DOL Issues Model MAP-21 Supplement to the Annual Funding Notice for Pension Plans | Practical Law

DOL Issues Model MAP-21 Supplement to the Annual Funding Notice for Pension Plans | Practical Law

The DOL's Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin No. 2013-01, which provides a model supplement to the annual funding notice required for certain single-employer defined benefit plans that meets the requirements of the Moving Ahead for Progress in the 21st Century Act (MAP-21) and additional guidance regarding the MAP-21 notice requirements.

DOL Issues Model MAP-21 Supplement to the Annual Funding Notice for Pension Plans

Practical Law Legal Update 2-525-0865 (Approx. 5 pages)

DOL Issues Model MAP-21 Supplement to the Annual Funding Notice for Pension Plans

by PLC Employee Benefits & Executive Compensation
Published on 11 Mar 2013 • USA (National/Federal)
The DOL's Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin No. 2013-01, which provides a model supplement to the annual funding notice required for certain single-employer defined benefit plans that meets the requirements of the Moving Ahead for Progress in the 21st Century Act (MAP-21) and additional guidance regarding the MAP-21 notice requirements.
On March 8, 2013, the DOL's Employee Benefits Security Administration (EBSA) issued Field Assistance Bulletin No. 2013-01 (FAB 2013-01), which helps single-employer defined benefit pension plans comply with the annual funding notice disclosure requirements of Section 40211(b)(2) of the Moving Ahead for Progress in the 21st Century Act (MAP-21). FAB 2013-01 includes a model supplement to the model annual funding notice (MAP-21 Supplement) as well as additional guidance on other aspects of the notice requirement.
The MAP-21 annual funding notice requirements apply only to single-employer defined benefit plans that are subject to both Titles I and IV of ERISA where the plan year is an "applicable plan year" within the meaning of ERISA Section 101(f)(2)(D)(ii) (FAB 2013-01 also provides guidance on the definition of "applicable plan year") (see Additional Guidance on MAP-21 Notice Requirements). The first annual funding notices to include the MAP-21 disclosures will be the 2012 plan year notices, which are due no later than April 30, 2013 for calendar year plans.

Model MAP-21 Supplement to Annual Funding Notice

The MAP-21 Supplement to the model annual funding notice for a single-employer defined benefit plan is included in the appendix to FAB 2013-01. The purpose of the MAP-21 Supplement is to show plan administrators how MAP-21 changed the way pension plans calculate their liabilities. The MAP-21 Supplement includes an information table that shows how the MAP-21 interest rates affect the plan's:
The table shows this information with and without the MAP-21 rates to illustrate the effect of MAP-21 for the applicable plan year and for each of the two preceding plan years. The MAP-21 Supplement also provides instructions on how to complete the cells of the table. The Q&As explain that for plan years 2012 and 2013, plan administrators using the MAP-21 Supplement should use the pre-MAP-21 rules to determine the FTAP, funding shortfall and MRC for the "Without MAP-21 Interest Rates" cells of the table. Plan administrators should insert "Not Applicable" in the "With MAP-21 Interest Rates" cells of the table for the relevant preceding plan years beginning before January 1, 2012.
FAB 2013-01 also discusses the information that should be used if the plan was not required to furnish the MAP-21 disclosures in one or both of the two preceding plan years beginning on or after January 1, 2012.
Plan administrators are not required to use the MAP-21 Supplement and may use other notice forms to satisfy the MAP-21 content requirements. But as a matter of DOL enforcement policy, an appropriately completed MAP-21 Supplement and the model annual funding notice will satisfy the content requirements of ERISA Section 101(f)(2).
If a plan administrator uses the model annual funding notice in DOL Field Assistance Bulletin 2009-01, it may attach the MAP-21 Supplement to the front of notice.

Additional Guidance on MAP-21 Notice Requirements

The Q&As in FAB 2013-01 also provide additional guidance on the notice requirement. They explain, for example, that:
  • When calculating the funding shortfall under ERISA Section 101(f)(2)(D)(ii)(II), a plan administrator may use the same value of plan assets used to determine the actual funding shortfall under ERISA Section 303(c)(4).
  • A plan sponsor cannot elect out of the MAP-21 disclosures for the 2012 plan year and still use the MAP-21 segment rates for funding purposes in 2012.
  • A plan is not subject to the MAP-21 annual funding notice disclosure requirements located in ERISA Section 101(f)(2)(D) if the plan sponsor elected (under ERISA Section 303(h)(2)(D)(ii)) to use the full corporate bond yield curve to determine the MRC to the plan.
  • A plan administrator does not have to include the MAP-21 disclosures within its required annual funding notice if the effective date of the funding rules under the Pension Protection Act of 2006 (PPA) is delayed in accordance with PPA Sections 104 and 105.
  • A plan administrator must include the statement, "as a result of the MAP-21, the plan sponsor may contribute less money to the plan when interest rates are at historical lows," which is located in ERISA Section 101(f)(2)(D)(i)(II), whether or not the plan sponsor contributed an amount equal to or greater than the MRC (calculated without regard to the MAP-21 segment rates) before the due date of the annual funding notice.
  • When the plan administrator calculates the FTAP, funding shortfall and MRC without regard to the MAP-21 segment rates in ERISA Section 303(h)(2)(C)(iv), the plan administrator may use the same value of plan assets and credit balances used to determine the FTAP, funding shortfall and MRC for funding purposes.
FAB 2013-1 also explains and provides illustrative examples of:
  • The definition of an "applicable plan year." An applicable plan year is any plan year beginning after December 31, 2011 and before January 1, 2015 for which the plan meets certain requirements of MAP-21 explained in FAB 2013-1.
  • The 95% funding target test under ERISA Section 101(f)(2)(D)(ii)(I). This test determines whether additional MAP-21 disclosures are required.
  • The funding shortfall test under ERISA Section 303(c)(4). If the plan is not in "at risk" status for funding purposes (and, therefore, using MAP-21 rates), the plan administrator may determine the funding target without regard to the at risk rules to calculate the shortfall.
  • How the previously established shortfall amortization bases in plan years 2012 and 2013 are used to determine the MRC without regard to the MAP-21 segment rates.
  • How to calculate the entries for the table required by ERISA Section 101(f)(2)(D)(i)(III), including when to use the at-risk rules of ERISA Section 303(i) to determine the "without regard to section 303(h)(2)(C)(iv)" entries of the table.
  • How the plan administrator applies the aggregation rule under ERISA Section 303(g)(2)(B) to determine the number of plan participants.