[Federal Register Volume 84, Number 124 (Thursday, June 27, 2019)]
[Proposed Rules]
[Pages 30666-30681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13419]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4001, 4006, 4010, 4041 and 4043

RIN 1212-AB34


Miscellaneous Corrections, Clarifications, and Improvements

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) is making 
miscellaneous technical corrections, clarifications, and improvements 
to its regulations on Reportable Events and Certain Other Notification 
Requirements, Annual Financial and Actuarial Information Reporting,

[[Page 30667]]

Termination of Single-Employer Plans, and Premium Rates. These changes 
are a result of PBGC's ongoing retrospective review of the 
effectiveness and clarity of its rules as well as input from 
stakeholders.

DATES: Comments must be submitted on or before August 26, 2019 to be 
assured of consideration.

ADDRESSES: Comments may be submitted by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the online instructions for submitting comments.
     Email: [email protected]. Refer to RIN 1212-AB34 in 
the subject line.
     Mail or Hand Delivery: Regulatory Affairs Division, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW, Washington, DC 20005-4026.
    All submissions must include the agency's name (Pension Benefit 
Guaranty Corporation, or PBGC) and the Regulation Identifier Number 
(RIN) for this rulemaking (RIN 1212-AB34). Comments received will be 
posted without change to PBGC's website, http://www.pbgc.gov, including 
any personal information provided. Copies of comments may also be 
obtained by writing to Disclosure Division, Office of the General 
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW, 
Washington, DC 20005-4026, or calling 202-326-4040 during normal 
business hours. TTY users may call the Federal relay service toll-free 
at 800-877-8339 and ask to be connected to 202-326-4040.

FOR FURTHER INFORMATION CONTACT: Stephanie Cibinic 
([email protected]), Deputy Assistant General Counsel for 
Regulatory Affairs, Office of the General Counsel, Pension Benefit 
Guaranty Corporation, 1200 K Street NW, Washington, DC 20005-4026; 202-
326-4400, extension 6352. TTY users may call the Federal relay service 
toll-free at 800-877-8339 and ask to be connected to 202-326-4400, 
extension 6352.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose and Authority

    The purpose of this regulatory action is to make miscellaneous 
technical corrections, clarifications, and improvements to several 
Pension Benefit Guaranty Corporation (PBGC) regulations. These changes 
are based on PBGC's ongoing retrospective review of the effectiveness 
and clarity of its rules, which includes input from stakeholders on 
PBGC's programs.
    Legal authority for this action comes from 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. It also comes from section 4006 of ERISA, which give PBGC 
the authority to prescribe schedules of premium rates and bases for the 
application of those rates; section 4010 of ERISA, which gives PBGC 
authority to prescribe information to be provided and the timing of 
reports; section 4041 of ERISA (Termination of Single-Employer Plans); 
and section 4043 of ERISA, which gives PBGC authority to define 
reportable events and waive reporting.

Major Provisions

    The major provisions of this proposed rulemaking would amend PBGC's 
regulations on:
     Reportable Events and Certain Other Notification 
Requirements, by eliminating possible duplicative reporting of active 
participant reductions, clarifying when a liquidation event occurs and 
providing additional examples for active participant reduction, 
liquidation, and change in controlled group events.
     Annual Financial and Actuarial Information Reporting, by 
eliminating a requirement to submit individual financial information 
for each controlled group member, adding a new reporting waiver and 
clarifying others, and providing guidance on assumptions for valuing 
benefit liabilities for cash balance plans.
     Termination of Single-Employer Plans, by providing more 
time to submit a complete PBGC Form 501 in the standard termination 
process.
     Premium Rates, by expressly stating that a plan does not 
qualify for the variable rate premium exemption for the year in which 
it completes a standard termination if it engages in a spinoff in the 
same year, clarifying the participant count date special rule for 
transactions (e.g., mergers and spinoffs), and by modifying the 
circumstances under which the premium is prorated for a short plan year 
resulting from a standard termination.

Background

    The Pension Benefit Guaranty Corporation (PBGC) administers two 
insurance programs for private-sector defined benefit pension plans 
under title IV of the Employee Retirement Income Security Act of 1974 
(ERISA)--one for single-employer pension plans, and one for 
multiemployer pension plans. The amendments proposed in this rulemaking 
apply primarily to the single-employer program.
    This proposed rulemaking comes out of PBGC's ongoing retrospective 
review program to identify and ameliorate inconsistencies, 
inaccuracies, and requirements made irrelevant over time. It also 
responds to suggestions and questions from stakeholders that PBGC 
receives on an ongoing basis and through public outreach, such as 
PBGC's July 2017 ``Regulatory Planning and Review of Existing 
Regulations'' Request for Information.\1\
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    \1\ 82 FR 34619 (July 26, 2017).
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Proposed Amendments

    The proposed technical and clarifying amendments and improvements 
to PBGC's regulations are discussed below. PBGC invites comment on 
these proposals.

Terminology--29 CFR Part 4001

    The proposed rule would amend the general ``Definitions'' section 
(29 CFR 4001.2) for terms used in regulations under title IV of ERISA 
to include the terms ``Ultimate parent'' and ``U.S. entity.'' Those 
terms are currently defined in PBGC's ``Reportable Events and Certain 
Other Notification Requirements'' regulation (29 CFR part 4043), 
``reportable events regulation,'' at Sec. Sec.  4043.2 and 4043.81(c) 
respectively. Because proposed amendments to PBGC's Annual Financial 
and Actuarial Information Reporting regulation (29 CFR part 4010), 
``4010 reporting regulation,'' would use those same two terms, it is 
appropriate to move them to the common definitions section in Sec.  
4001.2.

Reportable Events and Certain Other Notification Requirements--29 CFR 
Part 4043

    Section 4043 of ERISA requires that PBGC be notified of the 
occurrence of certain ``reportable events'' that may signal financial 
issues with the plan or a contributing employer. The statute provides 
for both post-event and advance reporting. PBGC's reportable events 
regulation implements section 4043 of ERISA.
    Reportable events include such plan events as missed contributions, 
insufficient funds, 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. Without timely information about a reportable

[[Page 30668]]

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.
    On September 11, 2015, PBGC issued a final rule,\2\ the ``2015 
Final Rule,'' implementing changes to the reportable events regulation. 
The rule revised longstanding procedures governing when administrators 
and sponsors of single-employer defined benefit pension plans are 
required to report certain events to PBGC. The major changes in the 
2015 Final Rule tied reporting waivers more closely to situations where 
a contributing sponsor is at risk of not being able to continue to 
maintain a plan (i.e., risk of default), revisions to definitions and 
descriptions of several reportable events, and new requirements on 
electronic filing. The goal of the 2015 Final Rule was to ease 
reporting requirements where notice to PBGC is unnecessary but to allow 
for possible earlier PBGC intervention where there is an opportunity to 
help sponsors maintain a plan or otherwise preserve benefits for 
participants.
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    \2\ 80 FR 54980 (Sept. 11, 2015).
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    Since publication of the 2015 Final Rule, PBGC has further 
identified some opportunities to improve the reportable events and 
notification requirements by filling in gaps where guidance is needed, 
simplifying or removing language, codifying policies, and providing 
examples.

Commercial Measures Criterion

    Section 4043.9(e) of the reportable events regulation describes the 
commercial measures waiver that is available for certain events.\3\ 
This waiver is available where a company that is a contributing sponsor 
of a plan has adequate capacity to meet its obligations as evidenced by 
satisfying a combination of certain criteria. Among the criteria 
listed, the commercial measures criterion requires that the company's 
probability of default on its financial obligations be no more than 4 
percent over the next 5 years or 0.4 percent over the next year, as 
``determined on the basis of widely available financial information on 
the company's credit quality.''
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    \3\ The five events are as follows: Active participant 
reduction, substantial owner distributions, controlled group 
changes, extraordinary dividends, and benefit liabilities transfers.
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    The preamble to the 2015 Final Rule made clear that the commercial 
measures criterion was to be met by looking to third party information 
and not, for example, information that a company itself generates but 
that might be considered ``widely available'' because the information 
is posted on the company's website.\4\ However, the regulatory text in 
the 2015 Final Rule did not explicitly mention third party information. 
To remove any ambiguity, the proposed rule would amend Sec.  4043.9 to 
make clear that a plan must use third party financial information to 
satisfy the criterion for the company financial soundness safe harbor.
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    \4\ See 80 FR 54986.
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Active Participant Reduction

    Under Sec.  4043.23 of the reportable events regulation, an active 
participant reduction reportable event generally occurs when, as a 
result of a single-cause event or through normal attrition of employees 
(described below), the number of active participants in a plan is 
reduced below 80 percent of the number at the beginning of the year 
(one-year lookback) or below 75 percent of the number at the beginning 
of the prior year (two-year lookback). The regulation distinguishes 
between reductions caused by single cause events and normal attrition 
events. If active participants cease to be members of a plan's 
controlled group due to a single cause event, such as a reorganization 
or layoff, the plan administrator and contributing sponsor must file a 
notice with PBGC within 30 days after the threshold is breached, unless 
a waiver applies. Conversely, if the active participant reduction is 
caused by the normal comings and goings of employees or other smaller 
scale reductions (i.e., normal attrition), notice of the event is 
extended until the premium filing due date for the plan year following 
the event year.
    Since publication of the 2015 Final Rule, PBGC has received 
questions from practitioners, including in a comment to its 2017 RFI on 
Regulatory Planning and Review of Existing Regulations (see the 
``Background'' section of this preamble), about whether a plan 
administrator or contributing sponsor that files a single-cause event 
notice must also file an attrition event notice at a later date due to 
the same active participant reduction. Upon review, PBGC recognizes 
that Sec.  4043.23 could be interpreted in this manner, though this was 
not PBGC's intent.
    To address this issue, PBGC proposes to amend Sec.  4043.23(a)(2) 
by altering the current method of counting active participants after 
the end of the plan year in determining whether an attrition event has 
occurred by taking into account the number of active participants that 
had already been the subject of a single-cause event report in the same 
plan year. Thus, to determine whether an attrition event has occurred, 
the number of active participants who ceased to be active and were 
covered by a single-cause event reported in the same year would be 
included in the year-end count. This proposed new method of counting 
would prevent duplicative reporting by disregarding the earlier single-
cause event if already reported to PBGC.
    The proposed rule also would make clear that multiple single-cause 
events during the plan year must be reported separately. Thus, each 
time a new single-cause event results in an active participant 
reduction greater than 20 percent over the number of active 
participants at the beginning of the plan year, a new Form 10 would be 
required to be filed. PBGC is making this clarification because PBGC 
believes that dramatic reductions due to different events in the same 
year could signal that the plan sponsor's ability to maintain the plan 
is rapidly deteriorating.
    For further explanation, the proposed rule includes examples in the 
regulatory text of the interplay between single-cause and attrition 
events, as well as a single-cause event that occurs over a period of 
time.
    The proposed rule would make non-substantive changes to the formula 
for counting a single-cause event in Sec.  4043.23(a)(1) that PBGC 
believes is clearer, more aligned to the proposed language in Sec.  
4043.23(a)(2) described above, and easier to use.
    To further reduce burden, the proposed rule would eliminate the 
two-year lookback requirement. With a few years' experience under the 
2015 Final Rule, PBGC has concluded that the one-year/80 percent test 
provides sufficient information and undertaking the additional burden 
of conducting the two-year/75 percent lookback is not necessary. Thus, 
the language regarding the two-year lookback in Sec.  4043.23(a)(1) and 
(2) would be removed under the proposed rule. To address the statutory 
requirement, the proposed rule would waive notice of the two-year 
lookback provided under section 4043(c)(3) of ERISA.
    Other proposed changes to Sec.  4043.23 include amending the 
current definition of ``active participant.'' The current definition 
provides that an active participant means, among other things, a 
participant who ``is receiving compensation for work performed,'' but 
does not address whether a participant becomes inactive if the 
participant leaves a controlled group member for employment by another 
member of the same controlled group. The proposed rule would clarify 
that a participant is

