Reportable Events and Certain Other Notification Requirements, 20039-20066 [2013-07664]

Agencies

• Pension Benefit Guaranty Corporation

[Federal Register Volume 78, Number 64 (Wednesday, April 3, 2013)]
[Proposed Rules]
[Pages 20039-20066]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07664]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / 
Proposed Rules

[[Page 20039]]



PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4000, 4001, 4043, 4204, 4206, and 4231

RIN 1212-AB06


Reportable Events and Certain Other Notification Requirements

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: Under ERISA, pension plans and the companies that sponsor them 
are required to report to PBGC a range of corporate and plan events. In 
2009, PBGC proposed to increase reporting requirements by eliminating 
most reporting waivers. Plan sponsors and pension practitioners 
objected, saying that PBGC would have required reports where the actual 
risk to plans and PBGC is minimal. On reflection, PBGC agrees. This new 
proposal exempts most companies and plans from many reports, and 
targets requirements to the minority of companies and plans that are at 
substantial risk of default.
    PBGC developed a revised proposal under the auspices of 
Presidential Executive Order 13563, which directs agencies to review 
and revise existing regulations. Under the new proposal, reporting 
would be waived for most events currently covered by funding-based 
waivers if a plan or its sponsor comes within a financial soundness 
safe harbor based on widely available measures already used in 
business. Waivers for small plans would be expanded and some other 
existing waiver provisions would be retained with modifications; other 
waivers would be eliminated.
    In this way, PBGC can reduce unnecessary reporting requirements, 
while at the same time target its resources to plans that are at risk. 
The revised proposal will exempt more than 90 percent of plans and 
sponsors from many reporting requirements. Reporting requirements would 
also be made simpler and more uniform.
    PBGC will also provide for more open and extensive public comment 
on the proposed rule.

DATES: Comments must be submitted on or before June 3, 2013. A public 
hearing will be held on June 18, 2013. Outlines of topics to be 
discussed at the hearing must be submitted on or before June 4, 2013. 
See Public Participation below for more information on the hearing.

ADDRESSES: Comments, identified by Regulation Identifier Number (RIN) 
1212-AB06, may be submitted by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the Web site instructions for submitting comments.
     Email: reg.comments@pbgc.gov.
     Fax: 202-326-4224.
     Mail or Hand Delivery: Regulatory Affairs Group, Office of 
the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington, DC 20005-4026.
    All submissions must include the Regulation Identifier Number for 
this rulemaking (RIN 1212-AB06). Comments received, including personal 
information provided, will be posted to www.pbgc.gov. 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 and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)
    Outlines of topics to be discussed at the public hearing on this 
rule must be submitted by email to regs.comments@pbgc.gov or by mail or 
courier to Regulatory Affairs Group, Office of the General Counsel, 
Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 
20005-4026. See Public Participation below for more information on the 
hearing.

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Assistant General 
Counsel (Klion.Catherine@PBGC.gov), Regulatory Affairs Group, Office of 
the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington, DC 20005-4026; 202-326-4024. (TTY/TDD users may 
call the Federal relay service toll-free at 1-800-877-8339 and ask to 
be connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION:

Executive Summary--Purpose of the Regulatory Action

    This rule is needed to conform PBGC's reportable events regulation 
to changes in the law, to avoid unnecessary reporting requirements, to 
make reporting more efficient and effective, and as a result help 
preserve retirement plans. It does these things by amending the 
regulation to track new legal rules, to change the scope of some 
reportable events, and to replace the existing waiver structure with a 
new structure including ``safe harbors'' that relieves reporting 
burdens on companies and plans where there is little risk to pensions.
    PBGC's 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, and section 4043 of ERISA, which gives 
PBGC authority to define reportable events and waive reporting.

Executive Summary--Major Provisions of the Regulatory Action

Changing the Waiver Structure

    Under the current waiver structure for reportable events, PBGC 
often doesn't get reports it needs; at the same time, it gets many 
reports it doesn't need--reports that are unnecessary. This mismatch 
occurs because the current waiver structure isn't well-tied to the 
actual risks and causes of plan terminations.
    When a reporting waiver keeps PBGC from learning of a reportable 
event that presents a high level of risk to a plan, its participants, 
and the pension insurance system, PBGC loses the opportunity to take 
protective action. That action might include steps such as involuntary 
plan termination or negotiation with the plan sponsor to improve plan 
funding.
    But when there is no waiver for a low-risk event, the reporting 
burden of the plan or sponsor involved outweighs the usefulness of the 
report to PBGC.
    In both these cases, the result is to reduce retirement security. 
In the former case, PBGC is unable to step in to support plan benefits 
in a timely way, either because a plan may have been terminated that 
could otherwise have been preserved, or because an

[[Page 20040]]

involuntary termination occurred after exposure had increased 
unreasonably. In the latter case, the unnecessary reporting burden may 
lead some firms to reconsider their decision to sponsor defined-benefit 
pension plans.
    The most significant provision of this rule is to propose a 
blueprint for a new reportable events waiver structure that is more 
closely focused on risk than the current waiver structure. Some waivers 
that poorly identify risky situations--like those based on an 
apparently modest level of plan underfunding--would be eliminated; at 
the same time, new ``safe harbors'' would be established--based on 
financial soundness--that are better measures of low plan risk.

Conforming to Changes in the Law

    The Pension Protection Act of 2006 (PPA 2006) made changes in the 
law that affect the test for whether advance reporting of certain 
reportable events is required. The test is based on the variable-rate 
premium rules, which PPA 2006 changed. This rule would conform the 
advance reporting test to the new legal requirements.

Revision of Definitions of Reportable Events

    The rule would simplify the descriptions of several reportable 
events and make some event descriptions narrower so that compliance is 
easier and less burdensome. One event would be broadened in scope, and 
clarification of another event would have a similar result. These 
changes, like the waiver changes, are aimed at tying reporting burden 
to risk.

Mandatory E-Filing

    The rule would make electronic filing of reportable events notices 
mandatory. This would further PBGC's ongoing implementation of the 
Government Paperwork Elimination Act. E-filing is more efficient for 
both filers and PBGC and has become the norm for PBGC's regulated 
community.

Introduction

    On January 18, 2011, the President issued Executive Order 13563 on 
Improving Regulation and Regulatory Review, directing agencies to 
review and improve their regulatory processes. In the spirit of 
Executive Order 13563 and in light of the comments received on its 2009 
proposal, PBGC reexamined the reportable events regulation and the 
proposed amendment with several factors in mind:
     Commenters said that under the 2009 proposal, many 
companies would have been required to report to PBGC on non-pension-
focused activities in circumstances where those activities were 
unlikely to affect their pension plans.\1\ To avoid such a result, PBGC 
has sought ways to establish safe harbors that waive reporting 
requirements in such circumstances.
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    \1\ Among the many comments received on this point: ``* * *in 
many situations in which reporting would be required--the reportable 
event would not create any meaningful risk that the employer would 
be unable to meet its plan funding obligations.'' ERISA Industry 
Committee comment letter, accessible on PBGC's Web site 
(www.PBGC.gov).
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     Since the reportable events program was legislated almost 
four decades ago, a vast quantity of business and financial information 
has become available through the internet and other means. As a result, 
PBGC can require less direct reporting from its insured plans and their 
sponsors.
     When reporting to PBGC is necessary, to the extent 
practicable PBGC can and should rely on procedures, documents, and 
performance standards that are already established and accepted. In 
short, PBGC is trying not to ``reinvent the wheel,'' nor does PBGC want 
to require insured plans and the companies that sponsor them to do so.

