[Federal Register Volume 80, Number 176 (Friday, September 11, 2015)]
[Rules and Regulations]
[Pages 54980-55010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22941]



[[Page 54979]]

Vol. 80

Friday,

No. 176

September 11, 2015

Part IV





Pension Benefit Guaranty Corporation





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29 CFR Parts 4000, 4001, 4043, et al.





Reportable Events and Certain Other Notification Requirements; Final 
Rule

  Federal Register / Vol. 80 , No. 176 / Friday, September 11, 2015 / 
Rules and Regulations  

[[Page 54980]]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4000, 4001, 4043, 4204, 4206, and 4231

RIN 1212-AB06


Reportable Events and Certain Other Notification Requirements

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: In 2013, PBGC proposed to establish risk-based safe harbors 
that would exempt most companies and plans from many of its reportable 
events requirements and target reporting toward the minority of plan 
sponsors and plans presenting the most substantial risk of involuntary 
or distress termination. After holding a hearing on the proposal, and 
carefully considering the public's written and oral comments, PBGC is 
publishing this final rule to make the requirements of the sponsor 
risk-based safe harbor more flexible, make the funding level for 
satisfying the well-funded plan safe harbor lower and tied to the 
variable-rate premium, and add public company waivers for five events. 
The waiver structure under the final rule will further reduce 
unnecessary reporting requirements, while at the same time better 
targeting PBGC's resources to plans that pose the greatest risks to the 
pension insurance system. PBGC anticipates the final rule will exempt 
about 94 percent of plans and sponsors from many reporting requirements 
and result in a net reduction in reporting to PBGC. This rulemaking is 
a result of PBGC's regulatory review under Executive Order 13563.

DATES: Effective October 13, 2015. See Applicability in SUPPLEMENTARY 
INFORMATION.

FOR FURTHER INFORMATION CONTACT: Daniel S. Liebman, Attorney 
([email protected]), Regulatory Affairs Group, Office of the 
General Counsel, 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: 

Executive Summary--Purpose of the Regulatory Action

    This rule is needed to make reporting more efficient and effective, 
to avoid unnecessary reporting requirements, and to conform PBGC's 
reportable events regulation to changes in the law. A better-targeted 
and more efficient reporting system helps preserve retirement plans.
    PBGC's legal authorities for this action are section 4002(b)(3) of 
the Employee Retirement Income Security Act of 1974 (ERISA), which 
authorizes PBGC to issue regulations to carry out the purposes of title 
IV of ERISA, and section 4043 of ERISA, which gives PBGC authority to 
define reportable events and waive reporting.

Executive Summary--Major Provisions of the Regulatory Action

Changing the Waiver Structure

    Under the regulation's long-standing waiver structure for 
reportable events, which primarily focused on the funded status of a 
plan, PBGC often did not get reports it needed; at the same time, it 
received many reports that were unnecessary. This mismatch occurred 
because the old waiver structure was not well tied to the actual risks 
and causes of plan terminations, particularly the risk that a plan 
sponsor will default on its financial obligations, ultimately leading 
to an underfunded termination of its pension plan.
    The final rule provides a new reportable events waiver structure 
that is more closely focused on risk of default than was the old waiver 
structure. Some reporting requirements that poorly identify risky 
situations--like those based on a supposedly modest level of plan 
underfunding--have been eliminated; at the same time, a new low-
default-risk ``safe harbor''--based on company financial metrics--is 
established that better measures risk to the pension insurance system. 
This sponsor safe harbor is voluntary and based on existing, readily-
available financial information that companies already use for many 
business purposes.
    With the low-default-risk safe harbor, PBGC is establishing a risk 
tolerance level for certain events faced by plans and plan sponsors 
that trigger reporting requirements so that PBGC can monitor and 
address situations that are most likely to pose problems to the pension 
insurance system. This reporting system is analogous to that used by an 
unsecured creditor in loan arrangements with a borrower so as to be 
alerted to important issues facing the borrower impacting its ability 
to meet its loan obligations.
    The final rule also provides a safe harbor based on a plan's owing 
no variable-rate premium (VRP) (referred to as the well-funded plan 
safe harbor).\1\ Other waivers, such as public company, small plan, de 
minimis segment, and foreign entity waivers, have been retained in the 
final rule, and in many cases expanded, to provide additional relief to 
plan sponsors where the risk of an event to plans and the pension 
insurance system is low. With the expansion in the number of waivers 
available in the final rule, PBGC estimates that 94 percent of plans 
covered by the pension insurance system will qualify for at least one 
waiver of reporting for events dealing with active participant 
reductions, controlled group changes, extraordinary dividends, benefit 
liability transfers, and substantial owner distributions.
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    \1\ The old regulation provided a waiver in some circumstances 
generally based on 80 percent funding on a premium basis. However, 
in PBGC's experience, that test was inadequate, as it was passed by 
many plans that underwent distress or involuntary terminations. See 
Well-Funded Plan Safe Harbor below. A safe harbor based on paying no 
VRP, in contrast, is consistent with a Congressional determination 
of the level of underfunding that presents risk to the pension 
insurance system.
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Revised Definitions of Reportable Events

    The rule simplifies the descriptions of several reportable events 
and makes some event descriptions (e.g., active participant reduction) 
narrower so that compliance is easier and less burdensome. One event is 
broadened in scope (loan defaults), and clarification of another event 
has a similar result (controlled group changes). These changes, like 
the waiver changes, are aimed at tying reporting burden to risk.

Conforming to Changes in the Law

    The Pension Protection Act of 2006 (PPA) made changes in the law 
that affect the test for whether advance reporting of certain 
reportable events is required. This rule conforms the advance reporting 
test to the new legal requirements.

Mandatory E-Filing

    The rule makes electronic filing of reportable events notices 
mandatory. This furthers PBGC's ongoing implementation of the 
Government Paperwork Elimination Act. E-filing is more efficient for 
both filers and PBGC and has become the norm for PBGC's regulated 
community.

Background

    The Pension Benefit Guaranty Corporation (PBGC) administers the 
pension plan termination insurance program under Title IV of the 
Employee Retirement Income Security Act of 1974 (ERISA). Section 4043 
of ERISA requires that PBGC be notified of the occurrence of certain 
``reportable events.'' The statute provides for both post-event and

[[Page 54981]]

advance reporting.\2\ PBGC's regulation on Reportable Events and 
Certain Other Notification Requirements (29 CFR part 4043) implements 
section 4043.
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    \2\ Except as otherwise noted, this preamble discusses post-
event reporting only.
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    Reportable events include such plan events as missed contributions, 
insufficient funds, and large pay-outs, and such sponsor events as loan 
defaults and controlled group changes--events that may present a risk 
to a sponsor's ability to continue a plan. When PBGC has timely 
information about a reportable event, it can take steps to encourage 
plan continuation--for example, by exploring alternative funding 
options with the plan sponsor--or, if plan termination is called for, 
to maximize recovery of the shortfall from all possible sources.\3\ 
Without timely information about a reportable event, PBGC typically 
learns that a plan is in danger only when most opportunities for 
protecting participants and the pension insurance system have been 
lost. The regulation does however, include a system of waivers and 
extensions to ease reporting burdens where the circumstances 
surrounding some events may make reporting unnecessary or where the 
PBGC has other ways to obtain needed information. The regulation (both 
the old regulation and the new regulation \4\) also provides that PBGC 
may grant waivers and extensions on a case-by-case basis.
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    \3\ For example, alerts from recent reportable events notices of 
missed contribution events have allowed PBGC to timely intervene to 
protect plan assets and participant benefits. In one such case, 
PBGC's involvement ensured that there was no interruption in 
benefits when PBGC ultimately terminated the plan. In a second case, 
PBGC's monitoring of the plan as a result of the reportable event 
filing ensured that there were sufficient funds from the sale of a 
business to complete a standard termination. In a third case, PBGC's 
early intervention provided an opportunity to examine options with 
the plan sponsor to continue the plan. As another example, a 
reportable event notice of an active participant reduction event led 
to a negotiated settlement with the plan sponsor that resulted in an 
additional $400,000 contribution to the plan. When the sponsor later 
filed for bankruptcy, PBGC took over the plan with a smaller amount 
of unfunded liabilities than if the contribution from the settlement 
had not been made.
    \4\ For ease of reference, the preamble refers to the regulation 
as it exists before this final rule becomes applicable as the ``old 
regulation'' and refers to the regulation as amended by this final 
rule as the ``new regulation.'' See Applicability below.
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    Reportable events are rare and reporting is often waived. As a 
result, each year, on average only 4 percent of plans experience an 
event and are required to report it; even fewer are required to report 
Category 1 events.\5\
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    \5\ Category 1 events include Extraordinary Dividend or Stock 
Redemption, Active Participant Reduction, Change in Contributing 
Sponsor or Controlled Group, Distributions to a Substantial Owner, 
and Transfer of Benefit Liabilities events. As discussed below, 
these are events for which the low-default risk and well-funded plan 
safe harbors will apply under the final regulation.
[GRAPHIC] [TIFF OMITTED] TR11SE15.002

Although the impact of the reportable events regulation on any company 
or plan or on the pension community as a whole is very small, a 
reportable events notice is potentially very important to PBGC, the 
pension insurance system, and participants of affected plans.\6\
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    \6\ See footnote 3 above.
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2009 Proposed Rule

    On November 23, 2009 (at 74 FR 61248), PBGC published in the 
Federal Register for notice and comment a proposed rule (the 2009 
proposal) that eliminated most automatic waivers. The proposal 
reflected PBGC's concern that it was not receiving reports of 
significant events because the existing automatic waivers were too 
broadly applicable.
    PBGC received comments from actuaries, pension consultants, and 
organizations representing employers and pension professionals. The 
public comments on the 2009 proposal uniformly opposed the proposed 
elimination of most waivers. Commenters said that without the waivers, 
reporting would be required for events that posed little risk to PBGC 
and said that the increase in the public's burden of compliance would 
outweigh the benefit to the pension insurance system of the additional 
reporting. They also expressed concern that the proposed changes to the 
rule would discourage employers from continuing to maintain pension 
plans covered by Title IV. Several commenters urged PBGC to rethink and 
repropose the rule to address issues raised by the comments.

[[Page 54982]]

Executive Order 13563

    On January 18, 2011, the President issued Executive Order 13563 on 
Improving Regulation and Regulatory Review (76 FR 3821, January 21, 
2011). Executive Order 13563 encourages identification and use of 
innovative tools to achieve regulatory ends, calls for streamlining 
existing regulations, and reemphasizes the goal of balancing regulatory 
benefits with burdens on the public. Executive Order 13563 also 
requires agencies to develop a plan to review existing regulations to 
identify any that can be made more effective or less burdensome in 
achieving regulatory objectives.\7\
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    \7\ PBGC's Plan for Regulatory Review can be found at http://www.pbgc.gov/documents/plan-for-regulatory-review.pdf (August 23, 
2011).
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2013 Proposal

    PBGC reconsidered the reportable events regulation in the spirit of 
Executive Order 13563 and in light of the comments to the 2009 
proposal. On April 3, 2013 (at 78 FR 20039), PBGC published a new 
proposed rule (the 2013 proposal). The 2013 proposal took a very 
different approach to waivers from the 2009 proposal. Whereas the 2009 
proposal simply eliminated most automatic waivers, the 2013 proposal 
substituted a new system of waivers (safe harbors) to reduce burden 
where possible without depriving PBGC of the information it needs to 
protect the pension insurance system.
    One of the waivers in the 2013 proposal was for employers that met 
a safe harbor based on what the proposal described as sponsor financial 
soundness (i.e., an employer's capacity to meet its financial 
commitments in full and on time) as determined through credit report 
scores and the satisfaction of related criteria. A second safe harbor 
that was more stringent than the existing funding-based waivers was 
available for plans that were either fully funded on a termination 
basis or 120 percent funded on a premium basis. The 2013 proposal also 
preserved or extended some waivers under the old regulation (including 
small-plan waivers) that the 2009 proposal would have eliminated.
    PBGC received 13 comment letters on the 2013 proposal, mainly from 
the same sources as the comments on the 2009 proposal.\8\ PBGC also 
held its first-ever regulatory public hearing, at which eight of the 
commenters discussed their comments.
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    \8\ The 2013 proposal also received comments from one plan 
sponsor.
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    Most of the commenters on the 2013 proposal expressed appreciation 
for PBGC's re-proposing the rule and for the opportunity for further 
public input. Several commenters complimented PBGC on its general 
overall effort or said the 2013 proposal was an improvement on the 2009 
proposal. One commenter approved PBGC's efforts to balance its need for 
information with the public's burden of providing it and to streamline 
the reporting process. Another commenter applauded PBGC on its common 
sense, risk-based approach to reporting, and yet another commended PBGC 
for the proposed rule's significant relief for small plans, as well as 
the general focus on tying reporting to risk.
    Nonetheless, all of the commenters took issue with aspects of the 
proposal, particularly with the safe harbors, which four commenters 
suggested could cause more sponsors to leave the defined benefit 
system. Other concerns dealt with the difficulty of monitoring events 
in controlled groups and with proposed changes to the events dealing 
with active participant reductions and missed contributions. Some plan 
sponsor groups expressed general concern that by creating a plan 
sponsor financial soundness safe harbor, PBGC, on behalf of the Federal 
government, inevitably would become an entity that makes formal 
pronouncements on the financial prospects of American businesses. Two 
commenters urged that the proposal be withdrawn. The comments on the 
2013 proposal and PBGC's responses are discussed below with the topics 
to which they relate.

Final Rule Waivers

    In response to the comments, PBGC is issuing a final rule with safe 
harbors that are simpler, more flexible, and easier to comply with and 
that clearly target risk to the pension insurance system.\9\ Under the 
final rule, all small plans (about two-thirds of all plans) will be 
waived from reporting Category 1 events (other than substantial owner 
distributions). Further, if a reportable event occurs, 82 percent of 
large plans qualify for at least one waiver for these events: \10\
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    \9\ See Summary Chart, below, for an overview of waivers and 
safe harbors under the old regulation and this final rule.
    \10\ For this purpose, large plans means those plans that have 
more than 100 participants. The charts included in this preamble do 
not reflect waivers for de minimis segments or foreign entities.

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[[Page 54983]]

[GRAPHIC] [TIFF OMITTED] TR11SE15.003

    As a result, if a reportable event occurs, 94 percent of all plans 
will qualify for at least one waiver under the final regulation (an 
increase from 89 percent under the old regulation):

[[Page 54984]]

[GRAPHIC] [TIFF OMITTED] TR11SE15.004

Low-Default-Risk Safe Harbor for Plan Sponsors

    To address the issue of risk, the 2013 proposal provided a risk-
based safe harbor tied to the risk of default on financial obligations 
of a plan sponsor. PBGC developed the proposed safe harbor based on its 
experience that the default risk of a plan sponsor generally correlates 
with the risk of an underfunded termination of the sponsor's pension 
plan. One major component of the risk of underfunded termination is the 
likelihood that the plan sponsor will, within the near future, fall 
into one of the ``distress'' categories in section 4041(c)(2)(B) of 
ERISA (liquidation, reorganization, or inability to pay debts when due 
and to continue in business). Another is that the sponsor will go out 
of business, abandoning the plan and forcing PBGC to terminate it under 
section 4042 of ERISA. Thus, the 2013 proposal recognized that the risk 
of underfunded termination of a plan within the near future depends 
most significantly on the plan sponsor's financial strength.\11\
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    \11\ In 2013, 66 percent of reportable events reports from 
filers that were below investment grade resulted in the opening of 
investigations. For this purpose, ``investment grade'' means a 
credit rating of Baa3 or higher by Moody's or BBB- or higher by 
Standard and Poor's.
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    The 2013 proposal provided a waiver from reporting for each of five 
events (active participant reductions, substantial owner distributions, 
controlled group changes, extraordinary dividends, and benefit 
liabilities transfers) if, as of the date an event occurred, each 
contributing sponsor (or highest US member of its controlled group) was 
what the proposal termed ``financially sound,'' that is, had adequate 
capacity to meet its obligations in full and on time as evidenced by 
its satisfaction of five criteria:
    1. The entity had a qualifying commercial credit report score.
    2. The entity had no secured debt (with certain exceptions).
    3. The entity had positive net income for the most recent two 
fiscal years.
    4. The entity did not experience any loan default event in the 
previous two years (regardless of whether reporting was waived).
    5. The entity did not experience a missed contribution event in the 
previous two years (unless reporting was waived).
    To focus public input on this issue, the 2013 proposal asked 
specific questions about the financial soundness standard and sought 
suggestions for alternative approaches to determining financial 
soundness based on widely available and accepted financial standards.
    One commenter found the sponsor financial soundness safe harbor to 
be a reasonable attempt to accomplish the goal of providing broad 
waivers in situations where there is no significant risk to PBGC. But 
most commenters opposed the safe harbor as a concept, arguing that it 
would not be business-friendly or helpful in protecting the pension 
insurance system. Some commenters characterized the financial soundness 
test as a pronouncement by PBGC on the financial status of American 
businesses, which they believed to be inappropriate for a government 
agency.
    However, many federal agencies have rules that include standards 
for measuring aspects of financial health or ability to meet certain 
financial obligations for a wide variety of purposes, including 
eligibility to use certain forms, qualification for funding, or 
participation in certain activities. These regulations govern not only 
the financial services industry, but such wide-ranging activities as 
agriculture, education, energy, and the environment.\12\ The provisions 
of the

[[Page 54985]]

Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-
203) (the Dodd-Frank Act) clearly contemplate the use of some types of 
creditworthiness standards in federal regulations.\13\ And there is 
precedent in federal regulations for using the ``adequate capacity'' 
standard in determining financial soundness.\14\
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    \12\ See e.g., Department of Agriculture biorefinery assistance 
program (7 CFR 4279.202(d)); Department of Education requirements 
for institutions to participate in Federal student assistance 
programs (34 CFR 668.15); Department of Energy loan guarantees for 
projects that employ innovative technologies (10 CFR part 609); and 
Environmental Protection Agency rules on owners and operators of 
underground carbon dioxide storage wells (40 CFR 146.85).
    \13\ Section 939A of the Dodd-Frank Act proscribes federal 
regulations that require the use of credit ratings, but Section 939 
also requires agencies to replace references to credit ratings in 
regulations with alternative standards of creditworthiness. Section 
939A is premised on the fact that federal agencies can and do use 
standards of financial capacity for various purposes.
    \14\ For example, recent rules promulgated by Federal banking 
agencies use similar language that PBGC reviewed in developing its 
own standard for its regulation on reportable events. The 2013 
proposal states: For purposes of this part, an entity that is a plan 
sponsor or member of a plan sponsor's controlled group is 
``financially sound'' . . . if . . . it has adequate capacity to 
meet its obligations in full and on time as evidenced by its 
satisfaction of all of the five criteria described in paragraphs 
(b)(1) through (b)(5) of this section''). This language is similar 
to an FDIC rule (``an insured savings association . . . , shall not 
acquire or retain a corporate debt security unless the savings 
association . . . determines that the issuer of the security has 
adequate capacity to meet all financial commitments under the 
security for the projected life of the security'') and an Office of 
the Comptroller of the Currency (OCC) rule (``Investment grade means 
the issuer of a security has an adequate capacity to meet financial 
commitments under the security for the projected life of the asset 
or exposure. An issuer has an adequate capacity to meet financial 
commitments if the risk of default by the obligor is low and the 
full and timely repayment of principal and interest is expected''). 
See FDIC rule (77 FR 43151, Jul. 24, 2102) at http://www.gpo.gov/fdsys/pkg/FR-2012-07-24/pdf/2012-17860.pdf and OCC rule (77 FR 
35253, June 13, 2012) at http://www.gpo.gov/fdsys/pkg/FR-2012-06-13/pdf/2012-14169.pdf.
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    PBGC understands that the proposed ``financial soundness'' 
terminology caused concern for some commenters, who perceived that the 
provisions of the safe harbor tests could be seen as measuring the 
overall financial prospects of a company. However, the safe harbor 
tests were never meant for that purpose. Rather, they were intended to 
measure the likelihood that a company would be able to continue to 
sponsor a plan and thus not present a risk to the pension insurance 
system. To clarify this point, the final regulation more precisely 
characterizes this safe harbor as the company low-default-risk safe 
harbor rather than the sponsor financial soundness safe harbor, and 
refers to a safe harbor for plans (described below) as the well-funded 
plan safe harbor rather than the plan financial soundness safe harbor.
    PBGC's company low-default-risk safe harbor is entirely voluntary 
and relies mainly on private-sector financial metrics derived from a 
company's own financial information; one component of the safe harbor, 
which is not required to be used to satisfy the low-default-risk 
standard, is based on widely available financial information that most 
plan sponsors (and their U.S. parents) already have, and that 
represents well-known, objective, non-governmental assessments of 
default risk used in a wide variety of business contexts. Use of the 
safe harbor is not conditioned on an evaluation by PBGC of plan sponsor 
financial soundness. Nor does it involve sponsors' reporting to PBGC 
(or anyone) any financial metrics, such as company financial 
information, credit scores or other evidence of creditworthiness.
    PBGC remains convinced that adding a company low-default-risk safe 
harbor to the reportable events regulation furthers PBGC's goals of 
tying reporting to risk and avoiding unnecessary reports. Thus, the 
final rule contains a risk-based safe harbor with modifications to 
mitigate commenters' concerns, particularly by providing more 
flexibility in applying the safe harbor and clarifying when and how the 
satisfaction of the low-default-risk standard is determined.