[[Page 30669]]

active if the participant receives compensation from any member of the 
plan's controlled group for work performed for any member of the plan's 
controlled group. The proposal thus would remove any ambiguity in the 
determination rules if the participant is employed by any member within 
the same controlled group.
    Finally, PBGC proposes to clarify that reporting an active 
participant reduction under Sec.  4043.23 would be disregarded if the 
reduction was already reported under section 4062(e) and/or 4063(a) of 
ERISA. The current regulation provides that a reduction in the number 
of active participants may be disregarded if the reduction is timely 
reported to PBGC under section 4063(a) of ERISA but does not specify 
when the report must be made in relation to a Form 10 Report under 
Sec.  4043.23 for the disregard provision to be available. PBGC's 
intent in providing the waiver was to prevent duplicative reporting for 
the same event where notice had previously been filed. To codify PBGC's 
intent, the proposed rule would clarify that reporting a reduction in 
the number of active participants under Sec.  4043.23 may be 
disregarded if the reduction is reported under section 4062(e) and/or 
4063(a) of ERISA before the filing of a notice is due under Sec.  
4043.23.

Inability To Pay Benefits When Due

    In general, a reportable event occurs under Sec.  4043.26 of the 
reportable events regulation 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 2015 Final Rule modified 
Sec.  4043.26(a)(1)(iii) so that a plan is not treated as having a 
``current inability'' to pay benefits when due if, among other things, 
the failure to pay is caused solely by ``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.'' In modifying the 
regulation, the 2015 Final Rule inadvertently imposed a time limit for 
verification of a person's eligibility for benefits. PBGC recognizes 
that employers may need more than the specified time limit to verify a 
person's eligibility for benefits and that such a circumstance is not 
indicative of a possible need for plan termination.
    To resolve this issue, PBGC proposes to amend Sec.  4043.26 to 
clarify that an inability to pay benefits when due caused by the need 
to verify eligibility is not subject to the time limit imposed for 
other administrative delays.

Change in Contributing Sponsor or Controlled Group

    Under Sec.  4043.29 of the reportable events 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 the plan's controlled group. PBGC has continued to receive inquiries 
about when a reportable event is triggered under Sec.  4043.29. For 
instance, although the heading of Sec.  4043.29 includes ``a change in 
contributing sponsor,'' the regulatory text does not. A 1996 rulemaking 
added a new reportable event for transactions that result in any person 
ceasing to be a member of the plan's controlled group, amending the 
then existing regulation that required reporting only if there was a 
change in the contributing sponsor.\5\ The 1996 rule, a product of 
negotiated rulemaking, left out a specific reference to contributing 
sponsors, though PBGC did not intend that changes in contributing 
sponsors would no longer be reportable.
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    \5\ See Reportable Events; Annual Report, 61 FR 38409 (July 24, 
1996) for a description of the amendment, which was adopted without 
modification in the final rule (61 FR 63988 (Dec. 2, 1996)).
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    Thus, PBGC proposes to modify the event definition to make clear 
that reporting would be required when a transaction results in one or 
more persons ceasing to be either a contributing sponsor of a plan, or 
a member of the plan's controlled group (other than by merger involving 
members of the same controlled group). The current exception to the 
reporting requirement for transactions that will solely result in a 
reorganization involving a mere change in identity, form, or place or 
organization (however effected), would apply under the proposed rule to 
only ``change in controlled group'' transactions. A reorganization such 
as this that involves a controlled group member that is not a 
contributing sponsor does not pose a significant risk to the pension 
insurance system. However, PBGC does need to know about any change to a 
contributing sponsor, since it is a contributing sponsor that primarily 
supports the pension plan.
    The proposed rule also would revise the first example in the 
existing regulation to provide greater clarity on the timing of, and 
responsibility for, filing a report. In addition, the proposed rule 
would add two new examples--one regarding dissolution of a controlled 
group member and one describing a merger of controlled group members. 
These examples illustrate some common situations implicated by the 
requirements in Sec.  4043.29.\6\
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    \6\ These examples also incidentally illustrate the importance 
to PBGC of identifying whether value is leaving the controlled group 
in analyzing whether a transaction poses a risk to the plan and the 
pension insurance system. When value (e.g., business or revenue 
generating assets of a sponsor) leaves a controlled group, the loss 
may raise a concern about the ability of a sponsor to make 
contributions to, or otherwise be able to maintain, a plan. The 
example on dissolution of a controlled group reflects value leaving 
the controlled group while the example on a merger of controlled 
group members reflects value remaining in the controlled group 
(hence PBGC's interest in being notified in the former situation but 
not the latter).
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Liquidation

    Section 4043.30(a)(1) of the reportable events regulation states 
that a reportable event occurs for a plan when a member of the plan's 
controlled group ``is involved in any transaction to implement its 
complete liquidation (including liquidation into another controlled 
group member).'' In discussing this provision with practitioners over 
the years, it has become clear that this event description could 
benefit from greater clarity and precision, particularly with respect 
to what ``involved in any transaction to implement'' a liquidation 
means and when the event was triggered.
    One liquidation scenario that commonly causes confusion involves a 
company that ceases operations and sells substantially all of its 
assets over a period of time. The company continues to sponsor a plan 
but with no business income, benefits stop accruing and no further plan 
contributions from the company are made. The result is a ``wasting 
trust'' where assets are depleted over time to make pension payments 
but no new contributions are made for future payment obligations. PBGC 
observes that because the plan has not been terminated, the company 
does not realize a reportable event has occurred. Although a cessation 
of business operations is not in and of itself a liquidation, because 
the cessation is tied to a sale of substantially all of the business' 
assets, with the intent to settle remaining obligations, PBGC views a 
cessation in this context as part of the liquidation process.
    When a company fails to notify PBGC that the company ceased 
business operations and began a liquidation, PBGC encounters greater 
difficulties in effectively intervening to protect plan assets and 
participant benefits, thereby increasing the potential for decreased 
employer funding for the plan and greater potential strain on the 
pension insurance system. In some cases, PBGC did not become aware of 
the process of liquidation until years later, when the

[[Page 30670]]

best opportunity for protecting plan assets and participant benefits 
had passed. Liquidations of the type that concern PBGC may take a 
myriad of forms and be implemented over long periods of time.
    To alleviate confusion and improve precision, PBGC proposes to 
clarify the definition of liquidation to state that a liquidation event 
occurs when a member of the plan's controlled group ``resolves to cease 
all revenue-generating business operations, sell substantially all its 
assets, or otherwise effect or implement its complete liquidation 
(including liquidation into another controlled group member) by 
decision of the member's board of directors (or equivalent body such as 
the managing partners or owners) or other actor with the power to 
authorize such cessation of operations or a liquidation.'' Hence, a 
cessation of operations, such as the example above, would trigger a 
reportable event under Sec.  4043.30. The proposed rule includes the 
word ``revenue-generating'' to qualify a cessation of business 
operations in acknowledgement of the fact that various administrative 
activities may continue during the winding down of a business. The use 
of the word ``revenue-generating'' is therefore designed to capture the 
fact that a company is not earning revenue to enable it to support the 
pension plan.
    The decision to liquidate can have serious implications for 
participants and the pension insurance system. Given that PBGC's 
success in such cases is often directly correlated with reporting an 
event when there is still time to preserve plan assets, PBGC believes 
triggering a reporting obligation to the time a decision by the 
person(s) or body (such as a board of directors) that has the authority 
to determine that a company will liquidate will be most protective of 
participants and the pension insurance system. Since a liquidation may 
or may not involve a formal plan, a written agreement to sell assets to 
a single buyer, or a series of sales over time to maximize proceeds, 
the language in the proposed rule represents as close as possible to a 
uniform trigger for reporting of liquidation events. PBGC believes that 
in the vast majority of cases, the decision to liquidate must go 
through a formal approval or authorization process. Even in cases where 
the plan sponsor is a company owned by a single person and board 
formalities do not exist, a moment occurs when that owner has made the 
decision to move forward with a liquidation. This decision is the 
common point of departure for liquidations to move forward. For 
reference and further clarity, PBGC has included in the proposed rule 
three additional examples, regarding a liquidation within a controlled 
group, occurring by cessation of operations, and through an asset sale.
    Companies that liquidate as a result of insolvency are required to 
report both events to PBGC under Sec.  [thinsp]4043.30 and Sec.  
[thinsp]4043.35 of the reportable events regulation. However, given the 
similarities between the two events, PBGC believes that reporting to 
PBGC under either section (instead of both) would be sufficient 
notification. Thus, PBGC is proposing an additional waiver that would 
provide relief from the possibility of duplicative reporting under a 
Sec.  [thinsp]4043.30 liquidation or a Sec.  [thinsp]4043.35 
insolvency. The proposed rule would provide parallel waivers in both 
Sec.  [thinsp]4043.30 and Sec.  [thinsp]4043.35 to clarify that notice 
would be waived if notice has already been provided to PBGC for the 
same event under the former section.
    PBGC does not intend to compel public company sponsors to disclose 
liquidations on a Form 10 before notifying the public. Thus, the 
proposed rule includes an extension under Sec.  4043.30(c) to file the 
post-event reportable events notice until the earlier of the timely 
filing of an SEC Form 8-K disclosing the event or the issuance of a 
press release discussing it.
    PBGC specifically requests comment on whether PBGC should make this 
extension available for foreign private issuers and if so, how. For 
example, should the regulation allow an extension to file a reportable 
events notice involving a foreign private issuer that is a plan sponsor 
until the earlier of the timely filing of a Form 6-K disclosing the 
event or the issuance of a press release discussing it, even if the 
country of incorporation for the foreign private issuer would not 
require reporting as timely as is required on a Form 8-K for the same 
event had the issuer been a U.S. filer? \7\
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    \7\ For more information on Securities and Exchange Commission 
filing obligations for foreign private issuers, see the discussion 
at https://www.sec.gov/divisions/corpfin/internatl/foreign-private-issuers-overview.shtml (including Form 6-K under section III.B.3. 
Periodic and Ongoing Reporting Obligations; Other Reports).
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Public Company Waiver