Establishing Financial Soundness Safe Harbors

    PBGC proposes to establish safe harbors to enable financially sound 
businesses and plans to avoid having to report many events, 
particularly those events that seem to have little chance of 
threatening pension plans.
     Establishing Financial Soundness for Companies. A business 
would be in the safe harbor if it has adequate capacity to meet its 
obligations in full and on time, as evidenced by meeting five criteria, 
including passing a ``credit report'' test and four other criteria 
designed to measure various aspects of financial soundness. The credit 
report test would require that the business have a credit report score 
from a commercial credit reporting company that is commonly used in the 
business community and that the score indicate a low likelihood that 
the company would default on its obligations. (The vast majority of 
plan sponsors already have credit report scores.) The other criteria 
would be that the business have: (a) Positive net income, (b) no 
secured debt (with some exceptions, such as purchase-money mortgages 
and leases), (c) no loan defaults or similar issues, and (d) no missed 
pension plan contributions (again, with some exceptions). For those in 
the safe harbor, no post-event reporting would be required for most 
events to which funding-based waivers currently apply.\2\
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    \2\ Most reporting requirements under the reportable events 
regulation call for post-event reports, but in some cases advance 
reporting is required. The new proposal would conform the advance 
reporting threshold test to changes in the law and eliminate certain 
extensions of the time to file (see Advance-Notice Extensions 
below), but would make other changes to advance-notice provisions 
only where they refer to post-event notice provisions that would be 
changed. Except as otherwise noted, this preamble discusses post-
event reporting only.
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     Establishing Financial Soundness via Plans. A plan would 
be in the safe harbor if it were either fully funded on a termination 
basis or 120 percent funded on a premium basis.\3\
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    \3\ The current regulation provides a waiver in some 
circumstances based on 80 percent funding on a premium basis. 
However, in PBGC's experience, that test is inadequate, in that many 
plans that have undergone distress or involuntary termination 
nonetheless have been 80 percent funded on a premium basis. See 
Financial Soundness Safe Harbor for Plans below.
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    The proposal would also generally provide more small-plan waivers 
and preserve foreign-entity and de minimis waivers but eliminate most 
other waivers.
    In addition, PBGC proposes to simplify reporting rules, to make 
them more uniform, and where possible to permit submission of 
information already prepared by plans and companies for other purposes.

Impact of Proposal

    Overall, PBGC expects the proposal to exempt or waive more than 90 
percent of plans and sponsors from many reporting requirements. The 
proposal will reduce the burden on the vast majority of companies 
(estimated at approximately three-fourths) that are financially sound. 
This reduction may make them less likely to eliminate their defined 
benefit plans and thereby have a beneficial effect on retirement 
security generally. In addition, the expansion of small plan waivers 
could help retention of small plans (which represent about two-thirds 
of all plans).
    Burden on plan sponsors with de minimis components in their 
controlled groups will be reduced because the inclusion of additional 
de minimis waivers for certain events will reduce both reporting and 
the need to monitor for reportable events to which waivers apply.
    Some reportable events present little or no risk to the pension 
insurance system--where, for example, the plan sponsor is financially 
sound and the risk of plan termination low. Reports of such events are 
unnecessary in the sense that PBGC typically reviews but takes no 
action on them. Based on an analysis of 2011 data, PBGC found that

[[Page 20041]]

the proportion of such unnecessary filings would be cut by 88 percent 
under the proposed regulation.\4\ The total number of filings under the 
proposed rule would be comparable to those under the present 
regulation, but they would be much reduced compared to the 2009 
proposal, and the proportion of unnecessary reports, and the regulatory 
burden on financially sound sponsors and plans, would be dramatically 
reduced. Fewer unnecessary reports means a more efficient reporting 
system and a greater proportion of filings that present the opportunity 
for increased plan protection through monitoring and possible 
intervention in transactions based on risk, leading to better 
protection for the pension insurance system and retirement security 
generally.
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    \4\ To 5 percent under the proposal compared to 42 percent under 
the present regulation.
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    If PBGC gets a reportable event notice, it can intervene earlier in 
the process. Using data from 2011, PBGC has estimated the benefit of 
better targeted reporting under the new proposal in terms of the value 
of early intervention as a creditor where a reportable event may 
foreshadow sponsor default. Early intervention as a creditor leads to 
higher recoveries of plan underfunding. PBGC estimates that the value 
of early intervention would exceed the dollar equivalent of the 
increased burden associated with the higher rate of targeted reporting 
by approximately $3.8 million.
    The methodology of these studies is discussed in more detail under 
Executive Order 12866 ``Regulatory Planning and Review'' and Executive 
Order 13563 ``Improving Regulation and Regulatory Review'' at the end 
of this preamble.
    The new proposal is described in more detail below.

Background

    The Pension Benefit Guaranty Corporation (PBGC) administers the 
pension plan termination insurance program under Title IV of the 
Employee Retirement Income Security Act of 1974 (ERISA). Under section 
4007 of ERISA, pension plans covered by Title IV must pay premiums to 
PBGC. Section 4006 of ERISA establishes the premium rates and includes 
provisions for determining the variable-rate premium (VRP), which is 
based on plan funding rules. PBGC's regulations on Premium Rates (29 
CFR part 4006) and Payment of Premiums (29 CFR part 4007) implement the 
premium rules. A number of other provisions of ERISA, and of PBGC's 
other regulations, refer to funding and premium rules. Thus, any change 
in the funding and premium rules may require corresponding changes in 
other PBGC regulations.