Adequate Capacity Standard

    The final rule provides that an entity (a ``company'') that is a 
contributing sponsor of a plan or the highest level U.S. parent of a 
contributing sponsor satisfies the low-default-risk standard if the 
company has adequate capacity to meet its obligations in full and on 
time as evidenced by satisfying either (A) the first two, or (B) any 
four, of the following seven criteria:
    1. The probability that the company will default on its financial 
obligations is not more than 4 percent over the next five years or not 
more than 0.4 percent over the next year, in either case determined on 
the basis of widely available financial information on the company's 
credit quality.
    2. The company's secured debt (with some exceptions) does not 
exceed 10 percent of its total asset value.
    3. The company's ratio of total-debt-to-EBITDA \15\ is 3.0 or less.
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    \15\ Earnings before interest, taxes, depreciation, and 
amortization.
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    4. The company's ratio of retained-earnings-to-total-assets is 0.25 
or more.
    5. The company has positive net income for the two most recent 
completed fiscal years.
    6. The company has not experienced any loan default event in the 
past two years regardless of whether reporting was waived.
    7. The sponsor has not experienced a missed contribution event in 
the past two years unless reporting was waived.
    For reporting to be waived for an event to which the safe harbor 
applies, both the contributing sponsor and the highest level U.S. 
parent of the contributing sponsor must satisfy the company low-
default-risk safe harbor. (The 2013 proposal required only that, for 
each contributing sponsor of the plan, either the sponsor or the 
highest level U.S. parent of the contributing sponsor satisfy the safe 
harbor requirements.) Requiring that both entities satisfy the safe 
harbor requirements addresses the issue of intercompany transactions 
between or among members of a controlled group that may disperse assets 
and liabilities within the controlled group.
    Although the low-default-risk safe harbor has some similarities 
with standards PBGC described in its 2013 guidelines concerning 
enforcement of ERISA section 4062(e),\16\ differences exist because of 
the different purposes of the statute. The 4062(e) guidelines were 
intended to inform PBGC's exercise of its discretion in enforcing 
monetary liability for certain business cessations, whereas the 
reportable events regulation provides rules for the public on 
compliance with ERISA section 4043's reporting requirements.
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    \16\ http://www.pbgc.gov/Documents/4062(e)-enforcement-of-
guidelines.pdf. See PBGC's Web site for 4062(e) Developments, http://www.pbgc.gov/prac/reporting-and-disclosure/section-4062(e)-
developments.html.
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    The final rule revises two criteria (probability of default in the 
first criterion and secured debt level in the second criterion) from 
the 2013 proposal and adds two new criteria (based on a ratio of total-
debt-to-EBITDA described in the third criterion listed above and a 
ratio of retained-earnings-to-total-assets described in the fourth 
criterion listed above). PBGC selected these four criteria based on 
historical data on rates of company defaults on financial obligations 
from widely published financial information.\17\ These criteria 
represent

[[Page 54986]]

financial metrics that are easily identified from existing sources of 
information and are used regularly by creditors as indicators of a 
company's ability to meet its financial obligations in full and on 
time. Lenders take into account such rates of default when extending 
credit to borrowers on terms showing the borrowers have adequate 
capacity to meet financial obligations. The revised criteria take into 
account one commenter's suggestion that PBGC consider incorporating 
into the safe harbor alternative risk measures such as debt-to-EBITDA 
and debt-to-total-capital ratios that are used in common debt covenants 
and routinely tracked by companies that issue debt or borrow from 
banks. The changes to the low-default-risk standard are described in 
more detail below.
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    \17\ See e.g., Moody's Investors Service Corporate and Recovery 
Default Rates, 1920-2010 (Feb. 28, 2011) http://efinance.org.cn/cn/FEben/Corporate%20Default%20and%20Recovery%20Rates,1920-2010.pdf; 
Standard & Poor's 2010 Annual U.S. Corporate Default Study And 
Rating Transitions (March 30, 2011) http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245302234800; and 
Standard & Poor's 2011 Annual U.S. Corporate Default Study And 
Rating Transitions (March 23, 2012) http://www.standardandpoors.com/spf/upload/Ratings_EMEA/2012-03-23_2011AnnualUSCorpDefaultStudy.pdf.
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Determination Date
    To make the safe harbor user-friendly, the final rule provides that 
a company determine whether it qualifies for the low-default-risk safe 
harbor once during an annual financial reporting cycle (on a 
``financial information date''). If it qualifies on that financial 
information date, its qualification remains in place throughout a 
``safe harbor period'' that ends 13 months later or on the next 
financial information date (if earlier).\18\ If it does not qualify, 
its non-qualified status remains in place until the next financial 
information date.
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    \18\ Thirteen months allows for some variation from year to year 
on the date that annual financials are reported.
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    The description of financial information used to determine whether 
the safe harbor is available is similar to that used in PBGC's 
regulation on Annual Financial and Actuarial Information Reporting.\19\ 
PBGC used this description so that the pension plan community would be 
familiar with the provisions and to maintain consistency across PBGC 
regulations, to the extent possible. The financial information date for 
a company is the date annual financial statements (including balance 
sheets, income statements, cash flow statements, and notes to the 
financial statements) are filed with the Securities and Exchange 
Commission (SEC) on Form 10-K (if the company is a public company) or 
the closing date of the company's annual accounting period (if the 
company is not a public company).
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    \19\ See Sec.  4010.9.
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    For a company that does not have annual financial statements, the 
financial information date is the date the company files with the 
Internal Revenue Service (IRS) its annual federal income tax return or 
IRS Form 990.
    The final regulation refers to the annual financial statements or 
applicable IRS return or Form 990 associated with a financial 
information date as ``supporting financial information.'' The 
supporting financial information associated with a financial 
information date will also be used to evaluate whether the secured 
debt, EBITDA-to-total-debt, and/or retained-earnings-to-total-assets 
criteria are met. To evaluate whether the positive net income criterion 
is met, supporting financial information associated with the two most 
recent consecutive fiscal years must be used.
    If an accountant's audit or review report expresses a material 
adverse view or qualification, the company will not satisfy the low-
default-risk standard for the safe harbor. Common adverse qualifiers 
used in the accounting profession that will render supporting financial 
information unsatisfactory for purposes of the safe harbor include such 
language as ``awareness of one or more material modifications that 
should have been made in order for the financial statements to be in 
conformity with [applicable accounting standards]''; ``the financial 
statements do not present fairly, in all material respects, the 
company's financial condition and results of operations in conformity 
with [applicable accounting standards]''; or ``substantial doubt about 
the company's ability to continue as a going concern for a reasonable 
period of time.'' \20\
---------------------------------------------------------------------------

    \20\ See e.g., Public Company Accounting Oversight Board, AU 
Section 508 Reports on Audited Financial Statements http://pcaobus.org/standards/auditing/pages/au508.aspx#ps-pcaob_e65bc2e0-ad78-42d7-a99b-8c59d98b3fd3; American Institute of CPAs (AICPA), AU-
C Section 705 Modifications to the Opinion in the Independent 
Auditor's Report http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-C-00705.pdf; and AICPA, AR 
Section 90 Review of Financial Statements http://www.aicpa.org/Research/Standards/CompilationReview/DownloadableDocuments/AR-00090.pdf.
---------------------------------------------------------------------------

Commercial Measures Criterion

    To satisfy the criterion for the company financial soundness safe 
harbor under the 2013 proposal, a company needed to have a credit 
score, reported by a commercial credit reporting company (CCRC) 
commonly used in the business community, that indicated a low 
likelihood that the company would default on its obligations over the 
next twelve months. Examples of such scores were to be listed in PBGC's 
reportable events forms and instructions.
    Seven commenters were critical of the commercial credit score 
criterion. Most of these commenters opposed the use of the score as a 
criterion altogether, while some indicated that the use of credit 
scores or similar information would be acceptable in limited 
circumstances if it were voluntary. Some concerns raised by commenters 
centered on the extent to which companies pay attention or have access 
to CCRC scores. Large public companies typically are more familiar with 
their credit ratings from nationally recognized statistical rating 
organizations (NRSROs) registered with the SEC, and some small 
companies may not have CCRC scores. Other concerns included costs 
associated with obtaining or monitoring scores, inaccurate score data, 
and a lack of specificity as to how and when PBGC would update its 
forms and instructions with valid CCRC score examples.
    The final regulation addresses these concerns. Under the final 
rule's company low-default-risk safe harbor provision, the criterion 
that corresponds to the proposed CCRC score criterion is optional. In 
addition, CCRC scores are not the exclusive benchmark for satisfying 
that new criterion. Instead, companies are not limited to using 
particular reports or tools and are afforded broad flexibility to use 
widely available business metrics that measure default probability. 
This approach avoids the need to list and update examples of scores in 
PBGC's forms and instructions.
    Under the final rule, the first criterion (referred to as the 
``commercial measures'' criterion) will be met for a company if the 
probability that the company will default on its financial obligations 
is not more than 4 percent over the next five years or not more than 
0.4 percent over the next year, in either case determined on the basis 
of widely available financial information on the company's credit 
quality--not limited to CCRC scores. PBGC's intent is to provide 
flexibility to companies in meeting the standard and allow a company to 
determine whether it satisfies the new criterion by referring to third 
party information that the company considers reliable and already uses 
with confidence for other business purposes. Thus, the final rule does 
not require the use of a CCRC score to satisfy the commercial measures 
criterion (although a company may still choose to obtain a CCRC score 
if it does not have one, as contemplated in the 2013 proposal).
    The commercial measures standard replicates the underlying 
probability of default risk reflected in the CCRC score standard under 
the 2013 proposal \21\ and

[[Page 54987]]

represents a threshold below which PBGC believes there is legitimate 
concern as to a company's long-term ability to continue a pension 
plan.\22\ The one- and five-year time periods for measuring default 
rate are typical periods over which third parties analyze the risk of 
default.
---------------------------------------------------------------------------

    \21\ PBGC compared company one-year default rates from 
information PBGC reviewed that is referred to in footnote 17 above 
with CCRC score data; see e.g., https://www.dnb.com/product/FSS/FAQsv7.1.pdf.
    \22\ See e.g., tying adequate capacity to meet financial 
obligations to the lowest tier of investment grade rating in Table 3 
in http://www.standardandpoors.com/spf/general/RatingsDirect_Commentary_979212_06_22_2012_12_42_54.pdf.
---------------------------------------------------------------------------

    PBGC believes that almost every sponsor and its highest level U.S. 
parent will be able to obtain widely available financial information 
that indicates their probability of default over either a one- or five-
year period. Typical metrics (from 2013) that would meet the 
probability-of-default standard include a D&B score of 1477, risk class 
of 3, or percentile of 46-55; a CreditRiskMonitor \23\ score of 9, and 
may include other financial metrics reflecting a level of investment 
grade rating. PBGC believes that 70 percent of plan sponsors will be 
able to meet the probability-of-default criterion based on widely 
available financial information on their credit quality. Sponsors of 
small plans, which are more likely to have difficulty obtaining credit 
quality information, will generally qualify for the small-plan waiver 
for four of the five events \24\ covered by the company low-default-
risk safe harbor.
---------------------------------------------------------------------------

    \23\ This company was suggested by one of the commenters on the 
2013 proposal. According to CreditRiskMonitor's Web site, the 
company provides comprehensive commercial credit reports for more 
than 40,000 public companies world-wide.
    \24\ The distributions to substantial owner event does not have 
a small plan waiver.
---------------------------------------------------------------------------

    In crafting the revised commercial measures criterion, PBGC 
reviewed language used in a recent final rule designed to bring a 
Department of Treasury regulation into compliance with the Dodd-Frank 
Act.\25\ PBGC also took into account other agency rulemakings where 
credit ratings were used in compliance with Section 939A of the Dodd-
Frank Act. Explaining the usefulness of outside sources of credit 
quality information, including credit ratings, these agencies suggested 
in preambles to their rules that the voluntary use of credit ratings 
from NRSROs is permissible where they are one but not the sole source 
of information used to determine credit quality.\26\
---------------------------------------------------------------------------

    \25\ See Department of Treasury Final Rule: Modification of 
Treasury Regulations Pursuant to Section 939A of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act. (78 FR 54758, September 
6, 2013) (http://www.gpo.gov/fdsys/pkg/FR-2013-09-06/pdf/2013-21752.pdf). The relevant regulatory text states:
    ``Sec. 1.249-1 Limitation on deduction of bond premium on 
repurchase: (e)(2)(ii) In determining the amount under paragraph 
(e)(2)(i) of this section, appropriate consideration shall be given 
to all factors affecting the selling price or yields of comparable 
nonconvertible obligations. Such factors include general changes in 
prevailing yields of comparable obligations between the dates the 
convertible obligation was issued and repurchased and the amount (if 
any) by which the selling price of the convertible obligation was 
affected by reason of any change in the issuing corporation's credit 
quality or the credit quality of the obligation during such period 
(determined on the basis of widely published financial information 
or on the basis of other relevant facts and circumstances which 
reflect the relative credit quality of the corporation or the 
comparable obligation). (Emphasis added.)
    \26\ See e.g., SEC Final Rule: Removal of Certain References to 
Credit Ratings Under the Investment Company Act (79 FR 1321, January 
8, 2014) (http://www.gpo.gov/fdsys/pkg/FR-2014-01-08/pdf/2013-31425.pdf): ``We believe, however, that credit ratings can serve as 
a useful data point for evaluating credit quality, and as noted 
above, a fund's board (or its delegate) may not rely solely on the 
credit ratings of an NRSRO without performing additional due 
diligence''; and Department of Labor, Employee Benefits Security 
Administration Proposed Amendments to Class Prohibited Transaction 
Exemptions To Remove Credit Ratings Pursuant to the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (78 FR 37578-9, June 21, 
2013) (http://www.gpo.gov/fdsys/pkg/FR-2013-06-21/pdf/2013-14790.pdf): ``In making these determinations, a fiduciary would not 
be precluded from considering credit quality reports prepared by 
outside sources, including credit ratings prepared by credit rating 
agencies, that they conclude are credible and reliable for this 
purpose'' and ``For purposes of this amendment, the Department 
believes that a fiduciary's determination of the credit quality of 
commercial paper according the proposed standard, should, as a 
matter of prudence, include the reports or advice of independent 
third parties, including, where appropriate, such commercial paper's 
credit rating.''
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    One of the commenters requested that PBGC provide relief from 
information penalties if a company relies on a CCRC score that turns 
out to be inaccurate or stale. PBGC believes such relief is unnecessary 
under the final rule because a company may choose a measure that the 
company knows is accurate, or the company may choose to satisfy the 
low-default-risk safe harbor in other ways.