    Five reportable events \8\ may be waived if any contributing 
sponsor of the plan (before the transaction that caused the event) 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, except under Item 
2.02 (Results of Operations and Financial Condition) or in financial 
statements under Item 9.01 (Financial Statements and Exhibits). As 
explained in the 2015 Final Rule, PBGC found that SEC filings provide 
timely and adequate information to PBGC with respect to the five events 
because these events are either required to be reported under a 
specific Form 8-K item or because they are material information for 
investors. Therefore, PBGC didn't need to compel reporting of these 
events under the reportable events regulation.
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    \8\ These five post-event filings are (1) active participant 
reduction, (2) distribution to a substantial owner, (3) change in 
contributing sponsor or controlled group, (4) extraordinary dividend 
or stock redemption, and (5) transfer of benefit liabilities.
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    The proposed rule does not make any changes to the public company 
waiver. However, in response to questions from practitioners since 
publication of the 2015 Final Rule, PBGC requests comment on whether 
the waiver should be expanded to apply in situations where a parent 
company timely files a Form 8-K but is not a contributing sponsor to 
the plan. Specifically, would the Form 8-K filing by a parent company 
that isn't a contributing sponsor provide adequate information to PBGC 
with respect to each of the five events to which the waiver applies?

Annual Financial and Actuarial Information Reporting--29 CFR Part 4010

    Section 4010 of ERISA requires the reporting of actuarial and 
financial information by controlled groups with single-employer pension 
plans that have significant funding problems. It also requires PBGC to 
provide an annual summary report to Congress containing aggregate 
information filed with PBGC under that section. PBGC's ``4010 reporting 
regulation'' (29 CFR part 4010) implements section 4010 of ERISA.

Definitions

    Section 4010.2 of PBGC's 4010 reporting regulation contains the 
terms used in part 4010 and their definitions. The proposed rule would 
amend this ``Definitions'' section to include the term ``Foreign 
entity,'' which is used in proposed amendments to Sec.  4010.9 
describing the financial information a filer is required to provide to 
PBGC. The proposed definition is similar to the definition of ``Foreign 
entity'' in Sec.  4043.2 of PBGC's reportable events regulation. The 
only difference is that ``information year'' replaces ``date the 
reportable event occurs'' in part (3) of the definition so that part 
(3) is satisfied for 4010 purposes if one of three tests are met for 
the fiscal year that includes the information year.

[[Page 30671]]

    The proposed rule also would add to the list of common terms 
referenced in Sec.  4010.2 the two terms it would define in the general 
definitions section of PBGC's regulations (Sec.  4001.2). As explained 
above, under ``Terminology--29 CFR part 4001,'' those terms would be 
``Ultimate parent,'' and ``U.S. entity.''

Filers

    Section 4010.4 of the 4010 reporting regulation prescribes who is a 
filer. Paragraph (e) of this section explains how reporting is 
applicable to plans to which special funding rules apply. This 
paragraph provides that except in connection with the actuarial 
valuation report, the special funding rules under sections 104 and 
402(b) of PPA (applicable to multiple employer plans of cooperatives 
and charities, and plans of commercial passenger airlines and airline 
caterers, respectively) and under the Cooperative and Small Employer 
Charity Pension Flexibility Act of 2013, are disregarded for all other 
4010 purposes. The proposed rule would remove from paragraph (e) the 
reference to PPA section 104 because it has expired.

Identifying Information

    Section 4010.7 of the 4010 reporting regulation describes what 
types of identifying information each filer must provide as part of its 
reporting. Paragraph (a)(1) of this section specifies what information 
is required to be included about current members of the filer's 
controlled group, such as identifying the legal relationships of each 
controlled group member to the other members. Filers identify the legal 
relationships by manually entering a description, e.g., parent, 
subsidiary, for each member. Identifying the legal relationships of 
controlled group members in this way can be burdensome to filers in 
larger controlled groups and does not provide a clear picture of the 
controlled group structure, frustrating the intent of this information.
    The proposed rule would provide a simple method for filers in 
larger controlled groups to satisfy the requirement in paragraph (a) of 
this section. Instead of entering ``parent,'' ``subsidiary,'' or other 
relationship, filers with more than 10 controlled group members would 
submit with their filing an organizational chart or other diagram 
showing the relationship of the controlled group members to each other. 
PBGC's understanding is that most filers have such diagrams. Also, 
filers may already include such diagrams in reportable events filings 
(29 CFR part 4043) to satisfy the requirement specified in those 
instructions for a description of the controlled group structure. PBGC 
believes that requiring a diagram for these larger groups would be less 
burdensome to provide and would more clearly show the controlled group 
structure.

Plan Actuarial Information

    Section 4010.8 of the 4010 reporting regulation prescribes the plan 
actuarial information a filer must provide. Paragraph (d)(2) of this 
section sets the actuarial assumptions and methods to use for 
determining a plan's benefit liabilities. PBGC has heard from 
practitioners that the assumptions in paragraph (d)(2) as they apply to 
cash balance pension plans are not clear and don't specify how these 
plans should convert a lump sum payment (which is the assumption used 
by most cash balance plans) to an annuity form. The proposed rule would 
provide needed guidance with respect to cash balance plans on these 
assumptions and make a change in the paragraph's overall structure to 
improve clarity.
    The proposed rule would reorganize Sec.  4010.8(d)(2) and combine 
the actuarial assumptions under paragraphs (d)(2)(i) through (ii) of 
this section into a table. The table would include as number (5) the 
assumptions to use for valuing benefit liabilities for cash balance 
plans. Cash balance plan filers must convert account balances to 
annuity forms of payment using the rules under section 411(b)(5)(B)(vi) 
of the Code and 26 CFR 1.411(b)(5)-1(e)(2) that specify the interest 
crediting rate and annuity conversion rate upon plan termination. In 
other words, for purposes of reporting benefit liabilities, a cash 
balance plan would be treated as if terminated and lump sums converted 
to annuity payments using the assumptions in the applicable U.S. 
Department of the Treasury regulation cited to above.
    The proposed edits to paragraph (d)(3) of this section focus on 
improved readability and conformed citations to ERISA and the Code.

Financial Information

    Section 4010.9 of the 4010 reporting regulation prescribes the 
financial information a filer must submit to PBGC for each member of 
the filer's controlled group. Paragraph (b) of this section permits a 
filer to submit consolidated financial statements if the financial 
information of a controlled group member is combined with the 
information of other members in a consolidated statement. However, if 
consolidated information is reported, paragraph (b)(2) requires that 
revenues, operating income, and net assets for each controlled group 
member also be reported.
    In PBGC's 2017 Request for Information (RFI) on Regulatory Planning 
and Review of Existing Regulations (noted in the ``Background'' section 
of this preamble), a commenter stated that some filers have difficulty 
trying to identify and collect the three types of information under 
Sec.  4010.9(b)(2) for each controlled group member and recommended 
that PBGC modify the regulation to request this detailed information 
only when necessary as part of reviewing the plan and controlled group 
financial statements. PBGC considered the comment, and after reviewing 
the information it collects for 4010 purposes, PBGC believes it can 
adequately assess risks to participants and plans without this detailed 
information, and by using additional ``off-the-shelf'' information as 
noted in the following paragraph. Therefore, the proposed rule would 
eliminate that requirement in paragraph (b)(2) of Sec.  4010.9.
    PBGC proposes to make another change to paragraph (b) of this 
section to clarify what financial information must be provided for 
controlled group members that are U.S. entities where the ultimate 
parent is a foreign entity. In addition to the consolidated statements 
for the whole controlled group, the filer must submit financial 
information on only the U.S. entities that are members of the 
controlled group. This information could be submitted in consolidated 
statements. Otherwise, the filer must provide the separate audited (or 
unaudited) financial statements (or tax returns if financial statements 
are not available) for controlled group members that are U.S. entities.
    Lastly, Sec.  4010.9 allows filers to direct PBGC to where PBGC can 
find required financial information that is publicly available (in lieu 
of submitting that information to PBGC). Paragraph (d) of this section 
on ``submission of public information'' provides that a filer may 
submit a statement indicating when the financial information was made 
available to the public and where PBGC may obtain it. In PBGC's 
experience, these statements have led to general websites, but not 
specific web pages where the information required to be reported can be 
found. Therefore, the proposed rule would clarify how to indicate where 
public financial information is located. The clarification would state 
that filers provide the web address (URL) and title of the web page. 
The example in paragraph (d) of a Securities and Exchange Commission 
filing is clarified accordingly.