Reportable Events

    One such regulation is PBGC's regulation on Reportable Events and 
Certain Other Notification Requirements (29 CFR part 4043), 
implementing section 4043 of ERISA, which requires that PBGC be 
notified of the occurrence of certain ``reportable events.'' Reportable 
events include such plan events as missed contributions, insufficient 
funds, and large pay-outs and such sponsor events as loan defaults and 
controlled group changes. Like section 4043, the reportable events 
regulation generally requires post-event reporting, but also calls for 
advance reporting for non-public companies where plan underfunding is 
large. The threshold test for advance reporting measures underfunding 
by reference to VRP quantities (in particular, the values of assets and 
vested benefits as determined for VRP purposes).
    The Pension Protection Act of 2006 (PPA 2006) changed the plan 
funding rules in Title I of ERISA and in the Internal Revenue Code of 
1986 (Code) and amended the VRP provisions of section 4006 of ERISA to 
conform to the changes in the funding rules. PBGC amended its premium 
rates regulation and its premium payment regulation accordingly, 
effective for plan years beginning after 2007. Since underfunding for 
purposes of reportable events was measured by reference to the VRP, the 
thresholds for reportable events also had to be modified. Pending the 
adoption of conforming amendments to the reportable events regulation, 
PBGC has issued a series of Technical Updates providing transitional 
guidance on how the PPA 2006 changes affect compliance with the 
reportable events requirements.\5\
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    \5\ On November 28, 2007, PBGC issued Technical Update 07-2, 
providing transitional guidance on the applicability of the changes 
made by PPA 2006, and the corresponding changes proposed for PBGC 
premium regulations, to the determination of funding-related amounts 
for purposes of the reportable events regulation. On March 24, 2008, 
PBGC issued Technical Update 08-2, providing a waiver for reporting 
of missed quarterly contributions by certain small employers in 
2008. On January 9, 2009, PBGC issued Technical Update 09-1, 
providing interim guidance on compliance with reportable events 
requirements for plan years beginning in 2009. On April 30, 2009, 
PBGC issued Technical Update 09-3, providing a waiver or alternative 
compliance method (depending on plan size) for reporting of missed 
quarterly contributions by certain small employers in 2009. On 
November 23, 2009, PBGC issued Technical Update 09-4, extending the 
guidance in Technical Updates 09-1 and 09-3 for 2010. On December 3, 
2010, PBGC issued Technical Update 10-4, extending the guidance in 
Technical Update 09-4 for 2011. On December 7, 2011, PBGC issued 
Technical Update 11-1, extending the guidance in Technical Update 
10-4 for 2012. Technical Updates are available on PBGC's Web site, 
www.pbgc.gov.
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2009 Proposed Rule

    On November 23, 2009 (at 74 FR 61248), PBGC published in the 
Federal Register for notice and comment a proposed rule providing for 
amendment of PBGC's reportable events regulation to make the advance 
reporting threshold test consistent with the PPA 2006 funding rules and 
PBGC's new variable-rate premium rules. The rule also proposed to 
eliminate most automatic waivers and filing extensions, create two new 
reportable events based on provisions in PPA 2006, and make other 
changes to the reportable events regulation. It also provided for 
amendment of five other PBGC regulations to revise statutory cross-
references and otherwise accommodate the statutory and regulatory 
changes in the premium rules.
    PBGC received comments on the proposed rule from eleven 
commenters--actuaries, pension consultants, and organizations 
representing employers and pension professionals. In general, the 
commenters considered the proposal unduly burdensome, primarily because 
of the elimination of most reportable event waivers. Several commenters 
urged PBGC to rethink and repropose the rule to address issues raised 
by the comments.

Executive Order 13563

    On January 18, 2011, the President issued Executive Order 13563 on 
Improving Regulation and Regulatory Review (76 FR 3821, January 21, 
2011). Executive Order 13563 encourages identification and use of 
innovative tools to achieve regulatory ends, calls for streamlining 
existing regulations, and reemphasizes the goal of balancing regulatory 
benefits with burdens on the public.
    Executive Order 13563 also requires agencies to develop a plan to 
review existing regulations to identify any that can be made more 
effective or less burdensome in achieving regulatory objectives. On 
April 1, 2011 (at 76 FR 18134), PBGC published a request for public 
comments on developing its preliminary review plan. The five responses 
to this comment request (all from commenters on the 2009 proposal) 
included comments on the 2009 proposed rule (largely reflective of 
those submitted previously) as well as comments on the existing 
regulation.

[[Page 20042]]

New Proposal

    PBGC has reconsidered the reportable events regulation and the 2009 
proposed amendment in the spirit of Executive Order 13563 and in light 
of the comments. In addition to conforming the reportable events 
regulation to PPA 2006's changes to the funding and premium rules, this 
new proposal includes significant changes to address issues under the 
regulation in a new way and to reduce burden in areas where that can be 
done without unduly compromising the objectives of section 4043.
    In particular, the proposal features the introduction of a newly 
conceived ``safe harbor'' from reporting in response to comments 
suggesting that PBGC reduce reporting where risk to the pension 
insurance system is low. This safe harbor, applicable to five 
reportable events, would be based on employer financial soundness 
(i.e., an employer's capacity to meet its financial commitments in full 
and on time) as determined through credit report scores and the 
satisfaction of related criteria. A second safe harbor would be 
available for plans that could meet one of two funding tests that would 
be more stringent than those currently provided for existing funding-
based waivers. The new proposed rule would also preserve or extend some 
waivers under the existing regulation that the 2009 proposal would have 
eliminated.
    Under this approach, PBGC would rely more heavily on publicly 
available sources of information, including information publicly 
reported to other agencies, to learn about reportable events. As a 
result, it might take longer for PBGC to learn of some reportable 
events, but PBGC believes the approach would provide a better balance 
between the agency's need for information and sponsors' interest in 
minimizing regulatory burdens on the conduct of their business.
    Public comments and regulatory changes (from both the existing 
regulation and the 2009 proposal) are discussed below in the context of 
the provisions they relate to.

Reportable Events

    PBGC proposes to amend the reportable events regulation to 
accommodate the changes to the funding and premium rules; to replace 
many automatic waivers with a new and simpler system of waivers 
featuring ``safe harbors'' for five events based on plan sponsors' 
financial soundness and on high levels of plan funding; and to make 
other modifications.
    Reports required by section 4043 of ERISA tell PBGC about events 
that may presage distress termination of plans or require PBGC to 
monitor or involuntarily terminate plans. These important reporting 
requirements are designed to protect participants and PBGC. When PBGC 
has timely information about a reportable event, it can take steps to 
encourage plan continuation--for example, by exploring alternative 
funding options with the plan sponsor--or, if plan termination is 
called for, to minimize the plan's potential funding shortfall through 
involuntary termination and maximize recovery of the shortfall from all 
possible sources. Without timely information about a reportable event, 
PBGC typically learns that a plan is in danger only when most 
opportunities for protecting participants and the pension insurance 
system may have been lost. But while such information can be critical 
to the protection of the pension insurance system, the circumstances 
surrounding some events may make reporting unnecessary. Thus, the 
regulation includes a system of waivers and extensions to ease 
reporting burdens in certain cases.