Secured Debt Criterion

    Under the 2013 proposal, one of the criteria required to satisfy 
the sponsor financial soundness standard was that the entity had no 
secured debt, disregarding leases or debt incurred to acquire or 
improve property and secured only by that property (e.g., mortgages and 
equipment financing, including capital leases). In the preamble to the 
2013 proposal, PBGC said it was aware that there may be other 
circumstances in which a company capable of borrowing without security 
might nonetheless choose to offer security to a lender--for example, if 
doing so would significantly reduce the cost of a loan. PBGC sought 
public comment on the extent to which the proposed no-secured-debt test 
might be failed by plan sponsors that had a low risk of default and on 
how to make the test correspond better with commercial reality (e.g., 
by disregarding more types of secured debt).
    Two commenters stated that a plan sponsor's use of secured debt is 
not appropriate as a measure of the plan sponsor's financial health 
because, as PBGC acknowledged in the 2013 proposal, a financially 
healthy company may obtain secured debt for a variety of business 
reasons that do not relate to the credit risk of the company, such as 
to obtain favorable interest rates or because the company has assumed 
the debt from an entity it acquires.
    These comments gave PBGC a better appreciation for how widespread a 
practice it is for creditworthy companies to obtain secured debt. Under 
the final rule, the criterion will be satisfied if a company's secured 
debt (disregarding leases or debt incurred to acquire or improve 
property and secured only by that property) does not exceed 10 percent 
of the company's total assets.
    PBGC was reluctant to try to predict the types of secured debt that 
low-risk borrowers would be more likely to have than higher-risk 
borrowers. The 10 percent threshold included in the criterion serves to 
make a simple allowance for secured debt that good credit quality 
businesses may have. In addition, PBGC's experience is that 
approximately 90 percent of companies that would meet the commercial 
measures criterion of the safe harbor do not have a ratio of secured-
debt-to-total-assets above 10 percent.\27\ PBGC believes this 
correlation between the ability to meet financial obligations and the 
level of secured debt supports the use of 10 percent as an appropriate 
threshold for this safe harbor criterion.
---------------------------------------------------------------------------

    \27\ This figure is based on review of financial statement data 
for companies in PBGC databases that could meet the commercial 
measures criterion.
---------------------------------------------------------------------------

Net-Income Criterion

    Another criterion for the sponsor financial soundness safe harbor 
in the 2013 proposal was that the company had positive net income for 
the past two years. (For non-profit entities, ``net income'' was to be 
measured as the excess of total revenue over total expenses as required 
to be reported on Internal Revenue Service Form 990.)
    Four commenters raised issues regarding the positive net income 
criterion. Two commenters stated that the requirement did not 
necessarily

[[Page 54988]]

reflect the financial risk profile of a company because, for example, 
accounting losses, such as non-cash adjustments, could create negative 
net income for purposes of financial statements but not reflect the 
health of business operations. One of these commenters suggested that 
if the positive net income criterion were retained, PBGC should 
consider adjustments to reflect these unusual charges.
    PBGC did not revise this criterion in the final rule in response to 
the commenters' concerns about non-cash accounting losses. Net income 
measures the economic value a company creates over the measurement 
period, and a lack of net income is one indication of risk that a 
company may lack the resources to fulfill its obligations. Because non-
cash losses (as well as non-cash gains) are components of such economic 
value, PBGC considers it appropriate not to exclude non-cash charges 
from the net-income criterion.
    The description of the net-income criterion in the 2013 proposal 
indicated that net income was to be measured under generally accepted 
accounting principles (GAAP) or International Financial Reporting 
Standards (IFRS) standards. PBGC included GAAP and IFRS in the 2013 
proposal to provide rigorous and widely-used accounting standards for 
determining net income and because some companies may need to comply 
with IFRS as a result of the international scope of their operations. 
One commenter stated that because GAAP and IFRS are not compatible 
standards, two similarly situated companies might have different 
reporting requirements. PBGC has addressed this concern by eliminating 
the references to GAAP and IFRS in the final rule.
    Another commenter said that a company might not know net income for 
the prior fiscal year when an event occurs, making it impossible to 
determine whether the safe harbor was available. The final rule 
addresses this concern by providing that the low-default-risk safe 
harbor is satisfied on a financial information date (discussed above) 
rather than on a date an event occurs.
    One commenter said that the net-income criterion was unfair because 
it could not be satisfied by financially healthy companies in cyclical 
industries or companies that experience rare and significantly adverse 
events, such as a natural disaster. As also explained in Active 
Participant Reduction below, PBGC is not making special exceptions from 
the reporting obligations due to a natural disaster or other unusual 
event because such an occurrence can cause significant financial 
challenges to a company and raise concerns about its ability to meet 
future pension and other financial obligations. Similarly, PBGC 
believes that it would be inappropriate to provide an exclusion for 
companies in cyclical industries because a company at a low point in 
its income cycle may for just that reason be vulnerable to an event 
that would cause concern about meeting its pension obligations. 
Alerting PBGC to the possibility that a company may not be able to meet 
such obligations is exactly what the reportable events regulation is 
intended to do, regardless of what caused the default risk to rise. In 
any event, such a company might still be able to avail itself of the 
safe harbor by choosing another way of meeting the low-default-risk 
standard.
    One commenter objected to the application of the criterion to non-
profits as inconsistent with the nature of non-profit organizations. 
PBGC disagrees. A non-profit may have positive net income that does not 
jeopardize its non-profit status, so long as the income is related to 
the non-profit's purpose and is not distributed to the non-profit's 
officers, directors, or others connected to the non-profit. In fact, 
many large non-profits with defined benefit plans, such as certain 
hospital systems, have substantial net income. Thus, PBGC does not view 
this criterion to be inconsistent with non-profit operating realities.

Criteria Related to Loan Defaults and Missed Contributions

    The 2013 proposal contained two other financial soundness safe 
harbor criteria, which were intended to supplement and confirm the 
general picture of financial soundness painted by the satisfaction of 
the credit report test. These criteria were:
     For the past two years, the company had no missed 
contribution events, unless reporting was waived.
     For the past two years, the company had no loan default 
events, whether or not reporting was waived.
    Two commenters urged PBGC to disregard for purposes of the missed 
contribution criterion a missed contribution that occurred because of a 
missed or untimely funding balance election or because of a mandatory 
reduction of a funding standard carryover balance or prefunding 
balance. The latter can retroactively create a late quarterly 
contribution that may not be known of by the reporting deadline.
    As discussed in the Missed Contributions section below, the final 
rule includes a modification of the missed contribution event (which is 
the basis for the operation of this criterion) to excuse a missed 
timely funding balance election. PBGC did not make a similar change 
with respect to a mandatory reduction of a funding standard carryover 
balance or prefunding balance. The commenter who raised this issue 
acknowledged that such a situation should be a reportable event but 
expressed concern that a company should not be deprived of qualifying 
for the safe harbor for this reason alone. With the changes in the 
final rule that allow for more flexibility in meeting the low-default-
risk safe harbor, a company that experiences a mandatory reduction in 
its funding balance can still qualify for the safe harbor by meeting 
another criterion.
    One of these commenters also requested that PBGC clarify that late 
contribution reporting under section 303(k) (for amounts over $1 
million) would not be considered when making the determination of 
whether the criterion was met. PBGC declined to make this change. 
Having unpaid contributions exceeding $1 million is too serious a 
deficit to ignore and in PBGC's view, not consistent with adequate 
capacity to meet one's obligations.
    One commenter asked that PBGC make an exception to the no-loan-
default criterion to excuse ``meaningless technical defaults'' that are 
not indicative of any financial challenges. As explained in detail in 
the Loan Default section, the final rule distinguishes between events 
of default (which can lead to substantial contractual remedies for a 
lender to protect its investment) and other circumstances (which may be 
violations of an agreement but do not trigger such remedies).

New Criteria--Ratios of Total-Debt-to-EBITDA and Retained-Earnings-to-
Total-Assets

    In addition to giving companies the ability to satisfy the low-
default-risk safe harbor by various combinations of criteria, the final 
rule includes two additional criteria available for companies to use. 
Both of these new criteria are financial metrics that are easily 
derived from standard financial information.
    One of these criteria is based on the ratio of total-debt-to-
EBITDA. This ratio is commonly referred to as a leverage ratio and is 
used to assess a company's ability to meet its debt obligations. 
Companies with a ratio of total-debt-to-EBITDA of 3.0 or less 
correspond fairly closely with those that would satisfy the

[[Page 54989]]

commercial measures criterion.\28\ Thus, for the debt-to-EBITDA 
criterion to be satisfied, a company must have a ratio of total-debt-
to-EBITDA of 3.0 or less.
---------------------------------------------------------------------------

    \28\ See e.g., Table 3 in http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245329097686.
---------------------------------------------------------------------------

    The other new criterion is based on the ratio of retained-earnings-
to-total-assets. To satisfy this criterion, a company must have a ratio 
of retained-earnings-to-total-assets of 0.25 (one-to-four) or more. 
PBGC included this safe harbor criterion because it shows how much of a 
company's assets have been financed with the company's profits. In 
PBGC's experience, companies with high retained earnings tend to have 
higher profitability and/or a longer operating history that enables the 
accumulation of retained earnings--qualities that indicate the ability 
to meet financial obligations. Analysis of information available to 
PBGC suggests that companies that would meet the commercial measures 
criterion have an average ratio of retained-earnings-to-total-assets of 
at least 0.25.

Well-Funded Plan Safe Harbor

    The old regulation had waivers based on several different measures 
of funded status, sometimes combined with other factors such as public 
company status. The 2013 proposal also used plan funding as a basis for 
relief from filing requirements, but with two different measures, both 
of which were to apply to the same five events as the company risk-
based safe harbor (active participant reductions, substantial owner 
distributions, controlled group changes, extraordinary dividends, and 
benefit liabilities transfers). Reporting was to be waived if the plan 
was either fully funded on a termination basis or 120 percent funded on 
a premium basis (determined, in either case, using prior-year data).
    In the preamble to the 2013 proposal, PBGC explained that from its 
perspective, it is more appropriate to measure plan funding levels 
using termination-basis assumptions than ongoing-plan assumptions 
because termination liability is a better measure of the financial 
impact of plan termination on PBGC and participants.\29\ However, PBGC 
was aware that for plans, measuring funding on an ongoing-plan basis is 
more common because variable-rate premiums, required contributions, 
benefit restrictions, and annual funding notices are all based on 
ongoing-plan calculations. Thus, PBGC proposed both ways of meeting the 
safe harbor. To compensate for the different assumptions and timing 
that generally make termination liability higher than on-going plan 
liability, the 2013 proposal included a 20-percent cushion to make 
those two measures more nearly equivalent.
---------------------------------------------------------------------------

    \29\ To underscore this point, PBGC is required under accounting 
rules to identify contingent liabilities on PBGC's financial 
statements in this manner.
---------------------------------------------------------------------------

    Nine commenters on the 2013 proposal criticized the plan financial 
soundness safe harbor because the required funding ratios were 
unrealistically high. The commenters also generally opposed basing a 
safe harbor on termination-basis liability since few plans ordinarily 
make that determination. Three commenters also said that funding at 100 
percent of termination liability could create a risk of excise tax 
liability.
    After consideration of the comments, PBGC is persuaded that a well-
funded plan safe harbor based on termination-basis liability would be 
unnecessarily burdensome for most plans--especially if the threshold 
remained at 100 percent--and would give reporting relief to few plans. 
Thus, the final rule eliminates the test for the well-funded plan safe 
harbor based on termination-basis liability.
    PBGC is also persuaded that a well-funded plan safe harbor based on 
120 percent funding on a premium basis is not helpful to most plans 
since plans are not likely to fund that high, despite PBGC's belief 
that such a level of funding would better reflect the risk to the 
pension insurance system. After considering various levels of funding 
as suggested by commenters, PBGC concluded that 100 percent funding--
meaning a plan would pay no variable-rate-premium (VRP)--is a realistic 
and reasonable goal and strikes an appropriate balance between the 
burden of reporting and PBGC's need for information to protect the 
pension insurance system. Thus, the well-funded plan safe harbor in the 
final rule applies if the plan owed no VRP for the plan year preceding 
the event year.\30\ Plans exempt from the VRP (e.g., certain new plans) 
will qualify for the safe harbor regardless of their funding 
percentage.
---------------------------------------------------------------------------

    \30\ This safe harbor essentially restores a similar waiver 
under the old regulation, which waived notice for six events if no 
VRP was required to be paid for the plan for the event year.
---------------------------------------------------------------------------

    This safe harbor is less protective of the pension insurance system 
because, among other reasons, liabilities measured on an on-going basis 
are generally lower than liabilities measured on a termination basis, 
and for premium purposes, only vested liabilities are counted. Thus, 
PBGC anticipates that it will not receive some potentially useful 
reports. However, PBGC accepts this trade-off in the interest of 
addressing sponsor and plan concerns.
    The 2013 proposal looked to the VRP data for the year before the 
event year to determine whether a plan qualified for the safe harbor. 
One commenter suggested that PBGC allow plans that did not meet the 
test with prior year premium information to meet the test based on 
current year premium information, if available by the date an event 
occurs. Under this approach, a calendar-year plan with a reportable 
event in November 2014 could determine its eligibility for the waiver 
based on its 2014 VRP filing, instead of its 2013 VRP filing.
    After consideration of the comment, PBGC is not accepting this 
suggestion. PBGC does not want to lose reports from plans when funding 
improves without gaining reports from plans whose funding deteriorates. 
Yet PBGC does not want to require all plans to reassess qualification 
for the safe harbor when VRP data become available. Basing the safe 
harbor on prior year premium information keeps the safe harbor simple 
and predictable; plans will know for certain prior to year-end whether 
they will qualify for the safe harbor for the entire next plan year.
    The 2013 proposal gave small plans a filing extension--for events 
to which this plan financial soundness safe harbor applied--until one 
month after the prior year's premium filing due date (i.e., five months 
after the end of the prior year). PBGC's recent final rule on premiums 
(see 79 FR 13547, March 11, 2014), which advances the small-plan 
premium due date 6\1/2\ months, makes this extension unnecessary, and 
thus it is not included in the final reportable events regulation.

Small-Plan Waivers

    The 2013 proposal included small-plan waivers for five events, as 
compared to two events under the old regulation. One commenter 
specifically commended PBGC for expanding the availability of small 
plan waivers. The final rule changes the small-plan category from fewer 
than 100 participants to 100 participants or fewer for consistency with 
PBGC's recent premium final rule. Otherwise, the small-plan waiver is 
unchanged from the 2013 proposal.

Public Company Waiver

    The old regulation contained a limited public company waiver for 
reporting controlled group change and

[[Page 54990]]

liquidation events. Reporting of these events was waived if the plan's 
contributing sponsor before the effective date of the transaction was a 
public company and the fair market value of the plan's assets was at 
least 80 percent of the plan's vested benefits amount. In the case of a 
liquidation event, the waiver applied only if each plan maintained by 
the liquidating member was maintained by another member of the plan's 
controlled group after the liquidation. The old regulation also 
contained an extension for public companies to report controlled group 
change, liquidation, and extraordinary dividend events until 30 days 
after the earlier of the first Form 10-Q filing deadline that occurred 
after the transaction or the date when a press release with respect to 
the transaction was issued.
    The 2013 proposal did not include a reporting waiver for public 
companies. One commenter urged PBGC to exempt public company sponsors 
from reportable events requirements entirely. This commenter asserted 
that because publicly-traded companies already report significant 
events on their SEC filings, there is no reason for them to provide 
duplicative filings to PBGC.
    In evaluating the commenter's suggestion, PBGC reviewed SEC 
reporting requirements and reportable event notices to determine the 
extent to which PBGC could get timely and relevant information from SEC 
filings that could substitute for reportable events filings.\31\ Based 
on this review, the final rule waives reporting where any contributing 
sponsor of the affected plan is a public company and the contributing 
sponsor timely files a SEC Form 8-K disclosing the event, except where 
such disclosure is under a SEC Form 8-K item relating primarily to 
results of operations or financial statements.\32\ This waiver applies 
to the same five events as the low-default-risk and well-funded plan 
safe harbors. PBGC found that SEC filings provide adequate and timely 
information to PBGC with respect to these events because they are 
either required to be reported under a specific Form 8-K item or 
because they are material information for investors.\33\
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    \31\ See http://www.sec.gov/about/forms/form8-k.pdf.
    \32\ The exceptions for results of operations and financial 
statements fall under SEC Form 8-K Item 2.02 (Results of Operations 
and Financial Condition) and Item 9.01 (Financial Statements and 
Exhibits). The final rule's public company waiver includes these 
exceptions because disclosure of a reportable event under these 
items may be incidental to the event that requires SEC disclosure. 
For example, the release of results of operations may include a 
reference to a reportable event in the context of the overall 
business activities during a fiscal quarter. In such a case, PBGC 
believes the SEC disclosure often may be a passing reference with 
little information about the reportable event and likely made long 
after the event may have occurred.
    \33\ Information about these events is often filed on SEC Form 
8-K under either Item 7.01 Regulation FD Disclosure or Item 8.01 
(Other Events) rather than under one of the specified disclosure 
items on SEC Form 8-K. Publicly-traded companies may also be subject 
to additional requirements to disclose events such as dividend 
transactions that are fulfilled through filing an 8-K report. For 
example, the New York Stock Exchange states that ``a listed company 
is expected to release quickly to the public any news or information 
which might reasonably be expected to materially affect the market 
for its securities'' and includes dividend announcements as an 
example of a news item that should be handled on an immediate 
release basis through SEC regulation FD disclosure. See Sections 
202.05 and 06 of the NYSE Listed Company Manual. http://nysemanual.nyse.com/lcm/. PBGC anticipates that not all controlled 
group changes will be reported on SEC Form 8-K. See e.g., Item 2.01 
(Completion of Acquisition or Disposition of Assets). The 
requirement is only to disclose the completion of an acquisition or 
disposition of a significant amount of assets.
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    The public company waiver does not apply to other events because 
PBGC found that for those events SEC filings would not necessarily 
provide adequate and timely information. For instance, SEC rules do not 
require specific reporting of ERISA events, such as an inability to pay 
benefits when due or a missed contribution, on SEC Form 8-K unless the 
events would be considered material to investor decisions,\34\ which 
often may not be the case for small plans sponsored by large companies. 
Yet these events may still pose a risk to the plan and the pension 
insurance system.\35\
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    \34\ Although such events may be disclosed in quarterly or 
annual SEC reports in financial statements, the disclosure would not 
be timely or provide adequate information for PBGC purposes.
    \35\ For instance, in one case, a company did not report the 
shutdown of one of its facilities in a March 2008 SEC filing. PBGC 
discovered the shutdown through a Form 10 filing and negotiated a 
settlement under ERISA section 4062(e) that resulted in a $400,000 
contribution into the plan before the company filed bankruptcy and 
terminated the pension plan.
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    Similarly, corporate events such as loan default and liquidation 
events may not be disclosed in SEC filings because the information is 
not considered material to investors (and thus not required to be 
reported under SEC rules).\36\ Further, even if an event is disclosed 
in an SEC filing, the filing will likely not contain actuarial or other 
important information that would be included in a reportable events 
notice. These kinds of events present a high risk to the pension 
insurance system by their very nature and thus, timely and complete 
information on them is particularly important.
---------------------------------------------------------------------------

    \36\ SEC Form 8-K's Item 2.04 (Triggering Events That Accelerate 
or Increase a Direct Financial Obligation or an Obligation under an 
Off-Balance Sheet Arrangement) requirement is only triggered if the 
consequences of the event are material to the registrant.
---------------------------------------------------------------------------

    There is no need for a public company waiver for the insolvency 
event in the final regulation (Bankruptcy or Similar Settlements under 
the old regulation), since the new event description excludes 
Bankruptcy Code filings, and public company insolvencies are handled 
through proceedings under the Bankruptcy Code.
    The public company waiver's requirement of actual disclosure (and 
not mere public company status) is consistent with the requirement of 
actual disclosure for public company extensions under the old 
regulation. Such extensions are no longer necessary because all public 
companies will be waived from reporting these events so long as the 
event is actually disclosed.

