather than 
those described in paragraphs (a) and (b) of this section) are 
applicable to plan years beginning before 2008.
    (a) Required information. * * *
* * * * *
    (5) The funding target (as of the valuation date) for the plan year 
ending within the information year determined in accordance with ERISA 
section 303(i) as if the plan has been in at-risk status for a 
consecutive period of at least 5 plan years;
    (6) The funding target attainment percentage (as of the valuation 
date) for the plan year ending within the information year;
    (7) The adjusted funding target attainment percentage as defined in 
ERISA section 206(g)(9)(B);
    (8) Whether the plan, at any time during the plan year, was subject 
to any of the limitations described in ERISA section 206(g) and, if so, 
which limitations applied, when such limitations applied, and when (if 
applicable) they were lifted;
    (9) * * *
    (i) The funding target calculated pursuant to ERISA section 303 
without regard to subsection 303(i)(1), setting forth separately the 
value of the liabilities attributable to retirees and beneficiaries 
receiving payment, terminated vested participants, and active 
participants (showing vested and nonvested benefits separately);
    (ii) A summary of the actuarial assumptions and methods used for 
purposes of ERISA section 303 and any change in those assumptions and 
methods since the previous valuation and justifications for any change; 
in the case of a plan that provides lump sums, other than de minimis 
lump sums, the summary must include the assumptions on which 
participants are assumed to elect a lump sum and how lump sums are 
valued;
    (iii) The effective interest rate (as defined in ERISA section 
303(h)(2)(A));
    (iv) The target normal cost calculated pursuant to ERISA section 
303 without regard to subsection 303(i)(2);
    (v) For the plan year and the four preceding plan years, a 
statement as to whether the plan was in at-risk status for that plan 
year;
    (vi) In the case of a plan that is in at-risk status, the target 
normal cost calculated pursuant to ERISA section 303 as if the plan has 
been in at-risk status for 5 consecutive years;
    (vii) The value of the plan's assets (reflecting any averaging 
method) as of the valuation date and the fair market value of the 
plan's assets as of the valuation date;
    (viii) The funding standard carryover balance and the prefunding 
balance

[[Page 9252]]

