PBGC Issues Guidance on HATFA's Effect on 4010 Reporting | Practical Law

PBGC Issues Guidance on HATFA's Effect on 4010 Reporting | Practical Law

The Pension Benefit Guaranty Corporation (PBGC) issued guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on information reporting under Section 4010 of the Employee Retirement Income Security Act of 1974 (ERISA).

PBGC Issues Guidance on HATFA's Effect on 4010 Reporting

Practical Law Legal Update 0-585-1405 (Approx. 4 pages)

PBGC Issues Guidance on HATFA's Effect on 4010 Reporting

by Practical Law Employee Benefits & Executive Compensation
Published on 21 Oct 2014 • USA (National/Federal)
The Pension Benefit Guaranty Corporation (PBGC) issued guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on information reporting under Section 4010 of the Employee Retirement Income Security Act of 1974 (ERISA).
On October 17, 2014, the Pension Benefit Guaranty Corporation (PBGC) issued Technical Update 14-2 which offers guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on annual financial and actuarial information reporting under Section 4010 of the Employee Retirement Income Security Act of 1974 (ERISA). Specifically, it provides guidance on HATFA's retroactive application for 2013 and the timing issues for some 4010 filers.

Background on MAP-21 and HATFA

HATFA, signed into law on August 8, 2014, extended the pension plan stabilization provisions that were part of the Moving Ahead for Progress in the 21st Century Act (MAP-21) (see Legal Updates, President Obama Signs the Highway and Transportation Funding Act of 2014 with Pension Funding Provisions and President Obama Signs Transportation Bill with Pension Funding Provisions).
MAP-21 stabilized the interest rates used by underfunded defined benefit plans in calculating pension liabilities for purposes of the minimum funding rules under the Internal Revenue Code (IRC), beginning for plan years in 2012. Under MAP-21, the interest rates used to estimate pension liabilities and determine employer contributions were limited to a specific "corridor" (90 to 110% for 2012, increasing by 5% beginning in 2013).
HATFA extended the 90 to 110% interest rate corridor through 2017, which ultimately reduces an employer's minimum required contributions. The extension applies retroactively to 2013 in certain cases, if plan sponsors make timely elections. Under IRS Notice 2014-54, plans may decide whether to use HATFA rates or MAP-21 rates for 2013 funding determinations up until December 31, 2014 (see Legal Update, IRS Notice 2014-53 Provides Deadlines and Requires Decisions on HATFA's Pension Funding Provisions).
A plan's decision to apply the HATFA rates retroactively for the 2013 plan year affects its 4010 filing because the actuarial information that is included in the filing is determined by the rate used and would need to be amended.

4010 Filing under Technical Update 14-2

Section 4010 of ERISA requires filers to provide actuarial information including an actuarial valuation report for the plan year ending within the information year. Because HATFA retroactively applies to 2013, employers may have timing issues with their 4010 filings for the 2013 plan year where the 4010 filings were either:
  • Submitted before HATFA was enacted so that the actuarial information was based on MAP-21 rates.
  • Due before the deadline to choose whether to use MAP-21 rates or HATFA rates so that the actuarial information reported may change depending on the employer's rate choice.

No Amendment Needed for Certain Filings

Filings for the 2013 plan year that contain actuarial information based on MAP-21 rates where the filer ultimately decides to use HATFA rates are excused from the requirement to amend the filing. This relief applies regardless of whether the 4010 filing is submitted before or after HATFA was enacted.

Actuarial Valuation Report Not Available

Where the actuarial valuation report is not available by the 4010 filing due date for the 2013 plan year, a filer may submit an actuarial valuation report based on either MAP-21 rates or HATFA rates by the alternative due date (15 days after a plan's Form 5500 is due) if the filer has either:
  • Already submitted a 4010 filing containing actuarial information using MAP-21 rates.
  • Will submit in the future a 4010 filing containing actuarial information using MAP-21 rates.

Unnecessary Reporting

In some cases, a filer may no longer be required to submit the actuarial valuation report or the 4010 filing for the next information year because of the retroactive application of HATFA. These filers are not required to submit the actuarial valuation report or an explanation of why the 4010 filing is not required. However, filers that wish to do so to avoid potential correspondence from the PBGC may send an explanatory email to [email protected].

Practical Impact

While this may be welcome relief for some filers, filers should be aware that the PBGC has reserved the right to request the submission of the actuarial information that is based on the rates that the plan ultimately uses for the 2013 plan year if the PBGC needs the information for monitoring and enforcement activities.