[[Page 30672]]

Waivers

    Reporting under section 4010 of ERISA is required if any one of 
three conditions is met. However, PBGC can waive reporting under its 
4010 reporting regulation and does so in three situations (with 
discretion to waive in others) under Sec.  4010.11 of the regulation.
    A condition triggering reporting is that the funding target 
attainment percentage (FTAP) at the end of the preceding plan year, of 
a plan maintained by the contributing sponsor or any member of its 
controlled group, is less than 80 percent (the ``80-percent FTAP 
Gateway Test''). Section 303(d)(2) of ERISA and section 430(d)(2) of 
the Code provide that in determining the FTAP of a plan for a plan 
year, plan assets are reduced by the amount of the plan's funding 
balance. Plan sponsors are permitted under section 303(f) of ERISA and 
section 430(f) of the Code to make certain elections to use, increase, 
or reduce a funding balance effective at the beginning of the plan 
year. Because of timing, a funding balance election that is made late 
may be the sole cause of a plan having a 4010 FTAP of less than 80 
percent. Practitioners have asked if PBGC would recognize for purposes 
of the 80-percent FTAP Gateway Test an untimely funding balance 
election.
    In response, and based on a review of its experience, PBGC proposes 
to recognize a late funding balance election for this purpose. The 
proposed waiver would clarify that reporting is not required where a 
plan makes a late election to reduce a funding balance, and the plan's 
FTAP for 4010 purposes would have been greater than or equal to 80 
percent had the election been timely made.
    PBGC also proposes to modify two of the existing three reporting 
waivers in Sec.  4010.11 of the regulation. PBGC automatically waives 
reporting where: (a) The aggregate funding shortfall is not in excess 
of $15 million; (b) the aggregate participant count is less than 500; 
or (c) the sole reason filing would otherwise be required is because of 
either a statutory lien resulting from missed contributions over $1 
million or outstanding minimum funding waivers exceeding the same 
amount, provided the missed contributions or applications for minimum 
funding waivers were previously reported to PBGC.
    Practitioners have raised with PBGC that, while it is clear under 
the 80-percent FTAP Gateway Test that only plans maintained by the 
controlled group on the last day of the information year are considered 
in determining whether that test is met, the same is not clear under 
Sec.  4010.11 in determining whether either of the first two waivers 
apply. Without specifying ``on the last day of the information year,'' 
the language of the aggregate funding shortfall waiver in paragraph (a) 
and the waiver for smaller plans in paragraph (b) of Sec.  4010.11, 
could be interpreted to mean that plans maintained at any time during 
the plan year must be included in the determination of whether the 
waiver applies. This is not the interpretation that PBGC intended or 
believes is reasonable in light of the standard in the 80-percent FTAP 
Gateway Test. PBGC agrees that a clarification would be helpful. 
Therefore, the proposed rule would modify paragraphs (a) and (b) of 
Sec.  4010.11 to insert ``on the last day of the information year.''
    Practitioners have also asked when at-risk assumptions are to be 
used to calculate the funding target (see section 303(i) of ERISA and 
section 430(i) of the Code for special rules for at-risk plans) for 
purposes of the 4010 funding shortfall and waiving reporting where a 
plan's aggregate funding shortfall is $15 million or less. In response, 
the proposed rule would revise paragraph (a)(1)(i) of Sec.  4010.11 to 
provide that a plan is not required to use at-risk retirement and form 
of payment assumptions to determine the funding target used to 
calculate the 4010 funding shortfall unless the plan is in ``at-risk 
status'' for funding purposes. This follows a similar clarification 
that had been made to the rules describing assumptions for determining 
the premium funding target under PBGC's premium rates regulation, Sec.  
4006.4(b)(3).

Termination of Single-Employer Plans--29 CFR Part 4041

    A single-employer plan covered by PBGC's insurance program may be 
voluntarily terminated only in a standard or distress termination. The 
rules governing voluntary terminations are in section 4041 of ERISA and 
PBGC's regulation on Termination of Single-Employer Plans (29 CFR part 
4041), ``termination of single-employer plans regulation.''

Post-Distribution Certification

    ERISA requires the plan administrator of a plan terminating in a 
standard termination to certify to PBGC that the plan's assets have 
been distributed to pay all benefits under the plan. Certification 
under section 4041(b)(3)(B) of ERISA must be made within 30 days after 
the final distribution of assets is completed.
    Section 4041.29 of the termination of single-employer plans 
regulation requires plans to submit by the 30-day statutory deadline a 
``post-distribution certification'' (i.e., PBGC Form 501). PBGC has 
heard from practitioners that it is sometimes challenging to collect 
all of the information required to be submitted as an attachment to 
Form 501 within the prescribed timeframe (e.g., documentation that 
benefit obligations were settled for all participants including copies 
of cancelled checks in the case of lump sum distributions) and have 
asked whether PBGC could extend the certification deadline.
    While PBGC cannot extend a statutory deadline, the proposed rule 
would amend paragraph (a) of Sec.  4041.29 to provide an alternative 
filing option for plan administrators who need more time to complete 
the PBGC Form 501. This proposed alternative would permit a plan 
administrator to submit a completed PBGC Form 501 within 60 days after 
the last distribution date for any affected party if the plan 
administrator certifies to PBGC that all assets have been distributed 
in accordance with section 4044 of ERISA and 29 CFR part 4044 (in an 
email or otherwise, as would be described in the instructions to the 
Form 501) within 30 days after the last distribution date for any 
affected party.
    Paragraph (b) of this section and paragraph (d)(2) of Sec.  4041.30 
(requests for deadline extensions) would be revised accordingly to 
account for the proposed changes to Sec.  4041.29(a).

Premium Rates--29 CFR Part 4006

    Under sections 4006 and 4007 of ERISA, plans covered by the 
termination insurance program under title IV of ERISA must pay premiums 
to PBGC. Section 4006 of ERISA deals with premium rates, including the 
computation of premiums, and PBGC's regulation on Premium Rates in 29 
CFR part 4006, ``premium rates regulation,'' implements section 4006 of 
ERISA.

Determination of Unfunded Vested Benefits--Plans to Which Special 
Funding Rules Apply

    Section 4006.4 of the premium rates regulation, which provides 
rules for determining unfunded vested benefits, states in paragraph (f) 
that plans subject to special funding rules must disregard those rules 
and determine unfunded vested benefits for premium purposes in the same 
manner as all other plans. Section 4006.4(f) refers to the special 
funding rules under sections 104, 105, 106, and 402(b) of the Pension 
Protection Act of 2006, Public Law 109-280 (PPA), that are applicable 
to

[[Page 30673]]

multiple employer plans of cooperatives and charities, PBGC settlement 
plans, plans of government contractors, and plans of commercial 
passenger airlines and airline caterers.
    The proposed rule would remove references to PPA sections 104, 105, 
and 106 because those provisions have expired. It would add a reference 
to subsequent law that permanently established special funding rules 
for multiple employer plans maintained by certain cooperatives and 
charities (the Cooperative and Small Employer Charity Pension 
Flexibility Act of 2013, Pub. L. 113-97).

Variable-Rate Premium Exemptions; Plans Terminating in Standard 
Terminations

    In general, a single-employer plan pays a variable-rate premium 
(VRP) for the plan year ten-and-a-half months after the plan year 
begins based on the level of the plan's underfunding at the beginning 
of the plan year. In 2014, as part of PBGC's regulatory review process, 
PBGC amended its premium rates regulation to provide for a VRP 
exemption for the year in which a plan completes a standard 
termination. PBGC adopted this exemption because it did not seem 
appropriate to require a terminating plan to pay a VRP based on the 
underfunding at the beginning of the year when, by the time the premium 
was due (or shortly thereafter), the sponsor had fully funded the plan 
and distributed all accrued benefits (i.e., purchased annuities or paid 
lump sums) and PBGC coverage had ceased.\9\
---------------------------------------------------------------------------

    \9\ Before 2014, the standard termination VRP exemption in Sec.  
4006.5(a)(3) was available only if the proposed date of termination 
was in a prior year, but the plan had not yet completed the close-
out by the end of that year. The 2014 change expanded that exemption 
to include plans that are able to complete the termination within 
one plan year. See 79 FR 13547, 13553 (March 11, 2014).
---------------------------------------------------------------------------

    PBGC has received questions from practitioners as to whether a plan 
qualifies for this ``final year'' exemption if a large number of 
participants are spun off to a new plan or transferred to another 
existing plan during the year in which the termination is completed. It 
has been suggested that, if the exemption applies, a plan sponsor could 
significantly reduce its VRP because the transferor plan would not owe 
any VRP for its final year and the transferee plan would owe, at most, 
a pro-rata VRP for the plan year in which the transfer occurs.\10\ 
However, the VRP exemption does not apply in this type of transaction 
because the benefits of most of the participants who were in the plan 
at the beginning of the year would not be fully funded or paid in full, 
and for those participants, PBGC coverage would still be in effect. 
PBGC added language to the 2018 premium filing instructions to 
highlight to filers that the VRP exemption does not apply in such 
cases.
---------------------------------------------------------------------------

    \10\ If the transferee plan is an existing plan, the additional 
underfunding resulting from the transfer would not be reflected in 
its VRP because underfunding for VRP purposes is measured at the 
beginning of the year. If the transferee plan is a new plan, it 
would owe only a pro-rata VRP (see Sec.  4006.5(f)(1)).
---------------------------------------------------------------------------

    In light of these questions, PBGC is proposing to amend Sec.  
4006.5(a)(3) of the premium rates regulation to expressly state that a 
plan does not qualify for the VRP exemption for the year in which a 
plan completes a standard termination if the plan engages in a spinoff 
during the premium payment year. The proposed rule would make an 
exception where the spinoff is de minimis pursuant to the regulations 
under section 414(l) of the Internal Revenue Code (the Code), i.e., 
generally fewer than 3 percent of the assets are spun off.
    To distinguish cases where the termination has not yet been 
completed, the proposed changes would move the exemption for certain 
plans in the process of completing a standard termination initiated in 
a prior year from Sec.  4006.5(a)(3) to Sec.  4006.5(a)(4) of the 
premium rates regulation.