(maintained pursuant to ERISA section 303(f)(1)) as of the beginning of 
the plan year and a summary of any changes in such balances in the past 
year (e.g., amounts used to offset minimum funding requirement, amounts 
reduced in accordance with any elections under ERISA section 303(f)(5) 
or Code section 430(f)(5), interest credited to such balances, and 
excess contributions used to increase such balances);
    (ix) A list of amortization bases (shortfall and waiver) under 
ERISA section 303, including the year the base was established, the 
original amount, the installment amount, and the remaining balance at 
the beginning of the plan year;
    (x) An age/service scatter for active participants including 
average compensation information for pay-related plans and average 
account balance information for hybrid plans presented in a format 
similar to that described in the instructions to the Form 5500 schedule 
for single-employer defined benefit plan actuarial information;
    (xi) Expected disbursements (benefit payments and expenses) during 
the plan year;
* * * * *
    (xiii) Details of any special funding rules that apply to the 
determination of the plan's minimum required contribution (e.g., 
special amortization schedules or interest rate assumptions applicable 
to certain plans of commercial airlines, or provisions for certain 
plans of rural cooperatives, defense contractors, or employers with 
PBGC settlement agreements); and
    (xiv) Any other similar information as specified in instructions on 
PBGC's Web site; and
* * * * *
    (c) Exempt plan. The actuarial information specified in this 
section is not required with respect to a plan if--
    (1) The plan--
    (i) Has fewer than 500 participants as of the end of the plan year 
ending within the information year and has a 4010 funding shortfall for 
the plan year ending within the information year that is not in excess 
of $15 million, or
    (ii) Has benefit liabilities as of the end of the plan year ending 
within the filers' information year (determined in accordance with 
paragraph (d) of this section) equal to or less than the fair market 
value of the plan's assets;
* * * * *
    (d) Value of benefit liabilities. * * *
* * * * *
    (2) Actuarial assumptions and methods. The value of benefit 
liabilities shall be determined using the assumptions and methods 
prescribed in Sec. Sec.  4044.51 through 4044.57 of this chapter. In 
addition to the assumptions described in Sec. Sec.  4044.51 through 
4044.57, the following rules apply:
    (i) Assumptions not included in Sec. Sec.  4044.51 through 4044.57. 
A filer may choose whether to include assumptions for pre-retirement 
decrements other than mortality (such as turnover or disability 
assumptions), provided that if such pre-retirement decrements are used, 
the assumptions used are the same as those used to determine the 
minimum required contribution under ERISA section 303 for the plan year 
ending within the filer's information year. Any other assumptions used 
to determine the minimum required contribution that are not overridden 
by Sec. Sec.  4044.51 through 4044.57 (assumed marital status, cost-of-
living increase, if applicable, etc.) must be used when determining 
benefit liabilities.
    (ii) Benefits to be valued. The value of benefit liabilities 
includes liabilities for all benefits accrued under the plan (including 
benefits that are not protected from the anti-cutback provisions of 
Code section 411(d)(6)) as of the end of the plan year ending within 
the filer's information year.
    (iii) Future service. Future service expected to be accrued by an 
active participant in an ongoing plan during future employment (based 
on the assumptions used to determine the value of benefit liabilities) 
must be reflected when determining the earliest retirement age at 
valuation (ERA) and unreduced retirement age (URA) used to determine 
expected retirement age (XRA). (For this purpose, ERA, URA, and XRA 
have the meaning as provided in Sec.  4044.2.) Such expected future 
service in an ongoing plan (at decrement) is also included in 
determining an active participant's entitlement to early retirement 
subsidies and supplements at XRA. (See the examples in paragraph (e) of 
this section.)
* * * * *
    (e) Examples. The following examples demonstrate how expected 
retirement age (XRA) is determined and applied for purposes of 
determining benefit liabilities under paragraph (d) of this section:
    (1) Example 1--(i) Facts. Plan X has a normal retirement age of 65, 
but allows benefits to commence as early as age 55 for participants who 
complete at least 10 years service before termination. Early retirement 
benefits are reduced (from age 65) for participants with fewer than 25 
years of service. Employee A is an active participant who is age 40 and 
has completed 5 years of service. Assume the ``medium'' XRA look-up 
table applies and that for purposes of Sec.  4010.8(d), the filer has 
decided not to take pre-retirement decrements other than mortality into 
account as permitted under Sec.  4010.8(d)(2)(i).
    (ii) Determination of XRA. If A continues working, the earliest age 
A could start receiving benefits is age 55. Therefore, A's ERA is 55. 
Because the earliest that A can receive an unreduced benefits is when A 
completes 25 years of service (at age 60), A's URA is age 60. Under the 
medium XRA look-up table, A's XRA is 58.
    (iii) Determination of benefit liabilities. The benefit liability 
is the present value of A's benefit accrued as of the measurement date 
assuming A retires at age 58 and elects to have payments commence 
immediately. Since A will not be eligible to receive unreduced benefits 
at that time, the accrued benefit is reduced in accordance with the 
plan's early retirement reduction provisions, including any subsidies 
to which A would be entitled under the assumption that A works until 
age 58.
    (2) Example 2. Employee B is also an active participant in plan X 
and is age 40 with 15 years of service. B will complete 25 years of 
service at age 50. However, because the plan does not allow for benefit 
commencement before age 55, B's ERA, URA and thus, XRA are all age 55. 
(Note: the XRA tables in Appendix D to part 4044 do not show URA's 
below age 60, but links to extended tables can be found on the PBGC's 
Web site at the bottom of  http://www.pbgc.gov/practitioners/law-regulations-informal-guidance/content/page14763.html.) The benefit 
liability is the present value of B's benefit accrued as of the 
measurement date assuming B retires at age 55 and elects to commence 
benefits immediately. Since B will be eligible to receive an unreduced 
benefit at that time, the full unreduced benefit amount is valued.
    (3) Example 3--(i) Facts. Assume the same facts as in Example 1, 
except that for purposes of Sec.  4010.8(d), the filer has decided to 
take pre-retirement decrements other than mortality into account as 
permitted under Sec.  4010.8(d)(2)(i). For the sake of simplicity, 
assume the only pre-retirement decrement other than mortality is 
turnover. The plan's turnover rates go from age 21 to age 54, and the 
retirement rates go from age 55 to age 65.
    (ii) Determination of XRA. If A terminates employment at or before 
age 45, A will not be eligible to receive