Automatic Waivers and Extensions--Overview

    Section 4043.4 of the reportable events regulation provides that 
PBGC may grant waivers and extensions case by case. In addition, the 
existing regulation provides automatic waivers and extensions for most 
of the reportable events. For example, waivers are provided in some 
cases for small plans, for plans that meet certain funding tests, or 
for events affecting de minimis segments of controlled groups or 
foreign entities. In cases where it may be impossible to know by the 
filing due date whether criteria for a particular waiver are met, an 
extension gives a potential filer an opportunity to determine whether 
the waiver applies.
    PBGC proposes to replace many of these automatic waivers with a new 
and simpler system, including many of the automatic waivers currently 
available and featuring new automatic waivers that would apply where a 
sponsor or plan comes within a financial soundness safe harbor.\6\ The 
proposal would retain the complete waivers provided for certain 
statutory events--in Sec. Sec.  4043.21 (disqualification or 
noncompliance), 4043.22 (amendment decreasing benefits), 4043.24 
(termination), and 4043.28 (merger, consolidation, or transfer)--that 
have been replaced by events defined in the regulation. PBGC also 
proposes to eliminate the automatic extensions under the existing 
regulation. These extensions are currently needed because many existing 
waivers are based on facts that may not be known when an event occurs. 
Since waivers of this kind are being replaced, related extensions are 
no longer needed.\7\
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    \6\ See Summary Chart, below, for an overview of waivers and 
safe harbors under the current regulation, the 2009 proposal, and 
this proposed rule.
    \7\ The proposed rule would provide extensions for small plans 
to determine whether they satisfied the plan financial safe harbor 
test based on plan funding on a premium basis. There would also be 
an extension to provide plans time to determine whether the year-end 
active participant count showed that an active participant reduction 
event had occurred by attrition at the end of the year.
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    To give plans and sponsors time to institute any necessary event-
monitoring programs and otherwise adjust to changes in the regulation, 
PBGC is proposing to defer the applicability date of the final rule.
    PBGC's experience indicates that many of the automatic waivers and 
extensions in the existing reportable events regulation are depriving 
it of early alerts that would enable it to mitigate distress 
situations. For example, the 2009 proposed rule noted that of the 88 
small plans terminated in 2007, 21 involved situations where, but for 
an automatic waiver, an active participant reduction reportable event 
notice would have been required an average of three years before 
termination. Had those notices been filed, the need for some of those 
terminations might have been avoided, and PBGC might have been able to 
reduce the impact of other terminations on the pension insurance 
system.\8\ Concerns of this kind led PBGC in 2009 to propose the 
elimination of most automatic waivers in the reportable events 
regulation.
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    \8\ Examples of the value of early alerts in mitigating distress 
situations can also be found in other PBGC programs. For example, as 
part of its Early Warning Program, PBGC negotiated substantial 
protections from Daimler AG for the pension plans of Daimler's 
former Chrysler North America division, and the Chrysler plans 
remain ongoing today. In another case, PBGC negotiated substantial 
protections under ERISA section 4062(e) for a plan sponsored by 
Visteon Corporation. When the company filed for Chapter 11 
protection in 2009, the company initially contemplated terminating 
three of its four pension plans, and shifting the obligations to the 
PBGC's insurance program, which would have caused $100 million in 
benefit reductions for the company's 22,000 workers and retirees and 
added more than $500 million to the PBGC's shortfall. However, due 
in part to the negotiated protections, all of the company's pension 
plans remain ongoing today.
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    The commenters uniformly opposed the proposal to eliminate most 
waivers. Commenters said that the increase in the public's burden of 
compliance would outweigh the benefit to the pension insurance system 
of the

[[Page 20043]]

additional reporting. They averred that the circumstances in which 
existing waivers apply pose little risk to PBGC and expressed concern 
that the proposed changes to the rule would discourage employers from 
continuing to maintain pension plans covered by Title IV.
    In response to the comments, PBGC has attempted to identify 
circumstances that appear less likely to call for involuntary plan 
termination and is now proposing a new set of automatic waivers more 
appropriately tailored to focus on such situations. In particular, PBGC 
proposes to create safe harbors based on sponsor and plan financial 
soundness. These safe harbors would apply to post-event reporting 
requirements for the events of active participant reduction, 
distribution to a substantial owner, controlled group change, 
extraordinary dividend, and transfer of benefit liabilities--all the 
reportable events to which a funding-based waiver applies under the 
existing regulation, except liquidation and loan default. PBGC feels 
that the occurrence of one of these latter two events is at odds with 
the premise of financial soundness underlying the safe harbor and 
portends likely deterioration in plan funding due to missed 
contributions. (As discussed below, this consideration would not apply 
if the event qualified for a foreign-entity or de minimis waiver.)

Financial Soundness Safe Harbor for Plan Sponsors

    Many commenters on the 2009 proposal contended that if funding-
based waivers were eliminated, plans and plan sponsors would be 
required to report events posing minimal risk to PBGC and the pension 
insurance system. To address the issue of risk, PBGC proposes to 
provide a risk-based ``safe harbor.'' PBGC is open to suggestions from 
the public to help identify existing, widely accepted standards that 
could form the basis for such a safe harbor. Pending such suggestions, 
PBGC is proposing, as discussed below, to base the safe harbor on the 
adequate capacity of an employer to meet its financial commitments in 
full and on time based on a combination of five factors, including a 
standard of financial strength reflected by commercial credit report 
scores and four confirmatory standards.
    The new safe harbor would generally apply if, when a reportable 
event occurred for a plan, the applicable financial soundness criteria 
were met by the plan's contributing sponsor \9\ or (where the 
contributing sponsor was a member of a controlled group) by the 
contributing sponsor's highest U.S. parent in the controlled group 
(that is, the highest level U.S. company in the group that was in the 
contributing sponsor's chain of ownership). For a change in 
contributing sponsor, the criteria would be applied to the post-
transaction sponsor group; for a transfer of benefit liabilities, the 
criteria would be applied to both the transferor and the surviving 
transferee plans' sponsor groups. The regulation would refer to an 
entity that satisfied the applicable criteria as ``financially sound.''
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    \9\ For multiple employer plans, all sponsors would have to 
qualify.
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    Focusing on the financial soundness of the plan sponsor (rather 
than just the funding level of the plan) is consistent with section 
4041 of ERISA, which permits distress termination of underfunded 
pension plans only in situations where plan sponsors are in bankruptcy 
or severe financial straits. This safe harbor proposal reflects PBGC's 
experience that the financial soundness of a plan sponsor generally 
correlates inversely with the risk of an underfunded termination of the 
sponsor's pension plan. One major component of the risk of underfunded 
termination is the likelihood that the plan sponsor will, within the 
near future, fall into one of the ``distress'' categories in section 
4041(c)(2)(B) of ERISA (liquidation, reorganization, or inability to 
pay debts or support the plan). Another is that the sponsor will go out 
of business, abandoning the plan and forcing PBGC to terminate it under 
section 4042 of ERISA. Thus, the risk of underfunded termination of a 
plan within the near future depends most significantly on the plan 
sponsor's financial strength.\10\
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    \10\ In 2011, 90 percent of reportable events reports from 
filers that were below investment grade resulted in the opening of 
case files. For this purpose, ``investment grade'' means a credit 
rating of Baa3 or higher by Moody's or BBB- or higher by Standard 
and Poor's.
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    In particular, PBGC believes the ability of a sponsor to meet its 
senior unsecured debt obligations reflects the sponsor's ability to 
meet pension plan funding obligations because of the parity in 
bankruptcy of senior unsecured debt and pension plan obligations. 
PBGC's experience with its Early Warning Program \11\ suggests that the 
higher the financial quality of a plan sponsor, the greater is the 
sponsor's commitment to its pension plan and its ability to meet its 
pension funding obligations. And analysis of PBGC data indicates that 
the credit ratings of sponsors of the vast majority of underfunded 
plans taken over by PBGC were below investment grade for many years 
before termination.\12\
---------------------------------------------------------------------------

