PBGC Issues Final Regulations on Section 4010 Filings for Unfunded Plans

By Gail Steward and Kartik Dhinakaran

The PBGC has issued an updated set of rules regarding ERISA 4010 reporting. Section 4010 of ERISA generally requires sponsors of severely underfunded pension plans to report their actuarial and financial information if any plan within their controlled group meets any of these conditions:

A Funding Target Attainment Percentage (FTAP) below 80% for the plan year ending within the
    information year;
Missed contributions exceeding $1 million; or
Outstanding minimum funding waivers in excess of $1 million.

Waiver for Controlled Groups with Plans that are Less than $15 Million Underfunded
A waiver is available if the aggregate underfunding for all plans within a controlled group is less than $15 million. The new regulation requires that "non-stabilized" interest rates be used to measure the shortfall. This will lead to more plans being required to file under Section 4010. The justification by the PBGC was that when "stabilized" interest rates were introduced, the higher rates allowed more plans to qualify for the waiver, which hindered the PBGC's ability to evaluate risk quickly and intervene when a plan was in poor condition. Note that credit balances are not subtracted in determining the underfunding and that only underfunded plans are aggregated; there is no offset for overfunded plans.

Waiver for Small Plans
To minimize burden on smaller plans, a new waiver was introduced. Controlled groups in which the total number of participants in all plans sponsored is fewer than 500 are not required to submit a 4010 filing.

Waiver for Liens and Outstanding Funding Waivers
Other new waivers introduced in the new regulations were for plans with either a lien for missed contributions exceeding $1 million or outstanding funding waivers exceeding $1 million for the fiscal year. These waivers are applicable only if the missed contributions or applications for funding waivers were reported to the PBGC by the due date of the 4010 filing as required by ERISA 4043.

Next Steps
The final regulations are applicable to information years beginning after December 31, 2015. The first filings under the new regulation will be due April 17, 2017. While some plans may benefit from these new rules, many plans may no longer qualify for reporting waivers, which could increase their filing burden. It is recommended that plan sponsors be proactive and discuss these changes with their actuary to determine whether they might need to submit this filing in 2017.

If you have any questions, please contact Gail Steward at This email address is being protected from spambots. You need JavaScript enabled to view it.

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