Participant Count Date; Certain Transactions

    To determine the flat-rate premium for a plan year, participants 
are counted on the ``participant count date,'' generally the day before 
the plan year begins. Changes in the participant count during the plan 
year do not affect that year's flat-rate premium. Under the premium 
rates regulation, a special rule (Sec.  4006.5(e)) shifts the 
participant count date to the first day of the plan year in specified 
situations that take place at the beginning of a plan year so that the 
change in participant count is recognized immediately (rather than a 
year later). Situations where the special rule applies include:
     The first plan year a plan exists.
     A plan year in which a plan is the transferor plan in the 
case of a beginning of year non-de minimis spinoff.
     A plan year in which a plan is the transferee plan in the 
case of a beginning of year non-de minimis merger.
    For example, consider a scenario where Plan A, a calendar year 
plan, spins off a group of participants (and the corresponding assets 
and liabilities) into new Plan B at the beginning of Plan A's 2018 plan 
year (assume the spinoff is not de minimis). Because of the special 
rule, both plans count participants on the first day of the year which 
means Plan B owes a 2018 flat-rate premium on behalf of the transferred 
participants, but Plan A does not.
    PBGC has received questions from practitioners as to whether the 
special rule applies to the transferee plan in a situation where spun 
off participants are transferred to an existing plan instead of a new 
plan. These practitioners believed the premium filing instructions 
could be interpreted to provide that the special rule does not apply to 
the transferee plan in this plan-to-plan transfer. However, that 
interpretation would lead to an inconsistent result.
    For example, assume that instead of spinning off participants into 
a new plan, Plan A (in the above example) had transferred those 
participants to a pre-existing Plan C (also a calendar year plan) at 
the beginning of Plan C's 2018 plan year. As noted above, the special 
rule would apply to Plan A, so Plan A would not include the transferred 
participants in its participant count. But, if the special rule does 
not apply to Plan C (i.e., to the transferee plan), Plan C would count 
participants on the day before the transfer. That would mean that 
neither Plan A nor Plan C would owe flat-rate premiums on behalf of the 
transferred participants for 2018.
    PBGC is proposing to amend the special rule in paragraph (e) of 
Sec.  4006.5 to clarify that, in such plan-to-plan transfers, the 
participant count date of the transferee plan shifts to the first day 
of its plan year. As a result, it is clear that the transferee plan 
would owe flat-rate premiums on behalf of the transferred participants. 
This provision generally would operate where both plans have the same 
plan year and the transfer takes place at the beginning of the plan 
year.
    As noted above, the special rule also applies where a plan is the 
transferee plan in the case of a beginning-of-year non-de minimis 
merger. For example, if two calendar year plans merge at the beginning 
of 2018, the surviving plan's participant count date is shifted to 
January 1, 2018. As a result, the surviving plan owes 2018 flat-rate 
premiums on behalf of the participants who were previously in the 
transferor plan.
    PBGC exempted de minimis mergers from this special rule because 
PBGC felt the burden resulting from shifting the participant count date 
was not justified in the case of a de minimis merger because the number 
of participants for whom neither plan would owe a flat-rate premium 
would be relatively small (i.e., the regulations under section 414(l) 
of the Code provide that a merger is de minimis where the liabilities 
of the

[[Page 30674]]

smaller plan are less than 3 percent of the assets of the larger plan).
    PBGC has received questions from practitioners as to whether this 
de minimis exemption applies where the surviving plan is the smaller 
plan. It has been suggested that, if the exemption applies, a plan 
sponsor could avoid paying flat-rate premiums on behalf of the large 
plan participants simply by merging it into a much smaller plan. In one 
case, a consultant reported that a plan sponsor was considering a 
strategy to establish a new plan covering only a few employees so that 
it could merge a large plan into the new small plan at the beginning of 
the next year and avoid paying flat-rate premiums on behalf of the 
large plan participants. These results are inconsistent with the intent 
of the special rule and de minimis exception.
    Because of these questions, PBGC is proposing to clarify that the 
special rule in paragraph (e) of this section applies in the case of a 
beginning-of-year merger where a large plan is merged into a smaller 
plan. This clarification maintains the de minimis exception where a 
smaller plan merges into a larger plan.

Premium Proration for Certain Short Plan Years

    The special rule in Sec.  4006.5(f) of PBGC's premium rates 
regulation allows plan administrators to pay prorated VRP and flat-rate 
premiums for a short plan year and lists the four circumstances that 
would create a short year. One of those circumstances is where the 
plan's assets are distributed pursuant to the plan's termination. For 
example, if a plan distributed its assets in a standard termination 
with a final short plan year covering nine months (i.e., 75 percent of 
a full year), the calculated premium would be reduced by 25 percent.
    This rule makes sense where all accrued benefits are distributed 
(i.e., purchased annuities or paid lump sums) and PBGC's coverage ends. 
However, where a completed termination is preceded in the same year by 
a spinoff of a group of the plan's participants to another plan, the 
transferred participants remain in the insurance program and PBGC 
coverage of their benefits is still in effect. It has been suggested 
that a plan sponsor could use this rule to significantly reduce its 
premium obligation for the year simply by transferring most of its 
participants to another plan early in the plan year and then 
terminating what's left of the transferor plan (and, thus, owing only a 
pro-rata premium for its final short plan year).
    In view of these considerations, PBGC is proposing to change the 
circumstances under which the premium is prorated for a short plan year 
resulting from a standard termination. The proposed rule would provide 
that premiums are not prorated for the year in which the plan completes 
a final distribution of assets in a standard termination if the plan 
engages in a spinoff in that same year, unless the spinoff is de 
minimis pursuant to the regulations under section 414(l) of the Code, 
i.e., generally fewer than 3 percent of the assets are spun off.
    In the same paragraph, the proposed rule replaces the words 
``excess assets'' with ``residual assets under section 4044(d) of 
ERISA'' to be consistent with the statutory language.

Executive Orders 12866, 13563, and 13771

    PBGC has determined that this rule is not a ``significant 
regulatory action'' under Executive Order 12866. Accordingly, this 
proposed rule is exempt from Executive Order 13771, and the Office of 
Management and Budget has not reviewed it under Executive Order 12866.
    Executive Order 12866 directs 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).
    Although this is not a significant regulatory action under 
Executive Order 12866, PBGC has examined the economic and policy 
implications of this proposed rule. Most of the proposed amendments 
clarify regulations and remove outdated provisions, which are neutral 
in their impact. A few would minimally affect the time and cost of 
reporting for plans and sponsors, which is discussed in the Paperwork 
Reduction Act section below.
    Section 6 of Executive Order 13563 requires agencies to rethink 
existing regulations by periodically reviewing their regulatory program 
for rules that ``may be outmoded, ineffective, insufficient, or 
excessively burdensome.'' These rules should be modified, streamlined, 
expanded, or repealed as appropriate. PBGC has identified technical 
corrections, clarifications, and improvements to some of its 
regulations and have included those amendments in this proposed 
rulemaking. PBGC expects to propose periodic rulemakings of this nature 
to revise its regulations as necessary for minor technical corrections 
and clarifications to rules.

Regulatory Flexibility Act

    The Regulatory Flexibility Act \11\ 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 final 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 a final regulatory flexibility 
analysis at the time of the publication of the final 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.
---------------------------------------------------------------------------

    \11\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

Small Entities

    For purposes of the Regulatory Flexibility Act requirements with 
respect to this proposed rule, PBGC considers a small entity to be a 
plan with fewer than 100 participants. This is substantially the same 
criterion PBGC uses in other regulations \12\ and is consistent with 
certain requirements in title I of ERISA \13\ and the Code,\14\ as well 
as the definition of a small entity that the Department of Labor has 
used for purposes of the Regulatory Flexibility Act.\15\
---------------------------------------------------------------------------

    \12\ See, e.g., special rules for small plans under part 4007 
(Payment of Premiums).
    \13\ See, e.g., section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \14\ See, e.g., section 430(g)(2)(B) of the Code, which permits 
single-employer plans with 100 or fewer participants to use 
valuation dates other than the first day of the plan year.
    \15\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
---------------------------------------------------------------------------

    Thus, PBGC believes that assessing the impact of this 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 \16\ under the Small Business Act. Therefore, PBGC 
requests comments on the appropriateness of the size standard used in 
evaluating the impact of the amendments in this proposed rule on small 
entities.
---------------------------------------------------------------------------

    \16\ See, 13 CFR 121.201.

---------------------------------------------------------------------------

[[Page 30675]]

Certification

    Based on its definition of small entity, PBGC certifies under 
section 605(b) of the Regulatory Flexibility Act that the amendments in 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. As explained above under 
``Executive Orders 12866, 13563, and 13771,'' some of the proposed 
amendments reduce requirements for plans and sponsors, including for 
small plans, resulting in administrative savings or have a very minimal 
cost impact as discussed in the Paperwork Reduction Act section below. 
Most of the amendments clarify regulations and remove outdated 
provisions, which are neutral in their impact. Accordingly, as provided 
in section 605 of the Regulatory Flexibility Act, sections 603 and 604 
do not apply.

Paperwork Reduction Act

    PBGC is submitting changes to the information requirements under 
this proposed rule to the Office of Management and Budget (OMB) for 
review and approval under the Paperwork Reduction Act (PRA). An agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information unless it displays a currently valid OMB 
control number. Most of the changes PBGC expects to make are revisions 
to filing instructions, where necessary or helpful, to incorporate the 
clarifications in the proposed rule. Therefore, PBGC estimates the 
proposed rule would have a minimal impact on the hour and cost burden 
of reporting as described below.

Reportable Events Regulation

    The collection of information in part 4043 is approved under 
control number 1212-0013 (expires February 28, 2022). The current 
information collection requirements in part 4043 have an estimated 
annual hour burden of approximately 1,855 hours and a cost burden of 
$439,500.
    PBGC's instructions for Form 10 and Form 10-Advance would be 
updated to describe, as necessary or helpful, the clarifications that 
would be made by the proposed rule. The clarifications incorporated in 
the instructions would replace or augment existing language but would 
not create additional filing burden. However, the proposed rule would 
reduce reporting of active participant reduction events by eliminating 
the two-year lookback requirement. PBGC estimates that the 
approximately 180 filings it receives for active participant reduction 
events per year would be reduced by approximately 38 percent. 
Therefore, PBGC estimates that the total average annual hour burden 
under the proposed rule would be approximately 1,641 hours and the cost 
burden $388,890.