Foreign Entity and De Minimis Waivers

    The old regulation provided reporting waivers for several events 
where the entity or entities involved in the event were foreign 
entities or represented a de minimis percentage of a controlled 
group.\37\ The 2013 proposal expanded the availability of those waivers 
to five events (extraordinary dividends, controlled group changes, 
insolvencies, liquidations, and loan defaults).\38\ The final rule's 
treatment of de minimis and foreign-entity waivers is unchanged from 
the 2013 proposal.
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    \37\ Both types of waiver apply to controlled group change, 
liquidation, and extraordinary dividend; the foreign entity waiver 
also applies to loan default and bankruptcy. The foreign entity 
waiver is limited to entities that are not direct or indirect 
parents of contributing sponsors; discussion of the foreign-entity 
waiver in this preamble should be understood to incorporate this 
limitation.
    \38\ The waiver would use the ten percent standard for de 
minimis segments. For liquidation, loan default, and insolvency, the 
de minimis waiver is available only if the entity involved in the 
event was not a contributing sponsor.
---------------------------------------------------------------------------

    With respect to de minimis waivers, one commenter requested that 
PBGC clarify whether an investment in a subsidiary is included in 
tangible or intangible assets, particularly in the case of shell 
companies whose only asset is the stock of a subsidiary, for purposes 
of determining whether the entity is de minimis. PBGC believes that 
treatment of stock in a subsidiary should be consistent with the 
regulatory and accounting requirements sponsors follow to prepare 
financial statements.

Controlled Group Situations

    One commenter raised concerns about the difficulty in monitoring 
members of complex controlled groups for reportable events, 
particularly for the

[[Page 54991]]

five reportable events that involve reporting at the controlled group 
level rather than the plan level: Controlled group changes, 
liquidation, loan defaults, extraordinary dividends, and insolvency 
events. The commenter stated that complicated controlled group 
situations require significant coordination across plan sponsors and 
controlled group members to gather information and test the various 
reporting waivers. Some commenters suggested that the proposal was 
unclear about whether the sponsor safe harbor tests had to be met by 
all controlled group members.
    Similar issues existed under the old regulation. Nonetheless, the 
final rule makes changes from the proposal to addresses these concerns 
and minimizes burden for plans that experience events involving 
controlled groups in a number of ways. The final rule:
     Includes public company waivers for five events.
     Clarifies that the company low-default-risk safe harbor 
(which also applies to controlled group changes and extraordinary 
dividends) requires satisfaction by a contributing sponsor and the 
highest level U.S. parent of the contributing sponsor, not by the whole 
controlled group or by the contributing sponsor or highest level U.S. 
parent alone.
     Provides that satisfaction of the low-default-risk safe 
harbor is based on a single point in time during an annual financial 
cycle rather than determination after each of one or more events during 
a year.
    Besides those changes in the final rule, the exclusion of 
proceedings under the Bankruptcy Code from the insolvency event 
description in the final rule (as in the 2013 proposal) will obviate 
most reporting of insolvency cases that involve controlled groups, 
since most such companies will go through federal bankruptcy 
proceedings in the event of insolvency.
    The final regulation (like the proposal) provides relief from 
monitoring smaller controlled group members (through the de minimis 10-
percent segment waivers) and all foreign controlled group members that 
are not parent entities. The inclusion of a small-plan waiver for the 
controlled group change event also provides relief in this regard. PBGC 
believes these exceptions will alleviate the need to monitor the 
controlled group members that are potentially the most difficult to 
track. In addition, PBGC expects that many smaller controlled group 
members typically will not undergo loan default events because their 
debt levels will not meet the $10 million reporting threshold. Thus, 
PBGC determined that no further changes in the final regulation were 
necessary to address concerns about controlled group monitoring.

Effect of Proposal on Loan Agreements

    As discussed in the 2013 proposal, PBGC reviewed loan agreements to 
better understand the concerns of commenters on the 2009 proposal about 
the effect of the proposal on loan agreements.\39\ Based on this 
review, PBGC concluded that the elimination of reporting waivers would 
not adversely affect most plan sponsors with loan agreements. Further, 
PBGC was not aware of any instance where filing notice of a reportable 
event caused a lender to declare a default. PBGC believes that if a 
lender were to declare a default it would be because the underlying 
event indicated a deterioration in the debtor's financial situation.
---------------------------------------------------------------------------

    \39\ See 78 FR 20047-8.
---------------------------------------------------------------------------

    PBGC sought further feedback from the public on this issue in the 
2013 proposal and asked that commenters provide copies of relevant loan 
agreements and information about the number and circumstances of plan 
sponsors that have experienced default or suffered other adverse 
consequences related to loan agreements as a result of a reportable 
event. No such documentation was received.
    One commenter on the 2013 proposal said that since the 2009 
proposal, many companies already have renegotiated agreements to 
provide that the occurrence of a reportable event that is not 
automatically waived is an event of default only if the event could 
result in a certain amount of financial liability or could have a 
material adverse effect on the borrower. But the commenter went on to 
say that a material adverse effect clause does not provide clarity as 
to when the clause actually has been or could be triggered. A second 
commenter, while agreeing with PBGC that in most cases, a non-waived 
reportable event will not result in an automatic default, said it is 
the creditor who determines whether the event results in material 
adverse effect.\40\ Both commenters suggested that lenders may try to 
renegotiate agreements under the pretext that a reportable event had 
resulted in (or could have) a material adverse effect on the borrower, 
which would be time consuming and costly and could force the borrower 
to accept unfavorable terms.
---------------------------------------------------------------------------

    \40\ This commenter suggested that the preamble to the 2013 
proposal downplayed the significance of reportable events on loan 
covenants and loan defaults. The commenter estimates that five to 
ten percent of its time is spent monitoring and revising corporate 
events to avoid reporting.
---------------------------------------------------------------------------

    Two commenters urged PBGC to retain the old reportable events 
regulation because companies have taken the regulation's provisions 
into account in contracting with not only lenders but also with 
employee benefit plan investors (who invest in swaps and futures 
agreements).\41\ However, the old regulation has been unchanged since 
1997, when the economy, defined benefit pension plans and the pension 
insurance program looked very different than they do today. Based on 
more than 15 years of experience with the old regulation, PBGC has 
found that the regulation is not effective in providing timely reports 
for plans that pose the most risk to the pension insurance system.
---------------------------------------------------------------------------

    \41\ This commenter also stated at the hearing that one of its 
members would have faced bankruptcy proceedings unless it was able 
to renegotiate its credit agreement to include a material adverse 
effect clause to a provision that required the absence of a 
reportable events filing. The commenter indicated that the sponsor 
was successful in this effort.
---------------------------------------------------------------------------

    Moreover, reportable events notices are designed to give PBGC 
notices of events that could impair the payment of a debt (i.e., a 
pension obligation). If a lender invokes a material adverse effect 
clause as a result of a reportable event, it is because the lender has 
concerns that the event will impair the company's ability to pay on the 
loan, not because the event is reported to PBGC. In other words, a 
company's lender's concerns in this regard and PBGC's concerns are 
likely to be congruent.
    Although PBGC's understanding of the impact of the regulation on 
loan agreements has not changed, PBGC believes that the changes made in 
this final rule should assuage commenters' concerns in this area. The 
final rule provides more waivers than under the 2013 proposal. PBGC 
anticipates that about 94 percent of plans covered by PBGC will qualify 
for at least one waiver under the active participant reduction, 
controlled group change, extraordinary dividend, benefit liability 
transfer, and substantial owner distribution event provisions. Along 
with missed contribution events (which PBGC does not expect to be 
reported in greater numbers under the final rule), these five events 
accounted for over 90% of filings between 2012 and 2014. Thus, with 
more waivers covering the most common events, sponsors will be better 
off under the new regulation than under the old regulation, and PBGC 
expects an overall net reduction in reporting under the final rule (see 
discussion in Executive Orders 12866 and 13563 and Paperwork Reduction 
Act), and an

[[Page 54992]]

increase in the reporting of events that are a true concern to the 
pension insurance system. In addition, the deferral of the 
applicability date for the final regulation should give plan sponsors 
time to consult with loan providers about appropriate amendments to 
loan agreements, which, as mentioned by the commenter referred to 
above, companies appear already to be doing.\42\
---------------------------------------------------------------------------

    \42\ When credit and investment agreements are renegotiated, 
borrowers might be able to address uncertainty raised by having 
material adverse effect clauses by negotiating a dollar figure 
threshold that would trigger an event of default.
---------------------------------------------------------------------------

Descriptions of Events Under the Final Rule

    The next sections of the preamble address specific event 
descriptions, which can impact reporting requirements in much the same 
way as waivers. The final rule follows the 2013 proposal that reporting 
of an insolvency event is required only when a member of a plan's 
controlled group is involved in insolvency proceedings that are not 
under the federal Bankruptcy Code) and makes no changes in event 
descriptions that were not addressed in the 2013 proposal.

Active Participant Reduction

    Under ERISA section 4043(c)(3), in general, a reportable active 
participant reduction occurs when the number of active participants is 
reduced below 80 percent of the number at the beginning of the year or 
below 75 percent of the number at the beginning of the prior year.
    Creeping losses of active participants may cross the two percentage 
thresholds at different times in one year. The 2009 proposal added a 
reporting waiver to limit reporting to once a year on the premise that 
PBGC would monitor for at least a year any plan that reported an active 
participant reduction.
    The 2013 proposal introduced a new approach to reporting active 
participant reductions. It distinguished between rapid reductions--
which would have to be reported immediately--and slower reductions 
attributable to attrition--which would have to be tested for and 
reported only once a year. This approach addressed a comment on the 
2009 proposal requesting relief from the need to monitor constantly for 
creeping active participant reductions that might exceed one of the 
percentage thresholds. Because the attrition event can occur only once 
a year, PBGC eliminated the 2009 proposal's waiver from reporting 
subsequent active participant reduction event notices after the first 
such event in the same year was reported. PBGC reasoned that quick 
drops in the number of active participants should be easy to spot 
without exercising unusual vigilance.
    Under the 2013 proposal, a ``quick'' active participant reduction 
event would occur when the reporting threshold was crossed either 
within a single 30-day period (a short-period event) or as a result of 
a single cause (a single-cause event), such as the discontinuance of an 
operation, a natural disaster, a reorganization, a mass layoff, or an 
early retirement incentive program. An attrition event would occur if 
the active participant count at the end of a plan year fell below one 
of the percentage thresholds. A 120-day reporting extension beyond the 
end of the year would provide time to count active participants.
    The final rule generally tracks the 2013 proposal but eliminates 
the short-period event (as one commenter requested), lengthens the 
reporting extension for attrition events, and makes some minor 
editorial changes for clarification. PBGC concluded that the burden of 
monitoring for short-period events would outweigh the value of short-
period event reports, since most short-period events would likely also 
be either single-cause events or eventually captured in an attrition-
event filing. In addition, PBGC decided to extend the reporting 
deadline for attrition events until the premium due date for the plan 
year following the event year.
    Two commenters requested reinstatement of the waiver of reporting 
more than once a year from the 2009 proposal, or clarification of when 
more frequent reporting would be required. As explained above, the 
``once-a-year'' waiver is no longer necessary for creeping active 
participant losses because the attrition event can arise only once a 
year. And after consideration, PBGC has concluded that it cannot 
adequately monitor plans for multiple rapid active participant 
reduction events in the same year. Further, two or more distinct events 
in the same year could signal extreme financial distress that merit 
timely reporting to PBGC. Thus the ``once-a-year'' waiver is not in the 
final rule.
    Two commenters suggested exempting frozen plans from the active 
participant reduction event or waiving reporting unless plan 
liabilities increased (as from a triggering of shut-down benefits). 
PBGC has not adopted these suggestions. Although the active participant 
reduction event may be more easily triggered for a frozen plan, such 
plans can pose just as much risk to the pension insurance system as 
plans that are not frozen.
    One commenter asked for a waiver or extension of the requirement to 
report active participant reductions caused by natural disasters. The 
issue here would appear to apply equally to all reportable events, but 
even limiting the proposal to the active participant reduction event, 
PBGC is concerned that the occurrence of a disaster may increase, 
rather than obviate, the importance of timely reporting because a 
natural disaster may have a lasting negative impact on the ability of a 
business to continue operating. Thus, PBGC is providing no special 
rules for disasters in the final rule. Note, however, that in 
appropriate cases, PBGC issues disaster relief notices that provide 
temporary relief from reporting requirements.\43\ Case-by-case waivers 
and extensions are also available.
---------------------------------------------------------------------------

    \43\ See PBGC guidance on disaster relief at http://www.pbgc.gov/res/other-guidance/dr.html.
---------------------------------------------------------------------------

    One commenter wanted PBGC to waive reporting of active participant 
reductions due to spinoffs within a controlled group. PBGC sees no more 
reason to waive reporting where there is an intra-group spinoff than 
where there is no spinoff. The loss of active participants is of 
concern itself, regardless of cause. Further, such a spin-off may be a 
precursor to the transfer of benefit liabilities outside the controlled 
group. Accordingly, no such waiver is provided in the final rule, 
though case-by-case waivers are available.
    Finally, this commenter also questioned the utility of reports of 
active participant reduction events, suggesting that PBGC is unaffected 
by active participant reductions and takes no action on a report of 
such an event unless accompanied by some other event. PBGC disagrees 
with this assessment. Notices of active participant reductions (which 
often result from business restructurings) give PBGC a chance to 
intervene to protect plan assets when a restructuring fails and plan 
termination becomes a significant possibility.

Missed Contributions

    Under the old regulation (Sec.  4043.25), a missed contribution 
event occurs when a plan sponsor fails to make any required plan 
contribution by its due date.
    The final rule (like the 2009 and 2013 proposals) clarifies the 
language in Sec.  4043.25. This reportable event does not apply only to 
contributions required by statute,\44\ but also to contributions

[[Page 54993]]

required as a condition of a funding waiver that do not fall within the 
statutory provisions on waiver amortization charges.\45\ The final rule 
(like the 2013 proposal) includes waivers for this event for a missed 
contribution made up within 30 days after its due date and for small 
plans that miss quarterly contributions.
---------------------------------------------------------------------------

    \44\ Such required contributions include quarterly contributions 
under ERISA section 303(j)(3) and Code section 430(j)(3), liquidity 
shortfall contributions under ERISA section 303(j)(4) and Code 
section 430(j)(4), and contributions to amortize funding waivers 
under ERISA section 303(e) and Code section 430(e).
    \45\ Such ``non-statutory'' contributions are not taken into 
account under ERISA section 303(k) and Code section 430(k), dealing 
with liens that arise because of large missed contributions, and are 
therefore disregarded under Sec.  4043.81, which implements those 
provisions. However, violating the conditions of a funding waiver 
typically means that contributions that were waived become 
retroactively due and unpaid and are counted for purposes of Sec.  
4043.81.
---------------------------------------------------------------------------

    One commenter suggested that PBGC add a waiver for contributions 
missed solely because of a failure to timely make a funding balance 
election. The final rule adds a waiver for a missed contribution where 
the failure to timely make the contribution is due solely to the plan 
sponsor's failure to timely make a funding balance election.
    The final rule also clarifies a technical point from the 2013 
proposal. The requirement to submit a reportable event notice for a 
missed contribution is satisfied by submission of Form 200 for the same 
event. However, reliance on Form 200 to satisfy the reportable event 
filing requirement does not transform Form 200 into a reportable event 
notice. Thus, the final rule makes clear that a Form 200 filing is not 
protected by the non-disclosure provisions of ERISA section 4043(f).

Inability To Pay Benefits When Due

    In general, a reportable event occurs when a plan fails to make a 
benefit payment timely or when a plan's liquid assets fall below the 
level needed for paying benefits for six months. The old regulation 
excuses failure to pay due to inability to locate the payee or any 
other administrative delay of less than two months (or two benefit 
payment periods). In reviewing the proposed rule, PBGC concluded that 
it would be unfair to require a plan to report an inability to pay 
benefits when due simply because (despite the diligence called for by 
the fiduciary standards) a payee could not be located within the 
prescribed time limit. Accordingly, the final rule clarifies that the 
time limit does not apply to delay in paying a missing payee. Other 
administrative delays are excused only to the extent they do not exceed 
the prescribed time limit.

Distribution to Substantial Owner

    Under the old regulation, distributions to substantial owners 
generally were required to be reported if the total distributions to an 
owner exceeded $10,000 in a year, unless the plan was fully funded for 
nonforfeitable benefits. The 2013 proposal limited the event to 
circumstances where the distributions to one substantial owner exceeded 
one percent of plan assets or the distributions to all substantial 
owners exceeded five percent of plan assets. In addition, PBGC proposed 
to limit reporting for a distribution in the form of an annuity to one 
notice, which would satisfy all future reporting requirements for the 
annuity so long as the annuity did not increase. Once notified that an 
annuity was being paid to a substantial owner, PBGC would need no 
further notices that the annuity was continuing to be paid.
    One commenter asked PBGC to exclude from reporting payments made to 
comply with the minimum required distribution rules of Code section 
401(a)(9), which might involve an increasing annuity if the substantial 
owner were still working and accruing benefits but required to take 
minimum distributions. In response, the final rule provides that 
reporting for distributions in the form of annuities is required only 
once, without the limitation that the annuity be non-increasing.

