The Pension Protection Act of 2006 (PPA ‘06) amended the Employee Retirement Income Security Act of 1974 (ERISA) to require plan administrators of PBGC covered defined benefit pension plans to replace the Summary Annual Report (SAR) with an Annual Funding Notice that will provide participants and others with information annually about the funding status of their plans. The first Annual Funding Notice is due April 30, 2009 for large calendar year plans.

The Pension Protection Act of 2006 (PPA ‘06) amended the Employee Retirement Income Security Act of 1974 (ERISA) to require plan administrators of PBGC covered defined benefit pension plans to replace the Summary Annual Report (SAR) with an Annual Funding Notice that will provide participants and others with information annually about the funding status of their plans. The new notice requirement applies to plan years beginning after 2007. The first Annual Funding Notice is due April 30, 2009 for 2008 calendar year large plan filers.
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a Field Assistance Bulletin (FAB 2009-01) that in addition to providing technical assistance in the form of questions and answers and two model annual funding notices (one for single-employer plans and one for multiemployer plans) announced a “good faith” enforcement policy that provides that pending further guidance, use of an appropriately completed model notice will satisfy the new content requirements. FAB 2009-1 may be found at http://www.dol.gov/ebsa/regs/fab2009-1.html.

The PBGC insures workers in most private-sector defined benefit plans in the event that their plans do not have sufficient assets to pay benefits if the plan is terminated. The PBGC insures both single-employer and multiemployer defined benefit plans. While the vast majority of defined benefit plans are covered by the PBGC, there are a few exceptions, namely:
(1)     plans established and maintained exclusively for substantial owners - Form 5500-EZ filers among them. Generally, a substantial owner is anyone who owns the entire interest in an unincorporated business, or a partner or shareholder who owns (directly or indirectly) more than 10 percent of a partnership or corporation;
(2)     plans of professional services employers that have always had 25 or fewer active participants. This includes physicians, dentists, chiropractors, osteopaths, optometrists, other licensed practitioners of the healing arts, lawyers, public accountants, public engineers, architects, draftspersons, actuaries, psychologists, social or physical scientists, and performing artists; and
(3)     unfunded plans

What Information Must the New Notice Include?
(1) The Notice, for single-employer defined benefit plans, must include information about:

the Funding Target Attainment Percentage;
credit balances, if any;
the plan’s at-risk status, if applicable;
the fair market value of assets;
participant census information;
the plan’s funding & Investment polices; and
events, taking effect in the current plan year, that are expected to have a material effect on plan liabilities or assets.

federal rules governing the termination of single-employer plans;
benefit payments guaranteed by the PBGC
corporate information on file with PBGC, if applicable; and
where additional information can be obtained

the PBGC;
each plan participant and beneficiary;
each labor organization representing participants or beneficiaries;
each employer that has an obligation to contribute to the plan, in the case of a multiemployer plan

When Does the Notice Have to be Distributed?
The date that participants and beneficiaries must receive the notice, depends on whether the plan is a “large plan filer” or a “small plan filer” for Form 5500 reporting purposes.
1.      Plans that cover more than 100 participants as of the first day of the plan year are “large plan” filers, so the 2008 notice must be distributed no later than 120 days after the close of the plan year. For calendar year plans, the deadline is Thursday, April 30, 2009, which is 120 days after the close of the 2008 plan year.
2.      Plans that cover 100 or less participants as of the first day of the plan year are “small plan” filers. For small plan filers (including those filing under the 80/120 rule) the notice must be provided no later than the earlier of:
•     the date that the Form 5500 report is actually filed, or
•     the latest date the Form 5500 could be filed, including extensions.

How Can The Notice Be Distributed?
The Notice may be provided in written, electronic, or any other appropriate method as long as that method is reasonably accessible to those persons required to receive the Notice. It should be noted that while ERISA Reg. §2520.104b-1(c) allows for electronic delivery of documents to a participant, that participant must have the ability to effectively access documents furnished in an electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee and to whom the access is an integral part of their duties. In addition, other recipients may affirmatively consent to electronic receipt of such documents. A paper copy must be made available to any recipient of an electronic Notice who requests it.

What About The SAR?
A defined benefit plan that must provide the Annual Funding Notice no longer has to provide an SAR to plan participants and beneficiaries. However, other defined benefit plans, those not covered by the PBGC, as well as defined contribution plans and certain welfare benefit plans must continue to provide the SAR to participants and beneficiaries on an annual basis.

Please contact Michael F. Yates & Company Inc. for additional details. CONTACT MFYCO