Annual Financial and Actuarial Information Reporting Regulation

    The collection of information in part 4010 is approved under 
control number 1212-0049 (expires May 31, 2022). The current 
information collection requirements have an estimated annual hour 
burden of 532 hours and a cost burden of $12,871,040.
    PBGC's 4010 reporting e-filing instructions would be updated, as 
necessary or helpful, to describe the clarifications that would be made 
by the proposed rule. The clarifications incorporated in the 
instructions would replace existing language, and therefore would not 
create additional filing burden in these instances.
    However, PBGC estimates that the proposed rule would reduce filer 
burden by eliminating the requirement of Sec.  4010.9(b)(2) to provide 
the revenues, operating income, and net assets for each controlled 
group member if a filer is submitting consolidated financial 
information. (See Question 2 on Schedule F, Section II, of the e-4010 
module of PBGC's e-filing portal on www.pbgc.gov.) PBGC estimates that 
approximately 62 percent of a projected 560 filers per year (347.2 
filers) are required to file Question 2 financial information. Based on 
estimates of the average hour and cost burden of this requirement, PBGC 
estimates that by eliminating it, the proposed rule would reduce total 
average annual filer burden by approximately 17 hours and $7,742. 
Therefore, PBGC estimates the aggregate annual hour burden under the 
proposed rule would be approximately 515 hours and the cost burden 
$12,863,298.

Termination of Single-Employer Plans Regulation

    The collection of information in part 4041 is approved under 
control number 1212-0036 (expires March 31, 2021). The current 
information collection requirements in part 4041 (which includes 
standard and distress terminations) have an estimated annual hour 
burden of 29,890 hours and a cost burden of $5,963,400.
    The proposed rule would revise Sec.  4041.29 to provide plan 
administrators of plans terminating in a standard termination the 
option of more time to complete a PBGC Form 501. PBGC estimates up to 5 
minutes of time--for those plan administrators who would choose this 
option--to review the instructions and send an email to PBGC's standard 
termination filings email address to certify that distributions have 
been made timely. There is no change in the information requirements 
contained in the PBGC Form 501.
    PBGC estimates that approximately 25 percent of standard 
termination filers per year would choose this option. With a projected 
average increase in standard terminations over the current inventory, 
the total additional average hourly burden for this information 
collection would be approximately 31 hours (25 percent of 1,503 plans = 
375 plans x 5 minutes per plan (0.083 hours) = 31 hours). While PBGC 
projects this minimal additional time to review and send an email under 
the proposed new option, overall compliance for plan administrators 
would be eased by extending the time to file.

Premium Rates Regulation

    The collection of information with respect to premiums is approved 
under control number 1212-0009 (expires June 30, 2021). PBGC's 
Comprehensive Premium Filing Instructions would be updated to reflect 
the changes made by the proposed rule to the premium provisions. The 
updates incorporated in the instructions would replace existing 
language and therefore would not create additional filing burden.

List of Subjects

29 CFR Part 4001

    Business and industry, Organization and functions (Government 
agencies), Pension insurance, Pensions, Small businesses.

29 CFR Part 4006

    Employee benefit plans, Pension insurance.

29 CFR Part 4010

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

29 CFR Part 4041

    Employee benefit plans, Pension insurance, Pensions.

29 CFR Part 4043

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

    For the reasons stated in the preamble, PBGC proposes to amend 29 
CFR parts 4001, 4006, 4010, 4041, and 4043 as follows:

PART 4001--TERMINOLOGY

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


[[Page 30676]]


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

0
2. Amend Sec.  4001.2 by adding in alphabetical order, the definitions 
``U.S. entity'' and ``Ultimate parent'' to read as follows:


Sec.  4001.2  Definitions.

* * * * *
    U.S. entity means an entity subject to the personal jurisdiction of 
the U.S. district courts.
    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 4006--PREMIUM RATES

0
3. The authority citation for part 4006 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.

0
4. Amend Sec.  4006.4 by revising paragraph (f) to read as follows:


Sec.  4006.4  Determination of unfunded vested benefits.

* * * * *
    (f) Plans to which special funding rules apply. The following 
statutory provisions are disregarded for purposes of determining 
unfunded vested benefits (whether the standard premium funding target 
or the alternative premium funding target is used):
    (1) Section 402(b) of the Pension Protection Act of 2006, Public 
Law 109-280, dealing with certain frozen plans of commercial passenger 
airlines and airline caterers.
    (2) Section 306 of ERISA and section 433 of the Code, dealing with 
certain defined benefit pension plans maintained by certain 
cooperatives and charities.
0
5. In Sec.  4006.5:
0
a. Revise paragraphs (a) and (a)(3);
0
b. Redesignate paragraph (a)(4) as paragraph (a)(5);
0
c. Add a new paragraph (a)(4); and
0
d. Revise paragraphs (e) and (f)(3).
    The revisions and addition read as follows:


Sec.  4006.5   Exemptions and special rules.

    (a) Variable-rate premium exemptions. A plan described in any of 
paragraphs (a)(1) through (5) of this section is not required to 
determine or report its unfunded vested benefits under Sec.  4006.4 and 
does not owe a variable-rate premium under Sec.  4006.3(b).
* * * * *
    (3) Certain plans completing a standard termination. A plan is 
described in this paragraph if it--
    (i) Makes a final distribution of assets in a standard termination 
during the premium payment year, and
    (ii) Did not engage in a spinoff during the premium payment year, 
unless the spinoff is de minimis pursuant to the regulations under 
section 414(l) of the Code.
    (4) Certain plans in the process of completing a standard 
termination initiated in a prior year. A plan is described in this 
paragraph if--
    (i) The plan administrator has issued notices of intent to 
terminate the plan in a standard termination in accordance with section 
4041(a)(2) of ERISA;
    (ii) The proposed termination date set forth in the notice of 
intent to terminate is before the beginning of the premium payment 
year; and
    (iii) The plan ultimately makes a final distribution of plan assets 
in conjunction with the plan termination.
* * * * *
    (e) Participant count date; certain transactions. (1) The 
participant count date of a plan described in paragraph (e)(2) or (3) 
of this section is the first day of the premium payment year.
    (2) With respect to a transaction where some, but not all, of the 
assets and liabilities of one plan (the ``transferor plan'') are 
transferred into another plan (the ``transferee plan'')--
    (i) The transferor plan if the spinoff is not de minimis and is 
effective at the beginning of the transferor plan's premium payment 
year; and
    (ii) The transferee plan if the transferor plan meets the criteria 
in paragraph (e)(2)(i) of this section and the transfer occurs at the 
beginning of the transferee plan's premium payment year.
    (3) With respect to a merger effective at the beginning of the 
premium payment year, the transferee plan if--
    (i) The merger is not de minimis; or
    (ii) The assets of the transferee plan immediately before the 
merger are less than the total assets transferred to the transferee 
plan in the merger.
    (4) For purposes of this paragraph (e), ``de minimis'' has the 
meaning described in regulations under section 414(l) of the Code (for 
single-employer plans) or in part 4231 of this chapter (for 
multiemployer plans).
    (f) * * *
    (3) Distribution of assets. The plan's assets (other than any 
residual assets under section 4044(d) of ERISA) are distributed 
pursuant to the plan's termination, but only if the plan did not engage 
in a spinoff during the plan year, unless the spinoff is de minimis 
pursuant to the regulations under section 414(l) of the Code.
* * * * *

PART 4010--ANNUAL FINANCIAL AND ACTUARIAL INFORMATION REPORTING

0
6. The authority citation for part 4010 continues to read as follows:

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

0
7. In Sec.  4010.2:
0
a. Amend the introductory text by removing ``and'' and adding at the 
end of the sentence ``, ultimate parent, and U.S. entity''.
0
b. Add, in alphabetical order, the definition ``Foreign entity'' to 
read as follows:


Sec.  4010.2  Definitions.

* * * * *
    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 information year, 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 income tax returns for 
employee withholding.
* * * * *
0
 8. Amend Sec.  4010.4 by revising paragraph (e) to read as follows:


Sec.  4010.4   Filers.

* * * * *
    (e) Certain plans to which special funding rules apply. Except for 
purposes of determining the information to be submitted under Sec.  
4010.8(h) (in connection with the actuarial valuation report), the 
following statutory provisions are disregarded for purposes of this 
part:
    (1) Section 402(b) of the Pension Protection Act of 2006, Public 
Law 109-280, dealing with certain frozen plans of commercial passenger 
airlines and airline caterers.
    (2) Section 306 of ERISA and section 433 of the Code, dealing with 
certain defined benefit pension plans maintained by certain 
cooperatives and charities.
0
 9. Amend Sec.  4010.7 by revising paragraph (a) to read as follows:

[[Page 30677]]

Sec.  4010.7   Identifying information.

    (a) Filers. Each filer is required to provide, in accordance with 
the instructions on PBGC's website, http://www.pbgc.gov, the following 
identifying information with respect to each member of the filer's 
controlled group (excluding exempt entities)--
    (1) Current members; individual member information. For each entity 
that is a member of the controlled group as of the end of the filer's 
information year--
    (i) The name, address, and telephone number of the entity;
    (ii) The nine-digit Employer Identification Number (EIN) assigned 
by the IRS to the entity (or if there is no EIN for the entity, an 
explanation); and
    (iii) If the entity became a member of the controlled group during 
the information year, the date the entity became a member of the 
controlled group.
    (2) Current members; legal relationships of members. If, as of the 
end of the filer's information year, the filer's controlled group 
consists of--
    (i) More than ten members, an organization chart or other diagram 
showing the members of the filer's controlled group as of the end of 
the filer's information year and the legal relationships of the members 
to each other.
    (ii) Ten or fewer members, the legal relationship of each entity to 
the plan sponsor (for example, parent, subsidiary).
    (3) Former members. For any entity that ceased to be a member of 
the controlled group during the filer's information year, the date the 
entity ceased to be a member of the controlled group and the 
identifying information required by paragraph (a)(1) of this section as 
of the day before the entity left the controlled group.
* * * * *
0
10. Amend Sec.  4010.8 by revising paragraphs (d)(2) and (3) to read as 
follows:


Sec.  4010.8   Plan actuarial information.