Controlled Group Change

    Under Sec.  4043.29 (both in the old regulation and the new 
regulation), a reportable event occurs for a plan when there is a 
transaction that results, or will result, in one or more persons' 
ceasing to be members of a plan's controlled group. For this purpose, 
the term ``transaction'' includes a written or unwritten legally 
binding agreement to transfer ownership or an actual transfer or change 
of ownership. (A transaction is not reportable if it will result solely 
in a reorganization involving a mere change in identity, form, or place 
of organization, however effected.)
    One commenter to the 2013 proposal raised concerns that elimination 
of the waivers for this event under the old regulation (which the 2013 
proposal replaced with other waivers) would require significant 
monitoring of every transaction in which any controlled group member 
engages throughout the year and analysis of each such transaction to 
determine whether reporting is required. This commenter further 
asserted that the 2013 proposal would add significant administrative 
burdens without a corresponding increase in the security of the pension 
insurance system and urged PBGC to restore the funding and public 
company waivers that applied under the old regulation. PBGC has 
addressed this concern with the final rule's inclusion of the small 
plan and public company waivers, without regard to plan funding status. 
See the discussion above in the sections Public Company Waiver and 
Controlled Group Situations.
    The 2013 proposal deleted the example in Sec.  4043.29(e)(3) of the 
old regulation that indicated that a reportable event occurred when a 
member of a controlled group ceased to exist upon being merged into 
another member in the course of a reorganization. However, this point 
was not made clearly by the language in Sec.  4043.29(a) describing the 
event. The final rule adds language further clarifying that a 
controlled group member's ceasing to exist because of a merger into 
another member of the group is not a reportable event.
    Like the 2013 proposal, the final rule provides that whether an 
agreement is legally binding is to be determined without reference to 
any conditions in the agreement. For this purpose, a legally binding 
agreement means an agreement that provides for obligations that are 
material to and enforceable by and against the parties to the 
agreement, regardless of whether any conditions of the agreement have 
been met or satisfied (in other words, an agreement does not fail to be 
legally binding solely because it is subject to conditions that have 
not been performed).\46\ Example 2 in the regulatory text has been 
modified to make clear when the filing is triggered. The provisions on 
controlled group change events are otherwise unchanged from the 2013 
proposal.
---------------------------------------------------------------------------

    \46\ See similar language in SEC Form 8-K Item 1.01 used to 
define a material definitive agreement.
---------------------------------------------------------------------------

Extraordinary Dividends

    Under the old regulation, an extraordinary dividend or stock 
redemption occurred when a member of a plan's controlled group declared 
a distribution (a dividend or stock redemption) that alone or in 
combination with previous distributions exceeded a level specified in 
the regulation. The 2013 proposal eliminated much of the computational 
detail that the old regulation prescribed for determining whether a 
reportable event had occurred by providing that the computations be 
done in accordance with generally accepted accounting principles.
    Although PBGC did not receive comments on the 2013 proposal for 
this event, PBGC decided to include in the

[[Page 54994]]

final rule a waiver for public companies from reporting extraordinary 
dividends and stock redemptions, as discussed above under Public 
Company Waiver.

Transfer of Benefit Liabilities

    The reportable events regulation requires reporting to PBGC when, 
in any 12-month period, three percent or more of a plan's benefit 
liabilities are transferred to a person outside the transferor plan's 
controlled group or to a plan or plans maintained by a person or 
persons outside the transferor plan's controlled group. Transfers of 
benefit liabilities are of concern to PBGC because they may reduce the 
transferor plan's funded percentage \47\ and because the transferee may 
be a higher default risk than the transferor.
---------------------------------------------------------------------------

    \47\ Under Code section 414(l), transfers of liabilities must be 
covered by assets. In most cases of liabilities transfers, assets 
from the transferor plan also will be transferred to the transferee 
plan, which would reduce the amount of assets in the transferor plan 
and may affect its funded percentage.
---------------------------------------------------------------------------

    Both the 2009 and 2013 proposals clarified that satisfaction of a 
plan's benefit liabilities through the payment of a lump sum or the 
purchase of an irrevocable commitment to provide an annuity would not 
constitute a transfer of benefit liabilities that must be reported 
under the regulation. In the preamble to the 2013 proposal (78 FR at 
20050), PBGC stated it had concluded that such transfers need not be 
reported because the provisions in section 436 of the Code and section 
206(g) of ERISA (as added by the Pension Protection Act of 2006 (PPA)) 
prohibit or limit cashouts and annuitizations by significantly 
underfunded plans. In addition, since cashouts and annuitizations do 
not involve benefit liabilities transferring to another plan, PBGC 
reasoned there would be no concern about a transferee plan's financial 
health.
    One commenter on the 2013 proposal opposed the exclusion of lump 
sums and annuity purchases from the reporting requirement. This 
commenter suggested that cash-outs or annuitizations on a large scale, 
sometimes referred to as de-risking or risk transfers, presage the 
decline of the defined benefit pension plan system. This commenter 
stated PBGC could gather information that might lead to regulatory or 
statutory protection for participants impacted by these types of 
transactions. During the hearing on the 2013 proposal, however, all of 
the co-panelists of this commenter expressed opposite views.
    PBGC shares concerns about the potential impact of cashouts and 
annuitizations on a large scale on retirement security, including 
concerns that some of these transactions may leave a plan underfunded 
or effectively be part of a standard termination without meeting the 
applicable statutory and regulatory requirements (including reporting 
to PBGC and disclosure to participants). PBGC also recognizes that such 
transactions may create burdens on individuals whose options to obtain 
lifetime income in retirement are limited or who may not have the 
resources or experience to manage lump sum distributions in a way that 
replicates the professional investment management (with the associated 
fiduciary responsibilities) of defined benefit plan assets. PBGC notes, 
however, that few companies would be subject to advance reporting of 
such transactions, thus severely limiting the utility of such 
reporting, as compared to its burden. Therefore, PBGC is not adopting 
the commenter's suggestion in this final rule. Accordingly, the final 
rule retains the treatment of lump sum distributions and annuity 
purchases from the proposals.
    Nevertheless, PBGC believes there are ways to address the 
commenter's concerns. PBGC believes it has useful tools to monitor and 
analyze trends (e.g., Form 5500 and premium filings) as well as tools 
to provide education and outreach to participants, and is carefully 
considering how best to do so.\48\
---------------------------------------------------------------------------

    \48\ PBGC is requiring reporting of risk transfers on premium 
forms, starting with filings for plan years beginning in 2015. See 
http://www.pbgc.gov/Documents/2015-Premium-Payment-Instructions.pdf.
---------------------------------------------------------------------------

Loan Default

    Under the old regulation, a loan default reportable event occurred, 
with respect to a loan with an outstanding balance of $10 million or 
more to any member of a plan's controlled group, when a loan payment 
was more than 30 days late (10 days in the case of advance reporting), 
when the lender accelerated the loan, or when there was a written 
notice of default based on a drop in cash reserves, an unusual or 
catastrophic event, or the debtor's persistent failure to meet agreed-
on performance levels.
    PBGC believes that the significance of both potential and actual 
loan defaults on such large loans is so great that reporting should not 
be restricted to the current list of reporting triggers. Rather, PBGC 
believes that not only any default on a loan of $10 million or more--
even a default on a loan within a controlled group--but waivers and 
amendments of loan covenants that are made to avoid a default (to keep 
the loan arrangement functioning) may reflect financial difficulty and 
pose serious challenges for the pension insurance system. Accordingly, 
in the 2013 proposal PBGC expanded the definition of the loan default 
event. Under the 2013 proposal, a reportable event would occur if a 
member of a plan's controlled group had an outstanding loan balance of 
$10 million or more and--
     There was an acceleration of payment or a default under 
the loan agreement, or
     The lender waived or agreed to an amendment of any 
covenant in the loan agreement for the purpose of avoiding a default.
    These changes were to apply for both post-event notices and advance 
notices.
    In the preamble to the 2013 proposal, PBGC stated its belief that 
the reporting requirement for loan defaults under the proposed rule 
would be comparable to what a typical creditor would require of a 
borrower to monitor the ability of the borrower to meet its obligations 
under the loan agreement. PBGC sought the views of the public on 
specific issues dealing with loan defaults, including how PBGC might 
better replicate reporting of information to creditors and whether 
there is a category of ``technical'' defaults that should not be 
reportable events.
    One commenter was concerned that the proposal would require PBGC to 
determine a plan sponsor's intent behind a waiver or amendment and was 
not sure how such intent could be determined. To address this comment, 
the final rule replaces words ``for the purpose of avoiding a default'' 
in the 2013 proposal with the words ``the effect of which is to cure or 
avoid a breach that would trigger a default.''
    This commenter also said that the scope of the proposed expansion 
of the event definition was too broad, especially for public companies 
that might face SEC disclosure issues. The commenter urged PBGC to 
modify the proposal to require the reporting of an amendment or waiver 
only to ``material financial covenants,'' and not all covenants (e.g., 
non-financial covenants such as compliance with ERISA and similar 
laws). Another commenter, in responding to the proposed loan default 
criterion of the sponsor financial soundness safe harbor, was also 
concerned that the proposed rule's description of the loan default 
event was too broad because so-called meaningless ``technical 
defaults'' that are waived by a lender and are not indicative of 
financial stress would be reported. Other than these comments, PBGC did 
not receive feedback on loan default concerns.
    After reviewing the comments and further analysis of typical loan

[[Page 54995]]

agreement provisions, PBGC has decided to not make further changes to 
the event description in response to comments. Covenants that are tied 
to event-of-default triggers are put into loan agreements because 
lenders believe that failure to comply with such covenants is 
significant and serves as an early indicator that a company may be 
experiencing financial difficulties resulting in its inability to pay 
its debts on time and in full. Distinctions should be made between a 
breach of any covenant in a loan agreement and a breach of a particular 
covenant that gives rise to a possible event-of-default trigger. The 
former may cover the kinds of minor loan agreement violations of the 
kind the commenter who asked that ``technical defaults'' of loan 
agreements be excluded from reporting under the regulation. The latter 
are those types of breaches (e.g., non-payment, failure to meet a 
financial ratio, or failure to provide some important information) that 
the parties to the loan agreement have agreed are serious enough to 
undermine the loan agreement arrangement. Under the final regulation, 
PBGC will act as any another creditor would by requiring reporting of 
all incidents within the expanded scope of the loan default event. If a 
sponsor believes that an event triggering the loan default reporting 
requirement does not reflect financial difficulty or the ability of the 
sponsor to meet its pension obligations, PBGC will consider a request 
for a case-by-case waiver.
    The final rule makes one other change to this event from the 2013 
proposal. The final rule deletes a paragraph from the old regulation on 
the notice date for payment acceleration or loan default that referred 
to ``other conditions'' for such occurrences to be reportable. Because 
the provisions concerning ``other conditions'' are eliminated 
(following the 2013 proposal), this paragraph is no longer necessary.

Form 200 Reporting

    One commenter suggested that PBGC allow for simplified reporting 
for Form 200 filings in limited situations, such as when the missed 
contribution has been made up by the filing due date and the plan has 
not missed any other contributions within a certain period of time. 
PBGC thought this was a good suggestion. Accordingly, under the final 
rule, if a plan sponsor makes up a missed contribution by the Form 200 
notice due date, and the sponsor has not missed any other required 
contributions during the two-year period ending on the Form 200 notice 
due date, the plan may file the Form 200 notice without any of the 
attachments (e.g., controlled group listing and company financial 
statements) otherwise required by the Form 200 and instructions.

Other Topics Under the Final Rule

Advance Reporting

    In general, reportable events must be reported to PBGC within 30 
days after they occur. But section 4043(b) of ERISA requires advance 
reporting by a contributing sponsor for certain reportable events if a 
``threshold test'' is met, unless the contributing sponsor or 
controlled group member to which an event relates is a public company. 
The advance reporting threshold test is based on the aggregate funding 
level of plans maintained by the contributing sponsor and members of 
the contributing sponsor's controlled group. The funding level criteria 
are expressed by reference to calculated values that are used to 
determine VRPs under section 4006 of ERISA.
    PPA changed the plan funding rules in Title I of ERISA and in the 
Code and amended the VRP provisions of section 4006 of ERISA to conform 
to the changes in the funding rules. The final rule, like the prior 
proposals, conforms the regulation to the changes made under PPA.\49\
---------------------------------------------------------------------------

    \49\ Several other PBGC regulations also refer to plan funding 
concepts using citations outmoded by PPA: The regulations on Filing, 
Issuance, Computation of Time, and Record Retention (29 CFR part 
4000); Terminology (29 CFR part 4001); Variances for Sale of Assets 
(29 CFR part 4204); Adjustment of Liability for a Withdrawal 
Subsequent to a Partial Withdrawal (29 CFR part 4206); and Mergers 
and Transfers Between Multiemployer Plans (29 CFR part 4231). Thus, 
these regulations must also be revised to be consistent with ERISA 
and the Code as amended by PPA and with the revised premium 
regulations. The final rule makes the necessary conforming 
revisions, as proposed.
---------------------------------------------------------------------------

    The regulatory language under the final rule is slightly modified 
to conform to changes made in a recent final rule on PBGC premiums 
under which small plans generally calculate the VRP using data from the 
plan year preceding the premium payment year, a requirement referred to 
as the ``look-back rule.'' \50\ Thus, the reportable events final rule 
clarifies that the VRP data used for this advance reporting test are 
not the data for the prior year, but the data used to determine the VRP 
for the prior year.
---------------------------------------------------------------------------

    \50\ See 79 FR 13547 (March 11, 2014).
---------------------------------------------------------------------------

    There is no change in the final rule from the 2013 proposal that 
eliminated advance-notice extensions for loan default and voluntary 
insolvency events. (The notice date of an event where insolvency 
proceedings are filed against a debtor by someone outside the plan's 
controlled group is extended to 10 days after proceedings begin). Thus, 
under the final rule, the due date for these events is the same as for 
other reportable events subject to the advance-notice requirements 
(i.e., 30 days prior to the event).

Forms and Instructions

    PBGC issues three reporting forms for use under the reportable 
events regulation. Form 10 is for post-event reporting under subpart B 
of the regulation; Form 10-Advance is for advance reporting under 
subpart C of the regulation; and Form 200 is for reporting under 
subpart D of the regulation. Failure to report is subject to penalties 
under section 4071 of ERISA. The final rule eliminates some of the 
documentation that was required to be submitted with notices of two 
reportable events under the old regulation, but also requires that 
filers submit with notices of most events some information that is 
typically requested by PBGC after notices are reviewed. The final rule 
also requires the use of prescribed reportable events forms and moves 
from the regulation to the forms and instructions the lists of 
information items that must be reported.
    Three commenters expressed concern about moving the information 
requirements from the regulation to the forms and instructions because 
public input on any changes might be limited; one of these commenters 
said that Paperwork Reduction Act (PRA) notices are easy to miss.
    PBGC does not agree. PBGC posts all pending PRA submissions on its 
Web site at http://www.pbgc.gov/res/laws-and-regulations/information-collections-under-omb-review.html. Interested persons can sign up for 
notifications of new postings through PBGC's Web site at http://www.pbgc.gov/res/res/stay-informed.html. PBGC observes that the public 
was provided an opportunity to comment on the forms and instructions in 
connection with the 2013 proposal and PBGC received only one 
substantive comment (noted below). Moving the information requirements 
to the forms and instructions will allow PBGC to be more flexible in 
responding to future developments, such as changes in information 
technology.\51\
---------------------------------------------------------------------------

    \51\ Although changes to the paperwork would not have to go 
through notice and comment rulemaking, they would still have to be 
reviewed by OMB under the Paperwork Reduction Act, which typically 
requires two public notices and a total of 90 days for submission of 
public comments.
---------------------------------------------------------------------------

    One commenter felt that the 2013 proposal dramatically increased 
the information required to be initially reported. As explained in the 
2013

[[Page 54996]]

proposal (78 FR 20051), PBGC acknowledges that initial information 
requirements generally will increase. However, the total amount of 
information submitted to PBGC (including both initial reports and 
follow-up information requested by PBGC) generally will not increase, 
and providing information all at one time is more efficient than doing 
so in multiple installments. Further, by requiring more information 
with the initial filing, the new requirements will allow PBGC to 
intervene to protect plans and participants more quickly in appropriate 
circumstances.

Mandatory Electronic Filing

    The final rule, like the 2009 and 2013 proposals, requires 
electronic filing of reportable events notices. This requirement is 
part of PBGC's ongoing implementation of the Government Paperwork 
Elimination Act.
    Filers are permitted to email filings with attachments using any 
one or more of a variety of electronic formats that PBGC is capable of 
reading as provided in the instructions on PBGC's Web site. (PBGC 
accepts imaged signatures for filings.)
    PBGC may consider other E-filing enhancements, such as a Web-based 
filing application for reportable events similar to the applications 
for PBGC's section 4010 and premium filings, as internet capabilities 
and standards change. Such developments would be reflected in PBGC's 
reportable events e-filing instructions.
    PBGC sought public comment on its proposal to require electronic 
filing. One commenter favored electronic reporting while two others 
requested a paper filing option. In view of the fact that all plans 
subject to the reportable events regulation must file Form 5500 and 
PBGC premiums electronically, a paper option within the regulation for 
the occasional reportable event notice seems unnecessary. However, PBGC 
may grant case-by-case waivers of the electronic filing requirement.

Other Changes

    The final rule makes a change to Sec.  4043.20 that was not 
included in the 2013 proposal to clarify that the responsibility for a 
failure to file a reportable event notice if there is a change in plan 
sponsor or plan administrator lies with the person who is the plan 
administrator or contributing sponsor of the plan on the due date. 
Without this change, if there were a change in plan administrator or 
sponsor after a notice had been filed but before the due date, the new 
plan administrator or sponsor would be required to file another notice. 
A similar change is made to Sec.  4043.61(a) with respect to a change 
in a contributing sponsor and the responsibility to file advance-notice 
reports.
    The final rule also makes applicable to the regulation generally a 
provision--limited to one event in the old regulation--waiving 
reporting for statutory reportable events outside the scope of the 
reportable events described in the regulation. This provision has been 
reworded and moved from Sec.  4043.31(c)(1) (dealing with extraordinary 
dividends) to Sec.  4043.4(e) (dealing with waivers generally).
    The 2013 proposal made other technical changes that are retained in 
the final rule.\52\
---------------------------------------------------------------------------

    \52\ See 78 FR 20052-3.
---------------------------------------------------------------------------

Summary Chart

    The following tables summarize waiver and safe harbor provisions 
for reportable events for which post-event reporting is required. The 
first table shows waivers and safe harbors available under this final 
rule, and the second table shows a comparison of such provisions 
between the old regulation and this final rule. As explained in detail 
above, the final rule also provides reporting relief--like the relief 
provided by waivers--through changes to the definitions of certain 
reportable events, including substantial owner distributions and active 
participant reductions and through the requirement for filing only once 
a plan year for active participant reductions that occur by attrition.

[[Page 54997]]

[GRAPHIC] [TIFF OMITTED] TR11SE15.005


[[Page 54998]]


[GRAPHIC] [TIFF OMITTED] TR11SE15.006


[[Page 54999]]


[GRAPHIC] [TIFF OMITTED] TR11SE15.007


[[Page 55000]]



Applicability

    The changes to Part 4043 made by this final rule are applicable to 
post-event reports for reportable events occurring on or after January 
1, 2016, and to advance reports due on or after that date.