[[Page 9253]]

benefits until age 65. Therefore, the portion of Employee A that is 
assumed to terminate before age 45 has an ERA, URA, and XRA of 65. The 
portion of A that remains in service to age 45, after the application 
of the applicable turnover decrements, and then terminates at or after 
age 45, but before age 55, will be entitled to receive a reduced 
benefit as early as 55. Therefore, the portion of A that is assumed to 
terminate during this period has an ERA of 55, a URA of 65 and an XRA 
of 60. Since the turnover rates stop at age 55, the portion of A that 
remains in service to age 55 is assumed to remain in service until the 
XRA for that portion of A. For that portion of A, the ERA is 55, the 
URA is 60 and the XRA is 58. Note that for purposes of Sec.  4010.8(d), 
the plan's assumed retirement rates are replaced by the XRAs.
    (iii) Determination of benefit liabilities. The benefit liability 
for A is the sum of the present value of A's full accrued benefit at 
age 65 for the portion of A that terminates between age 40 and age 45, 
the present value of A's accrued benefit reduced for commencement at 
age 60 for the portion of A that terminates between age 45 and age 54, 
and the present value of A's accrued benefit reduced for commencement 
at age 58 for the portion of A that remains employed until age 55.
    (4) Example 4. Assume the same facts as in Example 3, except that 
Employee B, the sole active participant, is age 40 with 15 years of 
service. The portion of B that is assumed to terminate before age 50 
would be entitled to receive a reduced benefit as early as age 55 or an 
unreduced benefit at age 65. That portion of B has an ERA of 55, a URA 
of 65, and an XRA of 60. The benefit liability for that portion of B is 
the present value of B's benefit accrued as of the measurement date 
assuming B commences a reduced benefit at age 60. The portion of B that 
survives to age 50 would be entitled to receive an unreduced benefit as 
early as age 55. That portion of B has an ERA, URA and XRA of 55. The 
benefit liability for this portion of B is the present value of B's 
benefit accrued as of the measurement date assuming B retires and 
commences unreduced payments at age 55.
    (f) Multiple employer plans. If, with respect to a multiple 
employer plan, the actuarial information required under this section 
4010 for the plan year ending within the filer's information year has 
been filed under part 4010 by another filer, the filer may include this 
actuarial information by reference. The filer must include a comment in 
the submission reporting the name, EIN and plan number of the multiple 
employer plan and the name of the other filer that submitted this 
information. The filer is not relieved of responsibility for the filing 
of the actuarial information. If the information filed by the other 
filer is incomplete or erroneous, PBGC may assess a filing penalty 
against the filer.
    (g) Previous filing for plan year. If the actuarial information for 
the plan year as required under this Sec.  4010.8 has been submitted by 
the filer in a previous 4010 submission, the filing may include that 
actuarial information by reference to the previous submission.
    10. In Sec.  4010.9:
    a. Paragraph (a) is amended by removing the words ``the PBGC's'' 
and adding in their place the word ``PBGC's''.
    b. Paragraph (d) is amended by removing the words ``the PBGC'' 
where they appear three times and adding in their place each time the 
word ``PBGC''.
    c. New paragraph (f) is added at the end of the section to read as 
follows:


Sec.  4010.9  Financial information.

* * * * *
    (f) Multiple employer plans. A filer that is a contributing sponsor 
of a multiple employer plan need not provide financial information for 
another contributing sponsor of the multiple employer plan if that 
other contributing sponsor is not a member of the filer's controlled 
group.
    11. Section 4010.10 is amended by removing the words ``the PBGC'' 
where they appear once in the section heading, once in paragraph (a), 
once in paragraph (b), twice in paragraph (c), twice in paragraph (d), 
and once in paragraph (e), and adding in their place each time the word 
``PBGC''.
    12. In Sec.  4010.11:
    a. The existing text of the section is redesignated as paragraph 
(b).
    b. Redesignated paragraph (b) is amended by adding the paragraph 
heading ``Other waiver authority.''; by removing the words ``the PBGC'' 
where they appear three times and adding in their place each time the 
word ``PBGC''; by removing the word ``must'' where it appears twice and 
adding in its place each time the word ``should''; and by removing the 
words ``of this part'' where they appear twice.
    c. The section heading is revised, and new paragraphs (a), (c), 
(d), and (e) are added, to read as follows:


Sec.  4010.11  Waivers, extensions, and exclusions.