* * * * *
    (d) * * *
    (2) Actuarial assumptions and methods. The value of benefit 
liabilities must be determined using the rules in paragraphs (d)(2)(i) 
through (iii) of this section.
    (i) Benefits to be valued. Benefits to be valued include all 
benefits earned or accrued under the plan as of the end of the plan 
year ending within the information year and other benefits payable from 
the plan including, but not limited to, ancillary benefits and 
retirement supplements, regardless of whether such benefits are 
protected by the anti-cutback provisions of section 411(d)(6) of the 
Code.
    (ii) Actuarial assumptions. The value of benefit liabilities must 
be determined using the actuarial assumptions described in the 
following table:

                     Table 1 to Paragraph (d)(2)(ii)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Actuarial assumptions table to paragraph (d)(2)(ii) of this section
------------------------------------------------------------------------
Assumptions:                  As prescribed in accordance with
------------------------------------------------------------------------
    Interest................  Sec.   4044.52(a).
    Form of payment.........  Sec.   4044.51.
    Expenses................  Sec.   4044.52(d).
Decrements:
     Mortality......  Sec.   4044.53.
     Retirement.....  Sec.  Sec.   4044.55-4044.57.
     Other (e.g.,     Either Option 1 or Option 2--
     turnover, disability).
                             -------------------------------------------
                              Option 1:             Option 2:
                              Disregard (i.e.,      Use the same
                               assume 0%             assumptions as used
                               probability of        to determine the
                               decrements other      minimum required
                               than mortality or     contribution under
                               retirement            section 303 of
                               occurring).           ERISA and section
                                                     430 of the Code for
                                                     the plan year
                                                     ending within the
                                                     filer's information
                                                     year.
                                                    If there is no
                                                     distinction between
                                                     termination and
                                                     retirement
                                                     assumptions,
                                                     reflect only rates
                                                     for ages before the
                                                     Earliest PBGC
                                                     Retirement Date (as
                                                     defined in Sec.
                                                     4022.10 of this
                                                     chapter).
                             -------------------------------------------
Cash balance plan account     Section 204(b)(5)(B)(vi) of ERISA and
 conversions.                  section 411(b)(5)(B)(vi) of the Code
                               (which deal with the interest crediting
                               rate and annuity conversion rates), as if
                               the plan terminated on the last day of
                               the plan year ending within the filer's
                               information year.
------------------------------------------------------------------------

    (iii) Future service. Future service expected to be accrued by an 
active participant in an ongoing plan during future employment (based 
on the assumptions used to determine benefit liabilities) must be 
included in determining the earliest and unreduced retirement ages used 
to determine the expected retirement age and in determining an active 
participant's entitlement to early retirement subsidies and supplements 
at the expected retirement age. See the examples in paragraph (e) of 
this section.
    (3) Special actuarial assumptions for exempt plan determination. 
Solely for purposes of determining whether a plan is an exempt plan for 
an information year, the value of benefit liabilities may be determined 
by substituting the retirement age assumptions in paragraph (d)(2) of 
this section for the retirement age assumptions used by the plan for 
minimum funding purposes for the plan year ending within the 
information year without regard to the at-risk assumptions of section 
303(i) of ERISA and section 430(i) of the Code.
* * * * *
0
11. Amend Sec.  4010.9 by removing ``Web site'' and adding in its place 
``website'' in paragraph (a) and revising paragraphs (b), (d), and (e) 
to read as follows:


Sec.  4010.9  Financial information.

* * * * *

[[Page 30678]]

    (b) Consolidated financial statements. If the financial information 
of a controlled group member is combined with the information of other 
group members in consolidated financial statements, a filer may provide 
the following financial information in lieu of the information required 
in paragraph (a) of this section--
    (1) The audited consolidated financial statements for the 
controlled group for the filer's information year or, if the audited 
consolidated financial statements are not available by the date 
specified in Sec.  4010.10(a), unaudited consolidated financial 
statements for the fiscal year ending within the information year; and
    (2) If the ultimate parent of the controlled group is a foreign 
entity, financial information on the U.S. entities (other than an 
exempt entity) that are members of the controlled group. The 
information required by this paragraph (b)(2) may be provided in the 
form of consolidated financial statements if the financial information 
of each controlled group member that is a U.S. entity is combined with 
the information of other group members that are U.S. entities. 
Otherwise, for each U.S. entity that is a controlled group member, 
provide the financial information required in paragraph (a) of this 
section.
* * * * *
    (d) Submission of public information. If any of the financial 
information required by paragraphs (a) through (c) of this section is 
publicly available, the filer, in lieu of submitting such information 
to PBGC, may include a statement with the other information that is 
submitted to PBGC indicating when such financial information was made 
available to the public and where PBGC may obtain it (including the URL 
and title of the web page if applicable). For example, if the 
controlled group member has filed audited financial statements with the 
Securities and Exchange Commission, it need not file the financial 
statements with PBGC but instead can identify the SEC filing and the 
URL and title of the SEC web page where the filing can be retrieved as 
part of its submission under this part.
    (e) Inclusion of information about non-filers and exempt entities. 
Consolidated financial statements provided pursuant to paragraph (b) of 
this section may include financial information of persons who are not 
controlled group members (e.g., joint ventures) or are exempt entities.
0
12. In Sec.  4010.11:
0
 a. Revise paragraphs (a) and (a)(1);
0
 b. Add ``on the last day of the information year'' after the words 
``controlled group'' in the first sentence in paragraph (b)(1);
0
 c. Redesignate paragraph (d) as paragraph (e); and
0
 d. Add a new paragraph (d).
    The revisions and addition read as follows:


Sec.  4010.11   Waivers.

    (a) Aggregate funding shortfall not in excess of $15 million 
waiver. Unless reporting is required by Sec.  4010.4(a)(2) or (3), 
reporting is waived for a person (that would be a filer if not for the 
waiver) for an information year if, for the plan year ending within the 
information year, the aggregate 4010 funding shortfall for all plans 
(including any exempt plans) maintained by the person's controlled 
group on the last day of the information year (disregarding those plans 
with no 4010 funding shortfall) does not exceed $15 million, as 
determined under paragraphs (a)(1) and (2) of this section.
    (1) 4010 funding shortfall; in general. A plan's 4010 funding 
shortfall for a plan year equals the funding shortfall for the plan 
year as provided under section 303(c)(4) of ERISA and section 430(c)(4) 
of the Code, with the following exceptions:
    (i) The funding target used to calculate the 4010 funding shortfall 
is determined without regard to the interest rate stabilization 
provisions of section 303(h)(2)(C)(iv) of ERISA and section 
430(h)(2)(C)(iv) of the Code, and except for a plan that is in at-risk 
status for minimum funding purposes for the plan year ending within the 
filer's information year, without regard to the rules in section 
303(i)(1) of ERISA and section 430(i)(1) of the Code.
    (ii) The value of plan assets used to calculate the 4010 funding 
shortfall is determined without regard to the reduction under section 
303(f)(4)(B) of ERISA and section 430(f)(4)(B) of the Code (dealing 
with reduction of assets by the amount of prefunding and funding 
standard carryover balances).
* * * * *
    (d) 4010 funding target attainment percentage below 80 percent 
because of late election to waive a funding balance. If reporting is 
required solely under Sec.  4010.4(a)(1), reporting is waived for a 
person (that would be a filer if not for the waiver) for an information 
year if, for the plan year ending within the information year, for any 
plan (including an exempt plan) maintained by the members of the 
contributing sponsor's controlled group with a 4010 funding target 
attainment percentage below 80 percent, each such plan--
    (1) Would have had a 4010 funding target attainment percentage for 
that plan year of 80 percent or more if a timely election to reduce a 
funding balance pursuant to section 303(f)(5) of ERISA and section 
430(f)(5) of the Code had been made; and
    (2) Such an election was made after the applicable deadline and 
before the due date of the 4010 filing.
* * * * *

PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS

0
13. The authority citation for part 4041 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.

0
14. Revise Sec.  4041.29 to read as follows:


Sec.  4041.29   Post-distribution certification.

    (a) Filing requirement. The plan administrator must either--
    (1) Within 30 days after the last distribution date for any 
affected party, file with PBGC a post-distribution certification (PBGC 
Form 501), completed in accordance with the instructions thereto; or
    (2)(i) Within 30 days after the last distribution date for any 
affected party, certify to PBGC, in the manner prescribed in the 
instructions to PBGC Form 501, that the plan assets have been 
distributed as required, and
    (ii) Within 60 days after the last distribution date for any 
affected party, file a post-distribution certification (PBGC Form 501), 
completed in accordance with the instructions thereto.
    (b) Assessment of penalties. PBGC will assess a penalty for a late 
filing under paragraph (a) of this section only to the extent the 
completed PBGC Form 501 is filed more than 90 days after the 
distribution deadline (including extensions) under Sec.  4041.28(a).
0
15. Amend Sec.  4041.30 by revising paragraph (d)(2) to read as 
follows:


Sec.  4041.30  Requests for deadline extensions.

* * * * *
    (d) * * *
    (2) Post-distribution deadlines. Extend the filing deadline under 
Sec.  4041.29(a).

PART 4043--REPORTABLE EVENTS AND CERTAIN OTHER NOTIFICATION 
REQUIREMENTS

0
16. The authority citation for part 4043 continues to read as follows:

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


Sec.  4043.2   [Amended]

0
17. Amend Sec.  4043.2 by removing ``and'' and adding in its place ``,

[[Page 30679]]

ultimate parent, and U.S. entity'' in the introductory text, and 
removing the definition ``U.S. entity.''


Sec.  4043.3   [Amended]

0
18. Amend Sec.  4043.3(c) by removing ``Web site'' and adding in its 
place ``website''.


Sec.  4043.9  [Amended]

0
19. Amend Sec.  4043.9(e)(2)(i) by adding ``third party'' after 
``available''.
0
20. Revise Sec.  4043.23 to read as follows:


Sec.  4043.23   Active participant reduction.