Regulatory Procedures

Executive Orders 12866 and 13563

    PBGC has determined that this rule is a ``significant regulatory 
action'' under Executive Order 12866. The Office of Management and 
Budget has therefore reviewed this rule under Executive Order 12866.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. Executive Orders 12866 and 13563 require that a 
comprehensive regulatory impact analysis be performed for any 
economically significant regulatory action, defined as an action that 
would result in an annual effect of $100 million or more on the 
national economy or that have other substantial impacts. In accordance 
with OMB Circular A-4, PBGC has examined the economic and policy 
implications of this rule and has concluded that the action's benefits 
justify its costs.
    As discussed above, some reportable events present little or no 
risk to the pension insurance system--where, for example, the plan 
sponsor presents a low risk of default and the risk of plan termination 
is correspondingly low. Reports of such events are unnecessary in the 
sense that PBGC typically reviews but takes no action on them. PBGC 
analyzed 2013 records to determine how many such reports it received 
for events to which the proposed sponsor safe harbor would apply, then 
reanalyzed the data to see how many unnecessary reports would have been 
received if the plan sponsor safe harbor in the proposed rule had been 
in effect (that is, excluding reports that would have been waived under 
the plan sponsor safe harbor test).\56\ It found that the proportion of 
unnecessary filings would be much lower under the final regulation than 
under the old regulation--9 percent (19 filings) compared to 50 percent 
(215 filings). Such improved efficiency will be reflected in 
dramatically reduced regulatory burden on sponsors and plans that 
satisfy the risk-based safe harbors. Further, PBGC estimates that the 
number of total filings will be reduced under the final regulation.
---------------------------------------------------------------------------

    \56\ Filings that involved section 4062(e) events always 
resulted in the opening of cases and were excluded from the 
analysis.
---------------------------------------------------------------------------

    Fewer unnecessary reports means a more efficient reporting system 
and a greater proportion of filings that present the opportunity for 
increased plan protection through monitoring and possible intervention 
in transactions based on risk, leading to better protection for the 
pension insurance system and retirement security generally.
    Using data from 2013, PBGC has estimated the benefit of better-
targeted reporting under the new regulation in terms of the value of 
early intervention as a creditor where a reportable event may 
foreshadow sponsor default. Early intervention as a creditor leads to 
higher recoveries of plan underfunding. PBGC estimates that the value 
of early intervention would exceed the dollar equivalent of the 
increased burden associated with the higher rate of targeted reporting 
by approximately $4.3 million.
    Under Section 3(f)(1) of Executive Order 12866, a regulatory action 
is economically significant if ``it is likely to result in a rule that 
may . . . [h]ave an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities.'' PBGC has determined that this final rule does not cross 
the $100 million threshold for economic significance and is not 
otherwise economically significant.
    This action is associated with retrospective review and analysis in 
PBGC's Plan for Regulatory Review issued in accordance with Executive 
Order 13563 on ``Improving Regulation and Regulatory Review.''

Regulatory Flexibility Act

    The Regulatory Flexibility Act imposes certain requirements with 
respect to rules that are subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act and 
that are likely to have a significant economic impact on a substantial 
number of small entities. Unless an agency determines that a rule is 
not likely to have a significant economic impact on a substantial 
number of small entities, section 603 of the Regulatory Flexibility Act 
requires that the agency present an initial regulatory flexibility 
analysis at the time of the publication of the proposed rule describing 
the impact of the rule on small entities and seeking public comment on 
such impact. Small entities include small businesses, organizations and 
governmental jurisdictions.
    For purposes of the Regulatory Flexibility Act requirements with 
respect to the proposed amendments to the reportable events regulation, 
PBGC considers a small entity to be a plan with fewer than 100 
participants. This is the same criterion used to determine the 
availability of the ``small plan'' waiver, and is consistent with 
certain requirements in Title I of ERISA \57\ and the Code,\58\ as well 
as the definition of a small entity that the Department of Labor (DOL) 
has used for purposes of the Regulatory Flexibility Act.\59\ Using this 
definition, about 64 percent (14,349 of 22,344) of plans covered by 
Title IV of ERISA in 2014 were small plans.\60\
---------------------------------------------------------------------------

    \57\ See, e.g., ERISA section 104(a)(2), which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \58\ See, e.g., Code section 430(g)(2)(B), which permits plans 
with 100 or fewer participants to use valuation dates other than the 
first day of the plan year.
    \59\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66,637, 66,644 (Oct. 27, 2011).
    \60\ See PBGC 2014 pension insurance data table S-31 http://www.pbgc.gov/documents/2013-DATA-BOOK-FINAL.pdf.
---------------------------------------------------------------------------

    Further, while some large employers may have small plans, in 
general most small plans are maintained by small employers. Thus, PBGC 
believes that assessing the impact of the final rule on small plans is 
an appropriate substitute for evaluating the effect on small entities. 
The definition of small entity considered appropriate for this purpose 
differs, however, from a definition of small business based on size 
standards promulgated by the Small Business Administration (13 CFR 
121.201) pursuant to the Small Business Act. PBGC requested comments on 
the appropriateness of the size standard used in evaluating the impact 
on small entities of the proposed amendments to the reportable events 
regulation. PBGC received no comments in response to this request.
    On the basis of its definition of small entity, PBGC certifies 
under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.) that the amendments in this rule will not have a significant 
economic impact on a substantial number of small entities. Accordingly, 
as provided in section 605

[[Page 55001]]

of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), sections 603 
and 604 do not apply. This certification is based on the fact that the 
reportable events regulation requires only the filing of one-time 
notices on the occurrence of unusual events that affect only certain 
plans and that the economic impact of filing is not significant. The 
average burden of submitting a notice--based on the estimates discussed 
under Paperwork Reduction Act, below--is less than 5\1/2\ hours and 
$745 (virtually the same as under the old regulation).

Paperwork Reduction Act

    PBGC is submitting the information collection requirements under 
this rule to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act. There are two information collections under 
part 4043, approved under OMB control number 1212-0013 (covering 
subparts B and C), which expires May 31, 2018, and OMB control number 
1212-0041 (covering subpart D), which expires June 30, 2018.
    PBGC is making the following changes to these information 
requirements that were approved by OMB:
     PBGC's experience is that in order to assess the 
significance of virtually every post-event filing for a missed 
contribution, inability to pay benefits, loan default, liquidation, or 
insolvency, it must obtain from the filer certain actuarial, financial 
and controlled group information. Filers were previously required to 
submit some of this information for some events, but PBGC has made its 
information collection for all these events more uniform. Accordingly, 
in connection with the final rule, PBGC now requires that every post-
event filing for one of these events include the following financial 
and controlled group information (actuarial information was already 
required):
    1. The financial information required will be copies of audited 
financial statements for the most recent fiscal year. (If audited 
statements were not immediately available, copies of unaudited 
financial statements (if available) or tax returns would be required, 
to be followed up with required financial statements when available.)
    2. The controlled group information required will be tailored to 
the event being reported and will generally include identifying 
information for each plan maintained by any member of the controlled 
group and a description of the controlled group with members' names.
     Similarly, PBGC has found that it needs the same financial 
and controlled group information for advance-notice filings (in 
addition to actuarial information already required). For notices of 
applications for funding waiver requests, the information can typically 
be gleaned from the copy of the application that accompanies the 
reportable event notice. With this exception, PBGC is requiring that 
every advance notice filing include these items (unless the information 
is publicly available).
     Controlled group changes and benefit liability transfers 
involve both an ``old'' controlled group and a ``new'' controlled 
group. PBGC had already required submission of controlled group 
information with notices of controlled group changes under the old 
regulation and is now also requiring the same for benefit liability 
transfers.
     Because extraordinary distributions raise questions about 
controlled group finances, PBGC now requires submission of financial 
information with notices of events of this type.
     PBGC now requires that notices of substantial owner 
distributions give the reason for the distribution to help PBGC analyze 
its significance.
     Inability to pay benefits raises the specter of imminent 
sponsor shutdown and plan termination. Accordingly, for notice of this 
event, PBGC now requires submission of copies of the most recent plan 
documents and IRS qualification letter.
     PBGC is adding to the Form 200 information submission 
requirements a requirement to provide information about all controlled 
group real property, and identity of controlled group principal 
executive offices.
     Simplified reporting for Form 200 filings is now available 
where the filer has not missed any required contribution (other than 
the missed contribution that triggered the Form 200 filing requirement 
during the two-year period ending on the notice due date for the Form 
200) and has made up the missed contribution by the notice due date; 
under the simplified reporting provision, none of the attachments that 
are otherwise required to be included in the filing (e.g., controlled 
group listing and company financial statements) need to be provided.
     In missed contribution cases, there is sometimes a credit 
balance that is available for application to a contribution that is 
due. PBGC needs to be able to determine whether all or a portion of the 
credit balance has been properly applied toward payment of the 
contribution. Accordingly, PBGC is requiring Form 200 filers to 
indicate how much (if any) of the carryover balance or prefunding 
balance was used for partial payment of the missed contribution and 
submit copies of election letters relating to the application of the 
carryover balance and prefunding balance to the contribution.
     PBGC is requiring a description of each controlled group 
member's operational status (in Chapter 7 proceedings, liquidating 
outside of bankruptcy, on-going, etc.) in Form 200 filings.
    PBGC needs the information in reportable events filings under 
subparts B and C of part 4043 (Forms 10 and 10-Advance) to determine 
whether it should terminate plans that experience events that indicate 
plan or sponsor financial problems. PBGC estimates that it will receive 
such filings from about 816 respondents each year and that the total 
annual burden of the collection of information will be about 4,496 
hours and $607,570. This represents a decreased burden compared to that 
under the old regulation, as the following table shows:

------------------------------------------------------------------------
                                       Under old           Under new
         Annual burden:               regulation:         regulation:
------------------------------------------------------------------------
Number of responses.............  867...............  816.
Hour burden.....................  4,487 hours.......  4,496 hours.
Dollar burden...................  $660,853..........  $607,570.
------------------------------------------------------------------------

    As discussed above, the final rule is designed to reduce burden 
dramatically on well-funded plans and low-default-risk sponsors; thus, 
burden under the final rule is substantially associated with higher-
risk events, which are much more likely to deserve PBGC's attention. 
PBGC separately estimated the average burden changes for low-default-
risk and non-low-default-risk entities. The burden for low-default-risk 
sponsors is down from 443 hours and $118,025 to zero. The burden for 
non-low-default-risk sponsors is up by 402 hours and $64,742.

[[Page 55002]]



----------------------------------------------------------------------------------------------------------------
                        Low-default-risk                              Volume           Hours           Cost
----------------------------------------------------------------------------------------------------------------
Current.........................................................             128             443        $118,025
Final...........................................................               0               0               0
Change..........................................................           (128)           (443)       (118,025)
----------------------------------------------------------------------------------------------------------------


 
 
----------------------------------------------------------------------------------------------------------------
Non low-default-risk                                                  Volume           Hours           Cost
----------------------------------------------------------------------------------------------------------------
Current.........................................................             739           4,094        $542,828
Final...........................................................             816           4,496         607,570
Change..........................................................              77             402          64,742
----------------------------------------------------------------------------------------------------------------

    PBGC needs the information in missed contribution filings under 
subpart D of part 4043 (Form 200) to determine the amounts of statutory 
liens arising under ERISA section 303(k) and Code section 430(k) and to 
evaluate the funding status of plans with respect to which such liens 
arise and the financial condition of the persons responsible for their 
funding. PBGC estimates that it will receive such filings from about 
165 respondents each year and that the total annual burden of the 
collection of information will be about 990 hours and $146,406.

List of Subjects

29 CFR Part 4000

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

29 CFR Part 4001

    Employee benefit plans, Pension insurance.

29 CFR Part 4043

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

29 CFR Part 4204

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

29 CFR Part 4206

    Employee benefit plans, Pension insurance.

29 CFR Part 4231

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

    For the reasons given above, PBGC is amending 29 CFR parts 4000, 
4001, 4043, 4204, 4206, and 4231 as follows.

PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD 
RETENTION

0
The authority citation for part 4000 is revised to read as follows:

    Authority: 29 U.S.C. 1083(k), 1302(b)(3).


0
2. In Sec.  4000.3, paragraph (b)(3) is added to read as follows:


Sec.  4000.3  What methods of filing may I use?

* * * * *
    (b) * * *
    (3) You must file notices under part 4043 of this chapter 
electronically in accordance with the instructions on PBGC's Web site, 
http://www.pbgc.gov, except as otherwise provided by PBGC.
* * * * *


Sec.  4000.53  [Amended]

0
3. In Sec.  4000.53, paragraphs (c) and (d) are amended by removing the 
words ``section 302(f)(4), section 307(e), or'' where they occur in 
each paragraph and adding in their place the words ``section 101(f), 
section 303(k)(4), or''.

PART 4001--TERMINOLOGY

0
4. The authority citation for part 4001 continues to read as follows:

    Authority: 29 U.S.C. 1301, 1302(b)(3).


Sec.  4001.2  [Amended]

0
5. In Sec.  4001.2:
0
a. The definition of ``controlled group'' is amended by removing the 
words ``section 412(c)(11)(B) of the Code or section 302(c)(11)(B) of 
ERISA'' and adding in their place the words ``section 412(b)(2) of the 
Code or section 302(b)(2) of ERISA''.
0
b. The definition of ``funding standard account'' is amended by 
removing the words ``section 302(b) of ERISA or section 412(b) of the 
Code'' and adding in their place the words ``section 304(b) of ERISA or 
section 431(b) of the Code''.
0
c. The definition of ``substantial owner'' is amended by removing the 
words ``section 4022(b)(5)(A)'' and adding in their place the words 
``section 4021(d)''.

0
6. Part 4043 is revised to read as follows:

PART 4043--REPORTABLE EVENTS AND CERTAIN OTHER NOTIFICATION 
REQUIREMENTS

Subpart A--General Provisions
Sec.
4043.1 Purpose and scope.
4043.2 Definitions.
4043.3 Requirement of notice.
4043.4 Waivers and extensions.
4043.5 How and where to file.
4043.6 Date of filing.
4043.7 Computation of time.
4043.8 Confidentiality.
4043.9 Company low-default-risk safe harbor.
4043.10 Well-funded plan safe harbor.
Subpart B--Post-Event Notice of Reportable Events
4043.20 Post-event filing obligation.
4043.21 Tax disqualification and Title I noncompliance.
4043.22 Amendment decreasing benefits payable.
4043.23 Active participant reduction.
4043.24 Termination or partial termination.
4043.25 Failure to make required minimum funding payment.
4043.26 Inability to pay benefits when due.
4043.27 Distribution to a substantial owner.
4043.28 Plan merger, consolidation, or transfer.
4043.29 Change in contributing sponsor or controlled group.
4043.30 Liquidation.
4043.31 Extraordinary dividend or stock redemption.
4043.32 Transfer of benefit liabilities.
4043.33 Application for minimum funding waiver.
4043.34 Loan default.
4043.35 Insolvency or similar settlement.
Subpart C--Advance Notice of Reportable Events
4043.61 Advance reporting filing obligation.
4043.62 Change in contributing sponsor or controlled group.
4043.63 Liquidation.
4043.64 Extraordinary dividend or stock redemption.
4043.65 Transfer of benefit liabilities.
4043.66 Application for minimum funding waiver.
4043.67 Loan default.
4043.68 Insolvency or similar settlement.
Subpart D--Notice of Failure to Make Required Contributions
4043.81 PBGC Form 200, notice of failure to make required 
contributions; supplementary information.

    Authority: 29 U.S.C. 1083(k), 1302(b)(3), 1343.

[[Page 55003]]

Subpart A--General Provisions


Sec.  4043.1  Purpose and scope.

    This part prescribes the requirements for notifying PBGC of a 
reportable event under section 4043 of ERISA or of a failure to make 
certain required contributions under section 303(k)(4) of ERISA or 
section 430(k)(4) of the Code. Subpart A contains definitions and 
general rules. Subpart B contains rules for post-event notice of a 
reportable event. Subpart C contains rules for advance notice of a 
reportable event. Subpart D contains rules for notifying PBGC of a 
failure to make certain required contributions.


Sec.  4043.2  Definitions.

    The following terms are defined in Sec.  4001.2 of this chapter: 
benefit liabilities, Code, contributing sponsor, controlled group, 
ERISA, fair market value, irrevocable commitment, multiemployer plan, 
PBGC, person, plan, plan administrator, plan year, single-employer 
plan, and substantial owner.
    In addition, for purposes of this part:
    De minimis 10-percent segment means, in connection with a plan's 
controlled group, one or more entities that in the aggregate have for a 
fiscal year--
    (1) Revenue not exceeding 10 percent of the controlled group's 
revenue;
    (2) Annual operating income not exceeding the greater of--
    (i) 10 percent of the controlled group's annual operating income; 
or
    (ii) $5 million; and
    (3) Net tangible assets at the end of the fiscal year(s) not 
exceeding the greater of--
    (i) 10 percent of the controlled group's net tangible assets at the 
end of the fiscal year(s); or
    (ii) $5 million.
    De minimis 5-percent segment has the same meaning as de minimis 10-
percent segment, except that ``5 percent'' is substituted for ``10 
percent'' each time it appears.
    Event year means the plan year in which a reportable event occurs.
    Foreign entity means a member of a controlled group that--
    (1) Is not a contributing sponsor of a plan;
    (2) Is not organized under the laws of (or, if an individual, is 
not a domiciliary of) any state (as defined in section 3(10) of ERISA); 
and
    (3) For the fiscal year that includes the date the reportable event 
occurs, meets one of the following tests--
    (i) Is not required to file any United States federal income tax 
form;
    (ii) Has no income reportable on any United States federal income 
tax form other than passive income not exceeding $1,000; or
    (iii) Does not own substantial assets in the United States 
(disregarding stock of a member of the plan's controlled group) and is 
not required to file any quarterly United States tax returns for 
employee withholding.
    Foreign parent means a foreign entity that is a direct or indirect 
parent of a person that is a contributing sponsor of a plan.
    Low-default-risk has the meaning described in Sec.  4043.9.
    Notice due date means the deadline (including extensions) for 
filing notice of a reportable event with PBGC.
    Participant means a participant as defined in Sec.  4006.2 of this 
chapter.
    Public company means a person subject to the reporting requirements 
of section 13 or 15(d) of the Securities Exchange Act of 1934 or a 
subsidiary (as defined for purposes of the Securities Exchange Act of 
1934) of a person subject to such reporting requirements.
    U.S. entity means an entity subject to the personal jurisdiction of 
the U.S. district court.
    Well-funded plan safe harbor has the meaning described in Sec.  
4043.10.


Sec.  4043.3  Requirement of notice.