    \11\ See Technical Update 00-3.
    \12\ See Private Pensions, Recent Experiences of Large Defined 
Benefit Plans Illustrate Weaknesses in Funding Rules, GAO, May 2005, 
https://www.gao.gov/new.items/d05294.pdf, p. 30. For this purpose, 
GAO considered ``investment grade'' to correspond to a rating of BBB 
or higher.
---------------------------------------------------------------------------

    Typically, sponsors of pension plans that present the greatest 
exposure for PBGC (large plans that are not fully funded) are rated by 
one or more large nationally recognized statistical rating 
organizations (NRSROs) that are registered with the Securities and 
Exchange Commission. These NRSRO ratings are among the most well-known 
and widely used measures of financial soundness for such large plan 
sponsors. But while credit ratings of a plan sponsor or its senior 
unsecured debt obligations would seem to be a good basis for a 
financial soundness safe harbor, many plan sponsors (primarily small 
plan sponsors) do not have such ratings. Furthermore, the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Pub. L. 111-203) 
requires federal agencies to remove references to and requirements of 
reliance on credit ratings in regulations.\13\
---------------------------------------------------------------------------

    \13\ See section 939A of the Dodd-Frank Act.
---------------------------------------------------------------------------

    To avoid these drawbacks, PBGC proposes to use, as one of five 
criteria of financial soundness, credit scores reported by commercial 
credit reporting companies (CCRCs), which are already issued for the 
vast majority (over 90 percent) of businesses that sponsor plans 
covered by Title IV of ERISA. These commercial ratings are 
substantially different from traditional credit ratings. A CCRC 
generally assesses the creditworthiness of a business by reference to 
the ability of the business to pay its trade and other debts rather 
than by reference to the financial strength of the business reflected 
in financial statements (as credit rating agencies do). Just as a 
company's credit score is used by prospective creditors in evaluating 
the probability that an obligation will be paid, PBGC believes that it 
can appropriately use such scores as a measure of financial strength, 
which in turn is an indicator of the level of risk that a company will 
fail to meet its pension plan funding obligations. CCRCs are not within 
the purview of the Dodd-Frank Act since the relevant provisions cover 
credit ratings and credit rating agencies but not credit reporting 
companies (or, by implication,

[[Page 20044]]

the credit scores and reports they produce).\14\
---------------------------------------------------------------------------

    \14\ The Securities Exchange Act of 1934 (the Exchange Act), 
which is amended by relevant portions of the Dodd-Frank Act, defines 
a ``credit rating'' as an assessment of the creditworthiness of an 
obligor as an entity or with respect to specific securities or money 
market instruments and a ``credit rating agency'' as any entity 
engaged in, among other things, the business of issuing credit 
ratings. See sections 3(a)(60) and (61) of the Exchange Act. 
However, the definition of credit rating agency under section 
3(a)(61) of the Exchange Act specifically ``does not include a 
commercial credit reporting company.''
---------------------------------------------------------------------------

    To make the credit scores underlying this test for the financial 
soundness safe harbor as reliable and as uniform as possible, and 
minimize the burden of obtaining such scores, PBGC proposes to require 
that a credit score be reported by a CCRC that is commonly used in the 
business community (e.g., Dun & Bradstreet \15\ ). To satisfy this 
criterion for the financial soundness safe harbor, the credit report of 
a plan sponsor (or highest U.S. parent) by a CCRC that is commonly used 
in the business community would have to reflect a credit score 
indicating a low likelihood that the company would default on its 
obligations.
---------------------------------------------------------------------------

    \15\ Dun & Bradstreet provides free credit reports to companies 
willing to provide certain financial information for analysis and a 
free alert system to inform companies of changes in their credit 
scores (to permit inexpensive monitoring) and issues credit reports 
on at least 90 percent of sponsors of PBGC-covered plans. The United 
Kingdom's Pension Protection Fund, which performs pension protection 
functions like PBGC's, uses Dun & Bradstreet analyses to measure the 
risk of insolvency of sponsoring employers.
---------------------------------------------------------------------------

    Scores that satisfy the standard in the regulation may change over 
time, because of changes in scoring methods or for other reasons. PBGC 
will provide, and update as necessary, reportable events filing 
instructions to guide filers in determining whether their credit scores 
meet the standard. The instructions will include one or more examples 
of scores by commercial credit reporting companies commonly used in the 
business community that indicate a low likelihood that a company will 
default on its obligations. To give an idea of the level of score that 
PBGC has in mind, a minimum Dun & Bradstreet financial stress score of 
1477 would have satisfied the standard in 2011.
    PBGC invites commenters to identify CCRCs other than Dun & 
Bradstreet that are commonly used in the business community now and to 
suggest ways that PBGC can remain currently informed of the identity of 
all such CCRCs as usage by the business community changes over time.
    This financial strength criterion relies on private-sector 
commercial credit scores that most plan sponsors (or their U.S. 
parents) already have and that are used in a wide variety of business 
contexts. Such scores represent well known, objective, non-governmental 
assessments of financial soundness. PBGC would not itself evaluate the 
creditworthiness of plan sponsors as a condition to sponsors' use of 
the safe harbor. Sponsors would not have to certify or prove 
creditworthiness to PBGC--or even report a credit score--in order to 
take advantage of the safe harbor. For a sponsor not currently the 
subject of credit reporting, PBGC believes it would entail minimal 
effort and expense to have a CCRC that is commonly used in the business 
community begin issuing such reports on the sponsor.\16\ As discussed 
below under Small-Plan Waivers, small plans would have separate 
exemptions.
---------------------------------------------------------------------------

    \16\ A company may have its credit score reported by a CCRC 
simply by providing relevant data to the CCRC.
---------------------------------------------------------------------------