    (a) Reportable event. A reportable event occurs for a plan:
    (1) Single-cause event. (i) On each date in a plan year when, as a 
result of a new single cause, the ratio of the aggregate number of 
individuals who ceased to be active participants because of that 
single-cause, to the number of active participants at the beginning of 
such plan year, exceeds 20 percent.
    (ii) Examples of single-cause events include a reorganization or 
restructuring, the discontinuance of an operation or business, a 
natural disaster, a mass layoff, or an early retirement incentive 
program.
    (2) Attrition event. At the end of a plan year if the sum of the 
number of active participants covered by the plan at the end of such 
plan year, plus the number of individuals who ceased to be active 
participants during the same plan year that are reported to PBGC under 
paragraph (a)(1) of this section, is less than 80 percent of the number 
of active participants at the beginning of 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 from any member of the plan's 
controlled group for work performed for any member of the plan's 
controlled group;
    (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. For purposes of determining whether a 
participant is an active participant, a participant does not cease to 
be active if the person leaves employment with one member of a plan's 
controlled group to become employed by another controlled group member.
    (c) Reductions due to cessations and withdrawals. For purposes of 
paragraph (a) 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 sections 4062(e) or 
4063(a) of ERISA, and
    (2) Is timely reported to PBGC under section 4062(e) and/or section 
4063(a) of ERISA prior to the timely filing of the notice required by 
paragraph (a) of this section.
    (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).
    (5) Statutory events. Notice is waived for an active participant 
reduction event described in section 4043(c)(3) of ERISA except to the 
extent required under this section.
    (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.
    (f) Examples--(1) Determining whether a single-cause event occurred 
(Example 1). A calendar-year plan had 1,000 active participants at the 
beginning of the current plan year. As the result of a business unit 
being shut down, 160 participants are permanently laid off on July 30. 
Prior to July 30, and as part of the course of regular business 
operations, some active participants terminated employment, some 
retired and some new hires became covered by the plan. Because 
reductions due to attrition are disregarded for purposes of determining 
whether a single-cause event has occurred, it is not necessary for the 
sponsor to tabulate an exact active participant count as of July 30. 
Rather, the relevant percentage for determining whether a single-cause 
event occurred is determined by dividing the number of active 
participants laid-off as a result of the business unit shut down to the 
beginning of year active participant count. Because that ratio is less 
than 20 percent (i.e., 160/1,000 = .16, or 16 percent), a single-cause 
event under paragraph (a)(1) of this section did not occur on July 30. 
However, if, as a result of the business unit shutdown, additional 
layoffs occur later in the same year, a single-cause event may 
subsequently be triggered (See Example 3).
    (2) Determining whether an attrition event occurred in year when a 
single-cause event occurred (Example 2).--(i) Assume the same facts as 
in Example 1 except that the number of active participants laid off on 
July 30 was 230 and thus, a single-cause event occurred. Further, 
assume that the event was timely reported to PBGC (i.e., on or before 
August 30). Lastly, assume the active participant count as of year-end 
is 600.
    (ii) To prevent duplicative reporting (i.e., to ensure that the 
participants who triggered a single-cause reporting requirement do not 
also trigger an attrition event), the 230 participants who triggered 
that single-cause reporting requirement are not taken into account for 
purposes of determining whether an attrition event occurred. This is 
accomplished by increasing the year-end count by 230. Therefore, the 
applicable percentage for the attrition determination is 83 percent 
(i.e., (600 + 230)/1,000 = .83). Because 83 percent is greater than 80 
percent, an attrition event has not occurred.
    (3) Single-cause event spread out over multiple dates (Example 3). 
(i) Assume the same facts as in Example 1 except that the layoffs 
resulting from the business unit shut down are spread out over several 
months. The following table summarizes the applicable calculations:

[[Page 30680]]



                                                               Table 1 to Paragraph (f)(3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Single-cause event spread out over multiple dates
---------------------------------------------------------------------------------------------------------------------------------------------------------
                      Date                            Number laid-off        Aggregate reduction                    Applicable percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
February 1......................................                       50                       50  50/1,000 = 5 percent.
May 15..........................................                       50                      100  100/1,000 = 10 percent.
September 1.....................................                      110                      210  210/1,000 = 21 percent.
November 1......................................                       40                      250  250/1,000 = 25 percent.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) A single-cause event occurs on September 1 because that is the 
first time the applicable percentage exceeds 20 percent. This event 
must be reported by October 1. The November 1 layoff does not trigger a 
subsequent single-cause event because the layoff does not amount to an 
additional 20 percent decline in active participants. However, they 
will be considered in the determination of whether an attrition event 
occurs at year-end as explained in paragraph (f)(3)(iii) of this 
section.
    (iii) As illustrated in paragraph (f)(2) of this section (Example 
2), for purposes of determining whether an attrition event has 
occurred, the year-end count is increased by the number of participants 
that triggered a single-cause event. In this case, that number is 210. 
The fact that an additional 40 active participants were laid off as a 
result of the business unit shut down after the single-cause event 
occurred does not affect the calculation because it was not already 
reported to PBGC. For example, if the year-end active participant count 
is 560, the number that gets compared to the beginning-of-year active 
participant count is 770 (i.e., 560 + 210 = 770). Because 770 is less 
than 80 percent of 1,000, an attrition event has occurred and must be 
reported.
    (4) Multiple single-cause events in same plan year (Example 4). 
Assume the same facts as in Example 1 except that the July 30 shutdown 
of the business unit resulted in 205 layoffs on that date. A single-
cause event occurred and is timely reported. Later in the same plan 
year, the company announces an early retirement incentive program and 
210 employees participate in the program with the last employees 
participating in the program retiring on November 15 of the plan year. 
A new single-cause event has occurred as of November 15 resulting in a 
reporting obligation of the active participant reduction due to the 
retirement incentive program (210/1,000 = 21 percent).
0
 21. Amend Sec.  4043.26 by revising paragraph (a)(1) to read as 
follows:


Sec.  4043.26  Inability to pay benefits when due.

    (a) * * *
    (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 need to verify a person's eligibility for benefits,
    (iii) The inability to locate a person, or
    (iv) Any other administrative delay, to the extent that the delay 
is for less than the shorter of two months or two full benefit payment 
periods.
* * * * *


Sec.  4043.29   Change in contributing sponsor or controlled group.

0
 22. Amend Sec.  4043.29 by revising paragraphs (a) and (c) to read as 
follows:
    (a) Reportable event. (1) 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 a--
    (i) Contributing sponsor of the plan, or
    (ii) Member of the plan's controlled group (other than by merger 
involving members of the same controlled group).
    (2) 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 that does not involve a 
change in contributing sponsor described in this paragraph (a) is not 
reportable if it will result solely in a reorganization involving a 
mere change in identity, form, or place of organization, however 
effected.
* * * * *
    (c) Examples. The following examples assume that no waiver applies.
    (1) Controlled group breakup. Company A (the contributing sponsor 
of Plan A), and Company B (the contributing sponsor of Plan B) are in 
the same controlled group with Parent Company AB. On March 31, Parent 
Company AB and Company C enter into an agreement to sell the stock of 
Company B to Company C, a company outside of the controlled group. The 
transaction will close on August 31 and Company B will continue to 
maintain Plan B. Both Company A (Plan A's contributing sponsor) and the 
plan administrator of Plan A are required to report that Company B 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 and Parent Company AB are no longer part of Plan B's 
controlled group. Both reports are due on April 30, 30 days after they 
entered into the agreement to sell Company B.
    (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.
    (3) Dissolution of controlled group member. Company A (which 
maintains Plan A) and Company B are in the same

[[Page 30681]]

controlled group with Parent Company AB. Pursuant to an asset sale 
agreement, Company B sells its assets to a company outside of the 
controlled group. After the sale, Company B will be dissolved and no 
longer operating. Since Company B will no longer be a member of Plan 
A's controlled group, a reportable event occurs on the date Company B 
enters into the asset sale agreement. Note that this event may also be 
required to be reported as a liquidation event under 29 CFR 4043.30.
    (4) Merger of controlled group members. Company A (which maintains 
Plan A) and Company B are in the same controlled group with Parent 
Company AB. Parent Company AB decides to merge the operations of 
Company B into Company A. Although Company B will no longer be a member 
of Plan A's controlled group, no report is due given Company B is 
merging with Company A.
0
 23. Revise Sec.  4043.30 to read as follows:


Sec.  4043.30  Liquidation.

    (a) Reportable event. A reportable event occurs for a plan when a 
member of the plan's controlled group--
    (1) Resolves to cease all revenue-generating business operations, 
sell substantially all its assets, or otherwise effect or implement its 
complete liquidation (including liquidation into another controlled 
group member) by decision of the member's board of directors (or 
equivalent body such as the managing partners or owners) or other actor 
with the power to authorize such cessation of operations, sale, or a 
liquidation, unless the event would be reported under paragraph (a)(2) 
or (3) of this section;
    (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 under 
paragraph (a) of this section 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 under paragraph (a) of this section is a foreign 
entity other than a foreign parent.
    (3) Reporting under insolvency event. Notice under this section is 
waived if reporting is also required under Sec.  4043.35(a)(3) or (4) 
and notice has been provided to PBGC for the same event under that 
section.
    (c) Public company extension. If any contributing sponsor of the 
plan is a public company, notice under this section is extended until 
the earlier of--
    (i) The date 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); or
    (ii) The date when a press release with respect to the liquidation 
described under paragraph (a) of this section is issued.
    (d) Examples--(1) Liquidation within a controlled group. Plan A's 
controlled group consists of Company A (its contributing sponsor), 
Company B, Company Q (the parent of Company A and Company B). Company B 
represents the most significant portion of cash flow for the controlled 
group. Company B experiences an unforeseen event that negatively 
impacts operations and results in an increase in debt. The controlled 
group liquidates Company B by ceasing all operations, settling its 
debts, and merging any remaining assets into Company Q. (For purposes 
of this example, it does not matter under which subparagraph of 
paragraph (a) of this section reporting is triggered). The transaction 
is to be treated as a tax-free liquidation for tax purposes. Both 
Company A (Plan A's contributing sponsor) and the plan administrator of 
Plan A are required to report that Company B will liquidate within the 
controlled group.
    (2) Cessation of Operations. Plan A is sponsored by Company A. The 
owners of Company A decide to cease all revenue-generating operations. 
Certain administrative employees will wind down the business and 
continue to be employed until the wind down is complete, which could 
take several months. Company A is required to report a liquidation 
reportable event 30 days after the decision is made to cease all 
revenue-generating operations.
    (3) Sale of Assets. Plan A is sponsored by Company A. In a meeting 
of the Board of Directors of Company A, the Board resolves to sell all 
the assets of Company A to Company B. Under the asset sale agreement 
with Company B, Company B will not assume Plan A; Company A expects to 
undertake a standard termination of Plan A. Company A is required to 
report a liquidation event 30 days after the Board resolved to sell the 
assets of Company A.
0
 24. Amend Sec.  4043.35 by adding paragraph (b)(3) to read as follows:


Sec.  4043.35   Insolvency or similar settlement.

* * * * *
    (b) * * *
    (3) Liquidation event. Notice under paragraph (a)(3) or (4) of this 
section is waived if reporting is also required under Sec.  4043.30 and 
notice has been provided to PBGC for the same event under that section.


Sec.  4043.81  [Amended]

0
 25. Amend Sec.  4043.81 by removing paragraph (c).

    Issued in Washington, DC by.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2019-13419 Filed 6-26-19; 8:45 am]
 BILLING CODE 7709-02-P