    (a) Obligation to file--(1) In general. Each person that is 
required to file a notice under this part, or a duly authorized 
representative, must submit the information required under this part by 
the time specified in Sec.  4043.20 (for post-event notices), Sec.  
4043.61 (for advance notices), or Sec.  4043.81 (for Form 200 filings). 
Any information filed with PBGC in connection with another matter may 
be incorporated by reference. If an event is subject to both post-event 
and advance notice requirements, the notice filed first satisfies both 
filing requirements.
    (2) Multiple plans. If a reportable event occurs for more than one 
plan, the filing obligation with respect to each plan is independent of 
the filing obligation with respect to any other plan.
    (3) Optional consolidated filing. A filing of a notice with respect 
to a reportable event by any person required to file will be deemed to 
be a filing by all persons required to give PBGC notice of the event 
under this part. If notices are required for two or more events, the 
notices may be combined in one filing.
    (b) Contents of reportable event notice. A person required to file 
a reportable event notice under subpart B or C of this part must file, 
by the notice date, the form specified by PBGC for that purpose, with 
the information specified in PBGC's reportable events instructions.
    (c) Reportable event forms and instructions. PBGC will issue 
reportable events forms and instructions and make them available on its 
Web site (http://www.pbgc.gov).
    (d) Requests for additional information. PBGC may, in any case, 
require the submission of additional relevant information not specified 
in its forms and instructions. Any such information must be submitted 
for subpart B of this part within 30 days, and for subpart C or D of 
this part within 7 days, after the date of a written request by PBGC, 
or within a different time period specified therein. PBGC may in its 
discretion shorten the time period where it determines that the 
interests of PBGC or participants may be prejudiced by a delay in 
receipt of the information.
    (e) Effect of failure to file. If a notice (or any other 
information required under this part) is not provided within the 
specified time limit, PBGC may pursue any equitable or legal remedies 
available to it under the law, including assessing against each person 
required to provide the notice a separate penalty under section 4071 of 
ERISA.


Sec.  4043.4  Waivers and extensions.

    (a) Waivers and extensions--in general. PBGC may extend any 
deadline or waive any other requirement under this part where it finds 
convincing evidence that the waiver or extension is appropriate under 
the circumstances. Any waiver or extension may be subject to 
conditions. A request for a waiver or extension must be filed with PBGC 
in writing (which may be in electronic form) and must state the facts 
and circumstances on which the request is based.
    (b) Waivers and extensions--specific events. For some reportable 
events, automatic waivers from reporting and extensions of time are 
provided in subparts B and C of this part. If an occurrence constitutes 
two or more reportable events, reporting requirements for each event 
are determined independently. For example, reporting is automatically 
waived for an occurrence that constitutes a reportable event under more 
than one section only if the requirements for an automatic waiver under 
each section are satisfied.
    (c) Multiemployer plans. The requirements of section 4043 of ERISA 
are waived with respect to multiemployer plans.
    (d) Terminating plans. No notice is required from the plan 
administrator or contributing sponsor of a plan if the

[[Page 55004]]

notice date is on or after the date on which--
    (1) All of the plan's assets (other than any excess assets) are 
distributed pursuant to a termination under part 4041 of this chapter; 
or
    (2) A trustee is appointed for the plan under section 4042 of 
ERISA.
    (e) Events not described in this part. Notice of a reportable event 
described in section 4043(c) of ERISA is waived except to the extent 
that reporting is required under this part.


Sec.  4043.5  How and where to file.

    Reportable event notices required under this part must be filed 
electronically in accordance with the instructions posted on PBGC's Web 
site, http://www.pbgc.gov. Filing guidance is provided by the 
instructions and by subpart A of part 4000 of this chapter.


Sec.  4043.6  Date of filing.

    (a) Post-event notice filings. PBGC applies the rules in subpart C 
of part 4000 of this chapter to determine the date that a submission 
under subpart B of this part was filed with PBGC.
    (b) Advance notice and Form 200 filings. Information filed under 
subpart C or D of this part is treated as filed on the date it is 
received by PBGC. Subpart C of part 4000 of this chapter provides rules 
for determining when PBGC receives a submission.


Sec.  4043.7  Computation of time.

    PBGC applies the rules in subpart D of part 4000 of this chapter to 
compute any time period under this part.


Sec.  4043.8  Confidentiality.

    In accordance with section 4043(f) of ERISA and Sec.  4901.21(a)(3) 
of this chapter, any information or documentary material that is not 
publicly available and is submitted to PBGC pursuant to subpart B or C 
of this part will not be made public, except as may be relevant to any 
administrative or judicial action or proceeding or for disclosures to 
either body of Congress or to any duly authorized committee or 
subcommittee of the Congress. This provision does not apply to 
information or material submitted to PBGC pursuant to subpart D of this 
part, even where the submission serves as an alternative method of 
compliance with Sec.  4043.25.


Sec.  4043.9  Company low-default-risk safe harbor.

    (a) Low-default-risk. An entity (a ``company'') that is a 
contributing sponsor of a plan or the highest level U.S. parent of a 
contributing sponsor is ``low-default-risk'' on the date of an event if 
that date falls within a safe harbor period of the company as described 
in paragraph (b) of this section.
    (b) Safe harbor period. A safe harbor period for a company means a 
period that--
    (1) Begins on a financial information date (as described in 
paragraph (c) of this section) on which the company satisfies the low-
default-risk standard in paragraph (e) of this section, and
    (2) Ends 13 months later or (if earlier) on the company's next 
financial information date.
    (c) Financial information date. A financial information date for a 
company means--
    (1) A date on which the company files on Form 10-K with the 
Securities and Exchange Commission (``SEC'') audited annual financial 
statements (including balance sheets, income statements, cash flow 
statements, and notes to the financial statements) for the company's 
most recent completed fiscal year preceding the date of such filing;
    (2) The date (the ``closing date'') on which the company closes the 
annual accounting period that results in the production of audited or 
unaudited annual financial statements for the company's most recent 
completed fiscal year preceding the closing date, if audited annual 
financial statements are not required to be filed with the SEC; or
    (3) A date on which the company files with IRS an annual federal 
income tax return or IRS Form 990 (in either case, a ``return'') for 
the company's most recent completed fiscal year preceding the date of 
such filing, if at the time the return is filed there are no annual 
financial statements for the year of the return.
    (d) Supporting financial information. For purposes of this section, 
the ``supporting financial information'' is the annual financial 
statements or return associated with the establishment of the financial 
information date.
    (e) Low-default-risk standard--(1) Adequate capacity. For purposes 
of this part, except as provided in paragraph (e)(4) of this section, a 
company meets the low-default-risk standard as of a financial 
information date (the ``qualifying date'') if the company has adequate 
capacity to meet its obligations in full and on time on the qualifying 
date as evidenced by satisfying either:
    (i) Both of the criteria described in paragraphs (e)(2)(i) and (ii) 
of this section, or
    (ii) Any four of the seven criteria described in paragraphs 
(e)(2)(i) through (vii) of this section.
    (2) Criteria evidencing adequate capacity. The criteria referred to 
in paragraph (e)(1) of this section are:
    (i) The probability that the company will default on its financial 
obligations is not more than four percent over the next five years or 
not more than 0.4 percent over the next year, in either case determined 
on the basis of widely available financial information on the company's 
credit quality.
    (ii) The company's secured debt (disregarding leases and debt 
incurred to acquire or improve property and secured only by that 
property) does not exceed 10 percent of the company's total assets.
    (iii) The company has a ratio of retained-earnings-to-total-assets 
of 0.25 or more.
    (iv) The company has a ratio of total-debt-to-EBITDA (earnings 
before interest, taxes, depreciation, and amortization) of 3.0 or less.
    (v) The company has positive net income for the two most recently 
completed fiscal years preceding the qualifying date.
    (vi) During the two-year period ending on the qualifying date, the 
company has not experienced an event described in Sec.  4043.34(a)(1) 
or (2) (dealing with a default on a loan with an outstanding balance of 
$10 million or more) with respect to any loan with an outstanding 
balance of $10 million or more to the company regardless of whether 
reporting was waived under Sec.  4043.34(b).
    (vii) During the two-year period ending on the qualifying date, 
there has not been any failure to make when due any contribution 
described in Sec.  4043.25(a)(1) or (2) (dealing with failure to make 
required minimum funding payments), unless reporting was waived under 
Sec.  4043.25(c).
    (3) Using financial information to evaluate criteria--(i) Subject 
to paragraph (e)(3)(ii) of this section with respect to evaluating the 
criterion described in paragraph (e)(2)(v) of this section, to evaluate 
whether criteria described in paragraphs (e)(2)(ii) through (v) of this 
section are met, a company must use the supporting financial 
information described in paragraph (d) of this section associated with 
the qualifying date.
    (ii) In addition to the use of the supporting financial information 
to evaluate criteria as described in paragraph (e)(3)(i) of this 
section, to evaluate whether the criterion described in paragraph 
(e)(2)(v) of this section is met, the company must also use the 
supporting financial information as described in paragraph (d) of this 
section associated with the financial information date for the fiscal 
year preceding the fiscal year covered by the

[[Page 55005]]

supporting financial information associated with the qualifying date.
    (iii) For purposes of paragraph (e)(2)(v) of this section, the 
excess of total revenue over total expenses as reported on the IRS Form 
990 is considered to be net income.
    (4) Exception. If a company receives an audit or review report for 
supporting financial information described in paragraph (d) of this 
section associated with the qualifying date that expresses a material 
adverse view or qualification, the company does not satisfy the low-
default-risk standard.


Sec.  4043.10  Well-funded plan safe harbor.

    For purposes of this part, a plan is in the well-funded plan safe 
harbor for an event year if no variable-rate premium was required to be 
paid for the plan under parts 4006 and 4007 of this chapter for the 
plan year preceding the event year.

Subpart B--Post-Event Notice of Reportable Events


Sec.  4043.20  Post-event filing obligation.

    The plan administrator and each contributing sponsor of a plan for 
which a reportable event under this subpart has occurred are required 
to notify PBGC within 30 days after that person knows or has reason to 
know that the reportable event has occurred, unless a waiver or 
extension applies. If there is a change in plan administrator or 
contributing sponsor, the responsibility for any failure to file or 
defective filing lies with the person who is the plan administrator or 
contributing sponsor of the plan on the 30th day after the reportable 
event occurs.


Sec.  4043.21  Tax disqualification and Title I noncompliance.

    (a) Reportable event. A reportable event occurs when the Secretary 
of the Treasury issues notice that a plan has ceased to be a plan 
described in section 4021(a)(2) of ERISA, or when the Secretary of 
Labor determines that a plan is not in compliance with title I of 
ERISA.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.22  Amendment decreasing benefits payable.

    (a) Reportable event. A reportable event occurs when an amendment 
to a plan is adopted under which the retirement benefit payable from 
employer contributions with respect to any participant may be 
decreased.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.23  Active participant reduction.

    (a) Reportable event. A reportable event occurs for a plan:
    (1) Single-cause event. On the date in a plan year when, as a 
result of a single cause--such as a reorganization, the discontinuance 
of an operation, a natural disaster, a mass layoff, or an early 
retirement incentive program--the number of active participants is 
reduced to less than 80 percent of the number of active participants at 
the beginning of such plan year or less than 75 percent of the number 
of active participants at the beginning of the plan year preceding such 
plan year.
    (2) Attrition event. At the end of a plan year if the number of 
active participants covered by the plan at the end of such plan year is 
less than 80 percent of the number of active participants at the 
beginning of such plan year, or less than 75 percent of the number of 
active participants at the beginning of the plan year preceding such 
plan year.
    (b) Determination rules--(1) Determination dates. The number of 
active participants at the beginning of a plan year may be determined 
by using the number of active participants at the end of the previous 
plan year, and the number of active participants at the end of a plan 
year may be determined by using the number of active participants at 
the beginning of the next plan year.
    (2) Active participant. ``Active participant'' means a participant 
who--
    (i) Is receiving compensation for work performed;
    (ii) Is on paid or unpaid leave granted for a reason other than a 
layoff;
    (iii) Is laid off from work for a period of time that has lasted 
less than 30 days; or
    (iv) Is absent from work due to a recurring reduction in employment 
that occurs at least annually.
    (3) Employment relationship. The employment relationship referred 
to in this paragraph (b) is between the participant and all members of 
the plan's controlled group.
    (c) Reductions due to cessations and withdrawals. For purposes of 
paragraph (a)(1) of this section, a reduction in the number of active 
participants is to be disregarded to the extent that it--
    (1) Is attributable to an event described in ERISA section 4062(e) 
or 4063(a), and
    (2) Is timely reported to PBGC under ERISA section 4063(a).
    (d) Waivers--(1) Small plan. Notice under this section is waived if 
the plan had 100 or fewer participants for whom flat-rate premiums were 
payable for the plan year preceding the event year.
    (2) Low-default-risk. Notice under this section is waived if each 
contributing sponsor of the plan and the highest level U.S. parent of 
each contributing sponsor are low-default-risk on the date of the 
event.
    (3) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (4) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction is a public 
company and the contributing sponsor timely files a SEC Form 8-K 
disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).
    (e) Extension--attrition event. For an event described in paragraph 
(a)(2) of this section, the notice date is extended until the premium 
due date for the plan year following the event year.


Sec.  4043.24  Termination or partial termination.

    (a) Reportable event. A reportable event occurs when the Secretary 
of the Treasury determines that there has been a termination or partial 
termination of a plan within the meaning of section 411(d)(3) of the 
Code.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.25  Failure to make required minimum funding payment.

    (a) Reportable event. A reportable event occurs when--
    (1) A contribution required under sections 302 and 303 of ERISA or 
sections 412 and 430 of the Code is not made by the due date for the 
payment under ERISA section 303(j) or Code section 430(j), or
    (2) Any other contribution required as a condition of a funding 
waiver is not made when due.
    (b) Alternative method of compliance--Form 200 filed. If, with 
respect to the same failure, a filing is made in accordance with Sec.  
4043.81, that filing (while not considered to be submitted to PBGC 
pursuant to section 4043 of ERISA for purposes of section 4043(f) of 
ERISA) satisfies the requirements of this section.
    (c) Waivers--(1) Small plan. Notice under this section is waived 
with respect to a failure to make a required quarterly contribution 
under section 303(j)(3) of ERISA or section 430(j)(3) of the Code if 
the plan had 100 or fewer participants for whom flat-rate premiums were 
payable for the plan year preceding the event year.

[[Page 55006]]

    (2) 30-day grace period. Notice under this section is waived if the 
missed contribution is made by the 30th day after its due date.
    (3) Late funding balance election. Notice under this section is 
waived if the failure to make a timely required contribution is solely 
because of the plan sponsor's failure to timely make a funding balance 
election.


Sec.  4043.26  Inability to pay benefits when due.

    (a) Reportable event. A reportable event occurs when a plan is 
currently unable or projected to be unable to pay benefits.
    (1) Current inability. A plan is currently unable to pay benefits 
if it fails to provide any participant or beneficiary the full benefits 
to which the person is entitled under the terms of the plan, at the 
time the benefit is due and in the form in which it is due. A plan is 
not treated as being currently unable to pay benefits if its failure to 
pay is caused solely by--
    (i) A limitation under section 436 of the Code and section 206(g) 
of ERISA (dealing with funding-based limits on benefits and benefit 
accruals under single-employer plans),
    (ii) The inability to locate a person, or
    (iii) Any other administrative delay, including the need to verify 
a person's eligibility for benefits, to the extent that the delay is 
for less than the shorter of two months or two full benefit payment 
periods.
    (2) Projected inability. A plan is projected to be unable to pay 
benefits when, as of the last day of any quarter of a plan year, the 
plan's ``liquid assets'' are less than two times the amount of the 
``disbursements from the plan'' for such quarter. ``Liquid assets'' and 
``disbursements from the plan'' have the same meaning as under section 
303(j)(4)(E) of ERISA and section 430(j)(4)(E) of the Code.
    (b) Waiver--plans subject to liquidity shortfall rules. Notice 
under this section is waived unless the reportable event occurs during 
a plan year for which the plan is exempt from the liquidity shortfall 
rules in section 303(j)(4) of ERISA and section 430(j)(4) of the Code 
because it is described in section 303(g)(2)(B) of ERISA and section 
430(g)(2)(B) of the Code.


Sec.  4043.27  Distribution to a substantial owner.

    (a) Reportable event. A reportable event occurs for a plan when--
    (1) There is a distribution to a substantial owner of a 
contributing sponsor of the plan;
    (2) The total of all distributions made to the substantial owner 
within the one-year period ending with the date of such distribution 
exceeds $10,000;
    (3) The distribution is not made by reason of the substantial 
owner's death;
    (4) Immediately after the distribution, the plan has nonforfeitable 
benefits (as provided in Sec.  4022.5 of this chapter) that are not 
funded; and
    (5) Either--
    (i) The sum of the values of all distributions to any one 
substantial owner within the one-year period ending with the date of 
the distribution is more than one percent of the end-of-year total 
amount of the plan's assets (as required to be reported on Schedule H 
or Schedule I to Form 5500) for each of the two plan years immediately 
preceding the event year, or
    (ii) The sum of the values of all distributions to all substantial 
owners within the one-year period ending with the date of the 
distribution is more than five percent of the end-of-year total amount 
of the plan's assets (as required to be reported on Schedule H or 
Schedule I to Form 5500) for each of the two plan years immediately 
preceding the event year.
    (b) Determination rules--(1) Valuation of distribution. The value 
of a distribution under this section is the sum of--
    (i) The cash amounts actually received by the substantial owner;
    (ii) The purchase price of any irrevocable commitment; and
    (iii) The fair market value of any other assets distributed, 
determined as of the date of distribution to the substantial owner.
    (2) Date of substantial owner distribution. The date of 
distribution to a substantial owner of a cash distribution is the date 
it is received by the substantial owner. The date of distribution to a 
substantial owner of an irrevocable commitment is the date on which the 
obligation to provide benefits passes from the plan to the insurer. The 
date of any other distribution to a substantial owner is the date when 
the plan relinquishes control over the assets transferred directly or 
indirectly to the substantial owner.
    (3) Determination date. The determination of whether a participant 
is (or has been in the preceding 60 months) a substantial owner is made 
on the date when there has been a distribution that would be reportable 
under this section if made to a substantial owner.
    (c) Alternative method of compliance--annuity. In the case of an 
annuity for a substantial owner, a filing that satisfies the 
requirements of this section with respect to any payment under the 
annuity and that discloses the period, the amount of the payment, and 
the duration of the annuity satisfies the requirements of this section 
with respect to all subsequent payments under the annuity.
    (d) Waivers--(1) Low-default-risk. Notice under this section is 
waived if each contributing sponsor of the plan and the highest level 
U.S. parent of each contributing sponsor are low-default-risk on the 
date of the event.
    (2) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (3) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction is a public 
company and the contributing sponsor timely files a SEC Form 8-K 
disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).


Sec.  4043.28  Plan merger, consolidation or transfer.

    (a) Reportable event. A reportable event occurs when a plan merges, 
consolidates, or transfers its assets or liabilities under section 208 
of ERISA or section 414(l) of the Code.
    (b) Waiver. Notice under this section is waived for this event. 
However, notice may be required under Sec.  4043.29 (for a controlled 
group change) or Sec.  4043.32 (for a transfer of benefit liabilities).


Sec.  4043.29  Change in contributing sponsor or controlled group.