    As stated above, a sponsor would come within the financial 
soundness safe harbor if it passed the ``credit report'' test and in 
addition satisfied four further criteria.
    One of these further criteria for the sponsor financial soundness 
safe harbor would be based on whether the sponsor (or its highest-level 
U.S. parent) has secured indebtedness. A lender's insistence on 
security reflects a level of concern over whether its loan will be 
timely repaid, typically because it judges that the borrower's 
creditworthiness is questionable. Thus, in general, if a company is 
forced to make use of secured debt, there is the suggestion of risk of 
loss that must be mitigated by the securing of collateral. If the 
borrower is a plan sponsor, there is a concomitant risk of underfunded 
plan termination during that same time frame. Conversely, this 
implication of risk does not arise where a company is not forced to 
borrow with security. Thus, an absence of secured indebtedness tends to 
be associated with a greater degree of financial soundness.
    For purposes of this test, PBGC would except indebtedness incurred 
in connection with the acquisition or improvement of property and 
secured only by that property--such as mortgages and equipment 
financing (including capital leases). Secured debt of this kind is not 
uncommon even for financially sound businesses. But PBGC is aware that 
there may be other circumstances in which a company capable of 
borrowing without security might nonetheless choose to offer security 
to a lender--for example, if doing so would significantly reduce the 
cost of a loan. PBGC seeks public comment on the extent to which the 
proposed no-secured-debt test might be failed by plan sponsors whose 
risk level is in fact as low as that of other sponsors capable of 
passing the test. PBGC also seeks suggestions for ways to modify the 
no-secured-debt test--for example, by carving out a wider class of debt 
than purchase-money obligations--to make it correspond better with 
commercial reality.
    Another criterion for the sponsor financial soundness safe harbor 
would be that, for the past two years, the sponsor (or its highest-
level U.S. parent) has had positive net income under generally accepted 
accounting principles (GAAP) or International Financial Reporting 
Standards (IFRS). This requirement serves to confirm both that the 
business is successful and that it has been operating for at least two 
years. (For non-profit entities, ``net income'' would be measured as 
the excess of total revenue over total expenses as required to be 
reported on Internal Revenue Service Form 990.)
    In this connection, PBGC seeks public comment on the extent to 
which there are companies whose financial statements are not prepared 
using GAAP or IFRS but whose income level is comparable to the 
standards proposed for this criterion. PBGC seeks suggestions for 
supplementing the GAAP/IFRS standards with alternative standards to 
accommodate such companies.
    The two remaining criteria are intended similarly to supplement and 
confirm the general picture of financial soundness painted by the 
satisfaction of the credit report test. These two requirements would be 
that the business have no debt service problems and be current with its 
pension plan contributions. More specifically:
     For the past two years, the business would have to have 
not met the criteria for an event of default with respect to a loan 
with an outstanding balance of $10 million or more, regardless of 
whether the default was cured or if the lender entered into a 
forbearance agreement or waived the default. Defaults on credit 
agreements suggest the business may be underperforming and at greater 
risk of not meeting its debt obligations.
     For the past two years, the business would have to have no 
missed pension contributions, other than quarterly contributions for 
which reporting is waived. Like the debt service requirement, this 
criterion addresses the likelihood that the business will reliably fund 
its pension plans.

[[Page 20045]]

    Because of the novelty of the sponsor financial soundness standard 
and in the spirit of E.O. 13563's call for greater public participation 
in rulemaking, PBGC specifically invites public comment on the new 
risk-based financial soundness safe harbor for plan sponsors, as well 
as suggestions from the public for other tests or combinations of tests 
on which the sponsor financial soundness safe harbor might be based. 
PBGC seeks answers to the questions listed under Public Participation 
below and suggestions for alternative approaches to determining 
financial soundness based on widely-available and accepted financial 
standards.

Financial Soundness Safe Harbor for Plans

    Most of the commenters opposed the elimination from the reportable 
events regulation of automatic reporting waivers based on plan funding, 
as proposed in 2009. PBGC now proposes to retain plan funding as a 
basis for relief from filing requirements for the same five events as 
the sponsor financial soundness safe harbor discussed above, by 
providing new ``safe harbors'' based on plan financial soundness. The 
standard of financial soundness for these new safe harbors would be a 
plan's funding status. A special rule would accommodate the needs of 
small plans in determining funding status.
    The safe harbors would be less complex than the current funding-
based waivers. The current regulation provides funding-based waivers 
with several different thresholds--for example, waivers are available 
where a plan pays no variable-rate premium,\17\ has less than $1 
million in unfunded vested benefits, or is 80 percent funded for vested 
benefits. Some waivers are based on a combination of a funding 
criterion and a non-funding criterion--for example, reporting of a 
controlled group change event is waived where a plan is 80 percent 
funded and the plan sponsor is a public company. Different waiver 
criteria or combinations of criteria apply to different events. PBGC's 
proposed safe harbors for financially sound plans would involve just 
two alternative tests, which would be the same for all events covered 
by the safe harbors.
---------------------------------------------------------------------------

    \17\ In general, the variable-rate premium is based on unfunded 
vested benefits. However, in some cases no variable-rate premium 
might be owed because of an exemption. For example, before 2008, 
ERISA provided an exemption from the variable-rate premium for a 
plan at the ``full-funding limit,'' even if the plan had unfunded 
vested benefits. The exemption was removed by PPA 2006.
---------------------------------------------------------------------------

    Both tests (like most of the current funding-based waiver tests) 
would be based on plan funding level, which is a comparison of assets 
to liabilities. Determining liabilities--calculating a present value 
for the obligation to pay benefits for years into the future--requires 
that actuarial assumptions be made about such things as the rate of 
return on investments, when participants are likely to retire, and how 
long they are likely to live. The actuarial assumptions used, and thus 
the present value arrived at, may differ significantly depending on 
whether the plan is considered ``ongoing''--that is, expected to 
continue in operation indefinitely--or terminating. For example, 
assumptions about when participants will retire would be different for 
an ongoing plan than a terminating plan; in a terminating plan, 
participants generally retire earlier and may receive early retirement 
subsidies. Liabilities--the present value of future benefits--are 
typically higher on termination assumptions than on ongoing 
assumptions, and thus, for a given amount of assets, a plan's 
termination-basis funding percentage is typically lower than its 
funding percentage on an ongoing basis.
    From PBGC's perspective, it is more appropriate to measure plan 
funding levels using termination-basis assumptions than ongoing-plan 
assumptions because termination is what brings a plan under PBGC 
administration. In the context of the pension insurance system, a 
plan's funding level on a termination basis provides the better measure 
of exposure--that is, the magnitude of the financial impact PBGC and 
participants would suffer if the plan then (or soon thereafter) 
terminated. But from a plan perspective, funding on an ongoing basis is 
the more common measure. Variable-rate premiums, required 
contributions, benefit restrictions, and annual funding notices are all 
based on ongoing-plan calculations. Unless filing is required under 
ERISA section 4010 (dealing with annual financial and actuarial 
information reporting for controlled groups with large underfunding), 
plans typically do not calculate funding on a termination basis. PBGC 
considers it desirable to adopt a funding measure that links with 
calculations that plans already make.
    The funding-based waivers in the existing regulation are generally 
tied to variable-rate premium computations,\18\ which use ongoing-plan 
assumptions. Under the current regulation, plans that are funded for 80 
percent of premium liability qualify for reporting waivers for several 
reportable events. PBGC has found this test to be an inadequate 
threshold measure, because premium liability is significantly lower 
than termination liability, so that a plan that is 80 percent funded on 
a premium basis is likely to be much more significantly underfunded on 
a termination basis. In developing the revised plan funding safe harbor 
thresholds, PBGC reviewed plans with at least 100 participants that 
PBGC trusteed in fiscal years 2009 and 2010 and through April of fiscal 
year 2011 and compared the funded percentage at the date of plan 
termination (DOPT) measured on a termination basis to the VRP funded 
percentage for the plan year before the year in which DOPT 
occurred.\19\ This analysis showed that the average termination funded 
status at DOPT was 54 percent and the average VRP funded status for the 
year before DOPT was 84 percent. The analysis also showed great 
variability of funded status among the plans, and PBGC found no direct 
correlation between the two funding measures.
---------------------------------------------------------------------------