    (a) Aggregate underfunding not in excess of $15 million. Unless 
reporting is required by Sec.  4010.4(a)(2) or (a)(3), reporting is 
waived for an information year if, for the plan years ending within the 
information year, the aggregate 4010 funding shortfall for all plans 
(including any exempt plans) maintained by the members of the 
contributing sponsor's controlled group (disregarding those plans with 
no 4010 funding shortfall) does not exceed $15 million.
* * * * *
    (c) 4010 funding shortfall for waivers and exemptions--(1) General. 
Except as provided in paragraph (c)(2) of this section, a plan's 4010 
funding shortfall for a plan year equals the funding shortfall as 
provided under ERISA section 303(c)(4) determined as of the valuation 
date for the plan year, except that the value of plan assets is 
determined without regard to the reduction under ERISA section 
303(f)(4)(b).
    (2) Transition rule for plan years beginning before 2008. For plan 
years beginning before 2008, a plan's 4010 funding shortfall for a plan 
year equals the excess, if any, of the plan's current liability over 
the value of plan assets. For this purpose, both current liability and 
plan assets are determined in the manner provided in Sec.  
4010.4(b)(3), except that assets are not reduced by the credit balance 
in the funding standard account.
    (3) Multiple employer plans. For purpose of Sec.  4010.8(c) and 
paragraph (a) of this section, the entire 4010 funding shortfall of any 
multiple employer plan for which the filer or any member of the filers 
controlled group is a contributing sponsor is included.
    (d) Reduced reporting for multiple employer plans--(1) In general. 
Reporting is waived for a contributing sponsor of a multiple employer 
plan if neither the contributing sponsor nor any member of the 
contributing sponsor's controlled group is a contributing sponsor of 
any other plan, provided at least one contributing sponsor (or the plan 
administrator on behalf of a contributing sponsor) provides a timely 
filing under this part 4010 containing the following information:
    (i) Identifying information for each contributing sponsor of the 
multiple employer plan (as required under Sec.  4010.7) determined as 
of the plan year ending within the contributing sponsor's information 
year;
    (ii) Actuarial information for the multiple employer plan (as 
required under Sec.  4010.8) for the plan year ending within the 
contributing sponsor's information year; and
    (iii) Financial information as required Sec.  4010.9 (or such 
reduced information as PBGC may provide on its Web site) for every 
contributing sponsor of the

[[Page 9254]]

multiple employer plan who, for a salary related plan formula, is one 
of the ten largest contributing sponsors based on required 
contributions for the plan year ending within the contributing 
sponsor's information year, or, for an hourly plan formula, is one of 
the ten largest contributing sponsors based on number of participants 
for the plan year ending within the contributing sponsor's information 
years (using the census data as determined under Sec.  4010.8(d)(1)).
    (2) Information year. For purposes of this paragraph (d) (including 
determining when a filing is due), if any two contributing sponsors 
report financial information on the basis of different fiscal years, 
the information year shall be the calendar year.
    (e) Terminated plans. A plan may be excluded for purposes of 
Sec. Sec.  4010.4(a)(1) and (3), 4010.8, and 4010.11(a) and (d), if, on 
or before the last day of the information year, all of the assets 
(excluding excess assets) have been distributed pursuant to a standard 
termination under Subpart B of part 4041 of this chapter.


Sec.  4010.12  [Amended]

    13. Section 4010.12 is amended by removing the words ``section 
4010(c) of ERISA'' and adding in their place the words ``ERISA section 
4010(c)''; and by removing the words ``the PBGC'' and adding in their 
place the word ``PBGC''.


Sec.  4010.13  [Amended]

    14. Section 4010.13 is amended by removing the words ``section 4071 
of ERISA'' and adding in their place the words ``ERISA section 4071''; 
and by removing the words ``the PBGC'' where they appear twice and 
adding in their place each time the word ``PBGC''.

    Issued in Washington, DC, this 14th day of February, 2008.
Charles E.F. Millard,
Director, Pension Benefit Guaranty Corporation.
 [FR Doc. E8-3124 Filed 2-19-08; 8:45 am]
BILLING CODE 7709-01-P