    (a) Reportable event. A reportable event occurs for a plan when 
there is a transaction that results, or will result, in one or more 
persons' ceasing to be members of the plan's controlled group (other 
than by merger involving members of the same controlled group). For 
purposes of this section, the term ``transaction'' includes, but is not 
limited to, a legally binding agreement, whether or not written, to 
transfer ownership, an actual transfer of ownership, and an actual 
change in ownership that occurs as a matter of law or through the 
exercise or lapse of pre-existing rights. Whether an agreement is 
legally binding is to be determined without regard to any conditions in 
the agreement. A transaction is not reportable if it will result solely 
in a reorganization involving a mere change in identity, form, or place 
of organization, however effected.
    (b) Waivers. (1) De minimis 10-percent segment. Notice under this 
section is waived if the person or

[[Page 55007]]

persons that will cease to be members of the plan's controlled group 
represent a de minimis 10-percent segment of the plan's old controlled 
group for the most recent fiscal year(s) ending on or before the date 
the reportable event occurs.
    (2) Foreign entity. Notice under this section is waived if each 
person that will cease to be a member of the plan's controlled group is 
a foreign entity other than a foreign parent.
    (3) Small plan. Notice under this section is waived if the plan had 
100 or fewer participants for whom flat-rate premiums were payable for 
the plan year preceding the event year.
    (4) Low-default-risk. Notice under this section is waived if each 
post-event contributing sponsor of the plan and the highest level U.S. 
parent of each post-event contributing sponsor are low-default-risk on 
the date of the event.
    (5) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (6) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction is a public 
company and the contributing sponsor timely files a SEC Form 8-K 
disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).
    (c) Examples. The following examples assume that no waiver applies.
    (1) Controlled group breakup. Plan A's controlled group consists of 
Company A (its contributing sponsor), Company B (which maintains Plan 
B), and Company C. As a result of a transaction, the controlled group 
will break into two separate controlled groups -- one segment 
consisting of Company A and the other segment consisting of Companies B 
and C. Both Company A (Plan A's contributing sponsor) and the plan 
administrator of Plan A are required to report that Companies B and C 
will leave Plan A's controlled group. Company B (Plan B's contributing 
sponsor) and the plan administrator of Plan B are required to report 
that Company A will leave Plan B's controlled group. Company C is not 
required to report because it is not a contributing sponsor or a plan 
administrator.
    (2) Change in contributing sponsor. Plan Q is maintained by Company 
Q. Company Q enters into a binding contract to sell a portion of its 
assets and to transfer employees participating in Plan Q, along with 
Plan Q, to Company R, which is not a member of Company Q's controlled 
group. There will be no change in the structure of Company Q's 
controlled group. On the effective date of the sale, Company R will 
become the contributing sponsor of Plan Q. A reportable event occurs on 
the date of the transaction (i.e., the date the binding contract was 
executed), because as a result of the transaction, Company Q (and any 
other member of its controlled group) will cease to be a member of Plan 
Q's controlled group. The event is not reported before the notice date. 
If on the notice date the change in the contributing sponsor has not 
yet become effective, Company Q has the reporting obligation. If the 
change in the contributing sponsor has become effective by the notice 
date, Company R has the reporting obligation.


Sec.  4043.30  Liquidation.

    (a) Reportable event. A reportable event occurs for a plan when a 
member of the plan's controlled group--
    (1) Is involved in any transaction to implement its complete 
liquidation (including liquidation into another controlled group 
member);
    (2) Institutes or has instituted against it a proceeding to be 
dissolved or is dissolved, whichever occurs first; or
    (3) Liquidates in a case under the Bankruptcy Code, or under any 
similar law.
    (b) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the person or persons that liquidate do not 
include any contributing sponsor of the plan and represent a de minimis 
10-percent segment of the plan's controlled group for the most recent 
fiscal year(s) ending on or before the date the reportable event 
occurs.
    (2) Foreign entity. Notice under this section is waived if each 
person that liquidates is a foreign entity other than a foreign parent.


Sec.  4043.31  Extraordinary dividend or stock redemption.

    (a) Reportable event. A reportable event occurs for a plan when any 
member of the plan's controlled group declares a dividend or redeems 
its own stock and the amount or net value of the distribution, when 
combined with other such distributions during the same fiscal year of 
the person, exceeds the person's net income before after-tax gain or 
loss on any sale of assets, as determined in accordance with generally 
accepted accounting principles, for the prior fiscal year. A 
distribution by a person to a member of its controlled group is 
disregarded.
    (b) Determination rules. For purposes of paragraph (a) of this 
section, the net value of a non-cash distribution is the fair market 
value of assets transferred by the person making the distribution, 
reduced by the fair market value of any liabilities assumed or 
consideration given by the recipient in connection with the 
distribution. Net value determinations should be based on readily 
available fair market value(s) or independent appraisal(s) performed 
within one year before the distribution is made. To the extent that 
fair market values are not readily available and no such appraisals 
exist, the fair market value of an asset transferred in connection with 
a distribution or a liability assumed by a recipient of a distribution 
is deemed to be equal to 200 percent of the book value of the asset or 
liability on the books of the person making the distribution. Stock 
redeemed is deemed to have no value.
    (c) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the person making the distribution is a de minimis 
10-percent segment of the plan's controlled group for the most recent 
fiscal year(s) ending on or before the date the reportable event 
occurs.
    (2) Foreign entity. Notice under this section is waived if the 
person making the distribution is a foreign entity other than a foreign 
parent.
    (3) Small plan. Notice under this section is waived if the plan had 
100 or fewer participants for whom flat-rate premiums were payable for 
the plan year preceding the event year.
    (4) Low-default-risk. Notice under this section is waived if each 
contributing sponsor of the plan and the highest level U.S. parent of 
each contributing sponsor are low-default-risk on the date of the 
event.
    (5) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (6) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction is a public 
company and the contributing sponsor timely files a SEC Form 8-K 
disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).


Sec.  4043.32  Transfer of benefit liabilities.

    (a) Reportable event. A reportable event occurs for a plan when--
    (1) The plan makes a transfer of benefit liabilities to a person, 
or to a plan or plans maintained by a person or persons, that are not 
members of the transferor plan's controlled group; and

[[Page 55008]]

    (2) The amount of benefit liabilities transferred, in conjunction 
with other benefit liabilities transferred during the 12-month period 
ending on the date of the transfer, is 3 percent or more of the plan's 
total benefit liabilities. Both the benefit liabilities transferred and 
the plan's total benefit liabilities are to be valued as of any one 
date in the plan year in which the transfer occurs, using actuarial 
assumptions that comply with section 414(l) of the Code.
    (b) Determination rules--(1) Date of transfer. The date of transfer 
is to be determined on the basis of the facts and circumstances of the 
particular situation. For transfers subject to the requirements of 
section 414(l) of the Code, the date determined in accordance with 26 
CFR 1.414(l)-1(b)(11) will be considered the date of transfer.
    (2) Distributions of lump sums and annuities. For purposes of 
paragraph (a) of this section, the payment of a lump sum, or purchase 
of an irrevocable commitment to provide an annuity, in satisfaction of 
benefit liabilities is not a transfer of benefit liabilities.
    (c) Waivers--(1) Small plan. Notice under this section is waived if 
the plan had 100 or fewer participants for whom flat-rate premiums were 
payable for the plan year preceding the event year.
    (2) Low-default-risk. Notice under this section is waived if each 
contributing sponsor of the plan and the highest level U.S. parent of 
each contributing sponsor are low-default-risk on the date of the 
event.
    (3) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (4) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction is a public 
company and the contributing sponsor timely files a SEC Form 8-K 
disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).


Sec.  4043.33  Application for minimum funding waiver.

    A reportable event for a plan occurs when an application for a 
minimum funding waiver for the plan is submitted under section 302(c) 
of ERISA or section 412(c) of the Code.


Sec.  4043.34  Loan default.

    (a) Reportable event. A reportable event occurs for a plan when, 
with respect to a loan with an outstanding balance of $10 million or 
more to a member of the plan's controlled group--
    (1) There is an acceleration of payment or a default under the loan 
agreement, or
    (2) The lender waives or agrees to an amendment of any covenant in 
the loan agreement the effect of which is to cure or avoid a breach 
that would trigger a default.
    (b) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the debtor is not a contributing sponsor of the 
plan and represents a de minimis 10-percent segment of the plan's 
controlled group for the most recent fiscal year(s) ending on or before 
the date the reportable event occurs.
    (2) Foreign entity. Notice under this section is waived if the 
debtor is a foreign entity other than a foreign parent.


Sec.  4043.35  Insolvency or similar settlement.

    (a) Reportable event. A reportable event occurs for a plan when any 
member of the plan's controlled group--
    (1) Commences or has commenced against it any insolvency proceeding 
(including, but not limited to, the appointment of a receiver) other 
than a bankruptcy case under the Bankruptcy Code;
    (2) Commences, or has commenced against it, a proceeding to effect 
a composition, extension, or settlement with creditors;
    (3) Executes a general assignment for the benefit of creditors; or
    (4) Undertakes to effect any other nonjudicial composition, 
extension, or settlement with substantially all its creditors.
    (b) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the person described in paragraph (a) of this 
section is not a contributing sponsor of the plan and represents a de 
minimis 10-percent segment of the plan's controlled group for the most 
recent fiscal year(s) ending on or before the date the reportable event 
occurs.
    (2) Foreign entity. Notice under this section is waived if the 
person described in paragraph (a) of this section is a foreign entity 
other than a foreign parent.

Subpart C--Advance Notice of Reportable Events


Sec.  4043.61  Advance reporting filing obligation.

    (a) In general. Unless a waiver or extension applies with respect 
to the plan, each contributing sponsor of a plan is required to notify 
PBGC no later than 30 days before the effective date of a reportable 
event described in this subpart C if the contributing sponsor is 
subject to advance reporting for the reportable event. If there is a 
change in contributing sponsor, the responsibility for any failure to 
file or defective filing lies with the person who is the contributing 
sponsor of the plan on the notice date.
    (b) Persons subject to advance reporting. A contributing sponsor of 
a plan is subject to the advance reporting requirement under paragraph 
(a) of this section for a reportable event if --
    (1) On the notice date, neither the contributing sponsor nor any 
member of the plan's controlled group to which the event relates is a 
public company; and
    (2) The aggregate unfunded vested benefits, determined in 
accordance with paragraph (c) of this section, are more than $50 
million; and
    (3) The aggregate value of plan assets, determined in accordance 
with paragraph (c) of this section, is less than 90 percent of the 
aggregate premium funding target, determined in accordance with 
paragraph (c) of this section.
    (c) Funding determinations. For purposes of paragraph (b) of this 
section, the aggregate unfunded vested benefits, aggregate value of 
plan assets, and aggregate premium funding target are determined by 
aggregating the unfunded vested benefits, values of plan assets, and 
premium funding targets (respectively), as determined in accordance 
with part 4006 of this chapter for purposes of the variable-rate 
premium for the plan year preceding the effective date of the event, of 
plans maintained (on the notice date) by the contributing sponsor and 
any members of the contributing sponsor's controlled group, 
disregarding plans with no unfunded vested benefits (as so determined).
    (d) Shortening of 30-day period. Pursuant to Sec.  4043.3(d), PBGC 
may, upon review of an advance notice, shorten the notice period to 
allow for an earlier effective date.


Sec.  4043.62  Change in contributing sponsor or controlled group.

    (a) Reportable event. Advance notice is required for a change in a 
plan's contributing sponsor or controlled group, as described in Sec.  
4043.29(a).
    (b) Waivers--(1) Small and mid-size plans. Notice under this 
section is waived with respect to a change of contributing sponsor if 
the transferred plan has fewer than 500 participants.
    (2) De minimis 5-percent segment. Notice under this section is 
waived if the person or persons that will cease to

[[Page 55009]]

be members of the plan's controlled group represent a de minimis 5-
percent segment of the plan's old controlled group for the most recent 
fiscal year(s) ending on or before the effective date of the reportable 
event.


Sec.  4043.63  Liquidation.

    (a) Reportable event. Advance notice is required for a liquidation 
of a member of a plan's controlled group, as described in Sec.  
4043.30.
    (b) Waiver--de minimis 5-percent segment and ongoing plans. Notice 
under this section is waived if the person that liquidates is a de 
minimis 5-percent segment of the plan's controlled group for the most 
recent fiscal year(s) ending on or before the effective date of the 
reportable event, and each plan that was maintained by the liquidating 
member is maintained by another member of the plan's controlled group.


Sec.  4043.64  Extraordinary dividend or stock redemption.

    (a) Reportable event. Advance notice is required for a distribution 
by a member of a plan's controlled group, as described in Sec.  
4043.31(a).
    (b) Waiver--de minimis 5-percent segment. Notice under this section 
is waived if the person making the distribution is a de minimis 5-
percent segment of the plan's controlled group for the most recent 
fiscal year(s) ending on or before the effective date of the reportable 
event.


Sec.  4043.65  Transfer of benefit liabilities.

    (a) Reportable event. Advance notice is required for a transfer of 
benefit liabilities, as described in Sec.  4043.32(a).
    (b) Waivers--(1) Complete plan transfer. Notice under this section 
is waived if the transfer is a transfer of all of the transferor plan's 
benefit liabilities and assets to one other plan.
    (2) Transfer of less than 3 percent of assets. Notice under this 
section is waived if the value of the assets being transferred--
    (i) Equals the present value of the accrued benefits (whether or 
not vested) being transferred, using actuarial assumptions that comply 
with section 414(l) of the Code; and
    (ii) In conjunction with other assets transferred during the same 
plan year, is less than 3 percent of the assets of the transferor plan 
as of at least one day in that year.
    (3) Section 414(l) safe harbor. Notice under this section is waived 
if the benefit liabilities of 500 or fewer participants are transferred 
and the transfer complies with section 414(l) of the Code using the 
actuarial assumptions prescribed for valuing benefits in trusteed plans 
under Sec. Sec.  4044.51 through 4044.57 of this chapter.
    (4) Fully funded plans. Notice under this section is waived if the 
transfer complies with section 414(l) of the Code using reasonable 
actuarial assumptions and, after the transfer, the transferor and 
transferee plans are fully funded as determined in accordance with 
Sec. Sec.  4044.51 through 4044.57 of this chapter and Sec.  
4010.8(d)(1)(ii) of this chapter.


Sec.  4043.66  Application for minimum funding waiver.

    (a) Reportable event. Advance notice is required for an application 
for a minimum funding waiver, as described in Sec.  4043.33.
    (b) Extension. The notice date is extended until 10 days after the 
reportable event has occurred.


Sec.  4043.67  Loan default.

    Advance notice is required for an acceleration of payment, a 
default, a waiver, or an agreement to an amendment with respect to a 
loan agreement described in Sec.  4043.34(a).


Sec.  4043.68  Insolvency or similar settlement.

    (a) Reportable event. Advance notice is required for an insolvency 
or similar settlement, as described in Sec.  4043.35.
    (b) Extension. For a case or proceeding under Sec.  4043.35(a)(1) 
or (2) that is not commenced by a member of the plan's controlled 
group, the notice date is extended to 10 days after the commencement of 
the case or proceeding.

Subpart D--Notice of Failure To Make Required Contributions


Sec.  4043.81  PBGC Form 200, notice of failure to make required 
contributions; supplementary information.

    (a) General rules. To comply with the notification requirement in 
section 303(k)(4) of ERISA and section 430(k)(4) of the Code, a 
contributing sponsor of a single-employer plan that is covered under 
section 4021 of ERISA and (if that contributing sponsor is a member of 
a parent-subsidiary controlled group) the ultimate parent must complete 
and submit in accordance with this section a properly certified Form 
200 that includes all required documentation and other information, as 
described in the related filing instructions. Notice is required 
whenever the unpaid balance of a contribution payment required under 
sections 302 and 303 of ERISA and sections 412 and 430 of the Code 
(including interest), when added to the aggregate unpaid balance of all 
preceding such payments for which payment was not made when due 
(including interest), exceeds $1 million.
    (1) Form 200 must be filed with PBGC no later than 10 days after 
the due date for any required payment for which payment was not made 
when due.
    (2) If a contributing sponsor or the ultimate parent completes and 
submits Form 200 in accordance with this section, PBGC will consider 
the notification requirement in section 303(k)(4) of ERISA and section 
430(k)(4) of the Code to be satisfied by all members of a controlled 
group of which the person who has filed Form 200 is a member.
    (b) Supplementary information. If, upon review of a Form 200, PBGC 
concludes that it needs additional information in order to make 
decisions regarding enforcement of a lien imposed by section 303(k) of 
ERISA and section 430(k) of the Code, PBGC may require any member of 
the contributing sponsor's controlled group to supplement the Form 200 
in accordance with Sec.  4043.3(d).
    (c) Ultimate parent. For purposes of this section, the term 
``ultimate parent'' means the parent at the highest level in the chain 
of corporations and/or other organizations constituting a parent-
subsidiary controlled group.

PART 4204--VARIANCES FOR SALE OF ASSETS

0
7. The authority citation for part 4204 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1384(c).


Sec.  4204.12  [Amended]

0
8. Section 4204.12 is amended by removing the figures ``412(b)(3)(A)'' 
and adding in their place the figures ``431(b)(3)(A)''.

PART 4206--ADJUSTMENT OF LIABILITY FOR WITHDRAWAL SUBSEQUENT TO A 
PARTIAL WITHDRAWAL

0
9. The authority citation for part 4206 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3) and 1386(b).


Sec.  4206.7  [Amended]

0
10. Section 4206.7 is amended by removing the figures ``412(b)(4)'' and 
adding in their place the figures ``431(b)(5)''.

PART 4231--MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS

0
11. The authority citation for part 4231 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1411.

[[Page 55010]]

Sec.  4231.2  [Amended]

0
12. In Sec.  4231.2, the definitions of ``actuarial valuation'' and 
``fair market value of assets'' are amended by removing the words 
``section 302 of ERISA and section 412 of the Code'' where they appear 
in each definition and adding in their place the words ``section 304 of 
ERISA and section 431 of the Code''.


Sec.  4231.6  [Amended]

0
13. In Sec.  4231.6:
0
a. Paragraph (b)(4)(ii) is amended by removing the figures 
``412(b)(4)'' and adding in their place the figures ``431(b)(5)''.
0
b. Paragraph (c)(2) is amended by removing the words ``section 412 of 
the Code (which requires that such assumptions be reasonable in the 
aggregate)'' and adding in their place the words ``section 431 of the 
Code (which requires that each such assumption be reasonable)''.
0
c. Paragraph (c)(5) is amended by removing the figures ``412'' and 
adding in their place the figures ``431''.

    Issued in Washington, DC, this 8th day of September, 2015.
Alice C. Maroni,
Acting Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2015-22941 Filed 9-10-15; 8:45 am]
BILLING CODE 7709-02-P