    \18\ The sole exception is a waiver for the benefit liability 
transfer event, which applies if (among other things) the transferor 
and transferee plans are fully funded using the computation methods 
for calculating employer liability for terminated plans.
    \19\ Some 134 plans fall into this category, but 17 were 
excluded because of incomplete or questionable data.
---------------------------------------------------------------------------

    If a plan is fully funded on a termination basis, on the other 
hand, any risk associated with a reportable event can reasonably be 
ignored because the exposure can reasonably be considered to be zero. 
PBGC therefore proposes to provide a safe harbor from reporting for 
most of the events to which funding-based waivers now apply \20\ if the 
plan involved is fully funded on a termination basis on the last day of 
the plan year preceding the event year. But since funding on a 
termination basis is not commonly calculated for most plans--and since 
PBGC wants to provide another way to qualify for the safe harbor that 
is more accessible and yet provides a reasonably low exposure when 
compared to a termination-basis measurement--PBGC is also proposing to 
extend the safe harbor treatment to any case where the plan involved is 
120 percent funded on

[[Page 20046]]

a premium basis for the plan year preceding the event year.\21\
---------------------------------------------------------------------------

    \20\ As discussed above under Automatic waivers and extensions--
overview, PBGC proposes to exclude the liquidation and loan default 
events from the funding-based waiver because those two events imply 
sponsor financial difficulties that may affect plan contributions 
and lead to a decline in funding level.
    \21\ Variable-rate premium (``VRP'') funding information for a 
plan year is generally unavailable until the latter part of the year 
or (for many small plans) the early part of the following year. Thus 
it is more feasible to base the safe harbor test on premium 
information for the year before the event year. One of the reasons 
PBGC chose the ratio of assets to liabilities calculated according 
to premium rules as the standard for the funding-based safe harbor, 
rather than the vested portion of the funding target attainment 
percentage (``FTAP'') defined in section 430(d)(2) of the Internal 
Revenue Code, is that the FTAP is not reported (and may not be 
calculated) until a year later than the VRP. Another reason is that 
the VRP is determined using current market value of assets, whereas 
the FTAP often reflects an actuarially smoothed assets figure.
---------------------------------------------------------------------------

    The 20-percent cushion is needed to help compensate for several 
differences between the termination-basis funding level and the VRP-
basis funding level. First, the VRP funding level is to be measured in 
general one year earlier than the termination funding level.\22\ The 
lapse of a year raises the risk that funding will deteriorate between 
the measurement date and the event date. Second, the VRP funded 
percentage is calculated with ongoing-plan assumptions, which (as 
discussed above) generally yield higher funding percentages than 
termination-basis assumptions. Third, premium liability reflects only 
vested benefits, whereas termination liability is based on all 
benefits.\23\
---------------------------------------------------------------------------

    \22\ For some small plans, premium funding is computed later in 
the premium payment year and thus nearer (or on) the proposed date 
for determining termination-basis funding.
    \23\ PBGC's obligation to pay non-vested benefits is conditioned 
on the availability of funds from plan assets or recoveries of 
employer liability for plan underfunding.
---------------------------------------------------------------------------

    As noted above, PBGC data indicate that funded status on a 
termination basis in the recent past was about 30 percentage points 
lower than the prior year's VRP funded status. Thus, while a 20-percent 
VRP cushion will be in some cases more and in others less than enough 
to reduce exposure to the same near-zero level as full funding on a 
termination basis, it should overall give an acceptable result for 
purposes of this safe harbor.
    One difficulty with tying the safe harbor to the prior year's 
premium calculations is that a small plan's premium calculations may be 
as of a date as late as the last day of the year. For this reason, the 
premium filing due date for plans with fewer than 100 participants is 
four months after the end of the premium payment year. To address this 
situation, PBGC proposes to give a filing extension, in cases where the 
plan is small, until one month after the prior year's premium filing 
due date (i.e., five months after the end of the prior year). For a 
small calendar-year plan, this would mean that for the five reportable 
events subject to the proposed funding-based safe harbor, the notice 
date for an event that occurred from January 1st through May 1st would 
be May 31st.\24\
---------------------------------------------------------------------------

    \24\ No such extension would be needed for plans with 100 or 
more participants. Such plans calculate premiums as of the first day 
of the plan year and file premium declarations well before the end 
of the plan year. Thus, for example, a calendar year plan should 
know by October 15, 2013, whether it qualified for the premium-based 
funding safe harbor for events in 2014.
---------------------------------------------------------------------------

    The corresponding extension under the current reportable events 
regulation is available only if the plan would have qualified for the 
funding-based waiver for the preceding year. The proposed rule omits 
this qualification. Where an event subject to the safe harbor involves 
a small plan that does not qualify for the safe harbor, therefore, PBGC 
would get notice of the event as much as three months later than the 
generally applicable deadline. This delay might significantly impair 
PBGC's administration of Title IV of ERISA for such plans. On the other 
hand, an unconditional extension is simpler, and PBGC prefers that the 
relief provided by this small-plan extension not be diluted with 
complexity. Considering the lower exposure typically associated with 
small plans, PBGC is proposing to accept the (probably modest) 
impairment of its enforcement function in order to make compliance 
easier for such plans.

Other Safe Harbor Proposals

    Alternatively or in addition to the safe harbor proposals described 
above, PBGC is inviting the public to propose variant safe harbors that 
build on the same risk-related concepts by altering the mix and/or 
relative stringency of the constituent tests of the sponsor safe harbor 
or combining tests from the sponsor and plan safe harbors. Ideally, 
proposals would reduce reporting burden for plans and sponsors for 
which reportable events most likely do not pose risks for the pension 
insurance program and thus focus reporting on higher-risk events. (See 
Public Participation below.)

Small-Plan Waivers

    Rather than eliminating the small-plan waiver for active 
participant reductions (as it proposed in 2009), PBGC now proposes to 
retain a modified version of the waiver and to make it applicable to 
more events. Some commenters expressed concern about the adverse effect 
on small plans of eliminating waivers and extensions for reporting 
active participant reductions, pointing out that loss of a handful of 
employees as a result of normal turnover in a small company could cross 
the reporting threshold but be unrelated to financial distress.
    As noted in the preamble to the 2009 proposed rule, PBGC data 
suggest that in nearly a quarter of small-plan terminations, the small-
plan reporting waiver has prevented PBGC from learning about problems 
that might have been resolved through early outreach to plan sponsors, 
avoiding termination or reducing underfunding. Information from other 
sources (for example, Form 5500) is typically neither as detailed nor 
as timely. On the other hand, PBGC can get such information without 
imposing any additional burden on plans and sponsors. Weighing the 
disadvantages of relying on these other sources of information against 
the challenges faced by small plans and their sponsors in reporting 
active participant reduction events, PBGC is now proposing to provide a 
waiver for these events like the existing small-plan waiver, except 
that, for simplicity, small-plan status would be determined in the same 
way as for purposes of the premium filing rules.
    In addition, PBGC proposes to extend the small-plan waiver to three 
other events: controlled group changes, benefit liability transfers, 
and extraordinary dividends. Like active participant reductions, these 
events tend to be less serious than the events for which the safe 
harbors are unavailable. Furthermore, small plan sponsors typically are 
not members of controlled groups and generally do not have multiple 
lines of business. Thus stock or asset spinoffs (which could result in 
benefit liability transfers) and controlled group changes in general 
are infrequently experienced by such plans and sponsors. And 
extraordinary dividend events are relatively unusual for sponsors of 
plans of any size. In contrast, the burden on small plans and sponsors 
of monitoring for and reporting these events is relatively significant. 
Weighing that burden against the number and significance of the 
resultant reports, PBGC has concluded that small-plan waivers for these 
events seem appropriate.

Foreign-Entity and De Minimis Waivers

    The current reportable events regulation provides reporting waivers 
for several events where the entity or entities involved in the event 
are foreign entities or represent a de minimis percentage of a 
controlled group.\25\

[[Page 20047]]

PBGC's 2009 proposal preserved most de minimis waivers in the existing 
regulation but eliminated all foreign-entity waivers, because an 
increasingly large part of PBGC's insurance supervision and compliance 
cases deal with foreign controlled group members--a logical consequence 
of the globalization of the economy. All members of a plan's controlled 
group, whether domestic or foreign, are liable for plan underfunding. 
PBGC now proposes to provide both de minimis and foreign-entity waivers 
in tandem for five reportable events.
---------------------------------------------------------------------------

    \25\ Both types of waiver apply to controlled group change, 
liquidation, and extraordinary dividend; the foreign entity waiver 
also applies to loan default and bankruptcy. The foreign entity 
waiver is limited to entities that are not direct or indirect 
parents of contributing sponsors, and discussion of the foreign-
entity waiver in this preamble should be understood to incorporate 
this limitation.
---------------------------------------------------------------------------

    A number of commenters made the point that it can be difficult for 
a plan to keep track of events involving foreign controlled group 
members and argued that events involving foreign entities are too 
remote to warrant reporting to PBGC. Particular events mentioned in 
this regard included loan defaults, bankruptcies, controlled group 
changes, and extraordinary dividends. Commenters also expressed the 
view that PBGC's processing burden for reports on events involving 
foreign entities would be disproportionate to the value of the 
information in the reports, with the implication that requiring such 
reports would result in a misallocation of PBGC's resources.
    PBGC is persuaded that the challenges a plan or sponsor faces in 
keeping informed about events involving foreign members of the plan's 
controlled group may prove more burdensome than is currently required 
to protect the pension insurance system. Furthermore, multinational 
controlled groups that report publicly tend to be tracked by PBGC's 
Early Warning Program, which, while it is no substitute for reportable 
event reports, does give PBGC some idea of the status of such groups. 
PBGC has concluded that these considerations constitute an appropriate 
basis for providing relief from reporting, even though that means it 
must forgo the receipt of useful information that may be important to 
its monitoring and enforcement activities.
    Accordingly, PBGC now proposes to preserve all post-event foreign-
entity reporting waivers in the existing regulation. As with all 
regulatory provisions, PBGC will monitor developments in this area and 
may revisit this position if experience indicates a need for stronger 
monitoring mechanisms. In addition, PBGC now proposes to retain all 
post-event reporting waivers for de minimis transactions \26\ and to 
add de minimis waivers for two events--loan defaults and non-bankruptcy 
insolvency \27\--that do not have such waivers under the existing 
regulation. Thus, this pair of waivers would apply to five events. For 
liquidation, loan default, and insolvency, the de minimis waiver would 
be available only if the entity involved in the event was not a 
contributing sponsor. The waiver would use the ten percent de minimis 
standard, even for extraordinary dividends and stock redemptions under 
Sec.  4043.31, for which the existing de minimis waiver is limited to a 
five percent segment of a controlled group.
---------------------------------------------------------------------------

    \26\ PBGC proposes to eliminate one of three alternative tests 
for the annual operating income criterion that must be met for de 
minimis status: that such income not exceed 5 percent of the first 
$200 million in controlled group net tangible assets. PBGC believes 
that the other two alternatives provide a sufficient threshold. The 
change would apply to both post-event and advance notices.
    \27\ PBGC can obtain bankruptcy filings directly, so a separate 
PBGC report is unnecessary. For this reason, PBGC proposes to revise 
the reportable event covering bankruptcy and similar settlements to 
limit it to non-bankruptcy events only. See Bankruptcy and 
Insolvency below.
---------------------------------------------------------------------------

Effect of Proposal on Loan Agreements

    Some commenters said that, for plan sponsors with loan agreements, 
the increased reporting resulting from the elimination of waivers could 
give rise to events of default, a view that PBGC has been unable to 
substantiate. The commenters, who also said that requiring more 
reporting could preclude future loans or provide lenders with a pretext 
for renegotiating loan terms, did not provide any actual loan agreement 
provisions to support these contentions; to clarify its understanding 
of the commenters' concerns, PBGC reviewed 25 credit agreements from 20 
distressed and/or small public companies.\28\ PBGC reasoned that 
lenders to distressed companies would tend to be particularly sensitive 
to reportable events and that this heightened sensitivity would be 
reflected in loan agreement provisions of the kind that commenters 
expressed concern about. The smaller reporting companies provided a 
proxy for non-public companies (for which loan agreements are generally 
not made public).
---------------------------------------------------------------------------

    \28\ PBGC obtained the loan agreements from the Web site of the 
Securities and Exchange Commission (www.sec.gov). The companies with 
distressed plans were selected from an online business article 
titled ``40 Companies Sitting on Pension Time Bombs,'' posted at 
https://moneycentral.msn.com/content/P87329.asp, on August 25, 2004. 
PBGC found no relationship between the assumed financial straits of 
the companies' plans and any specific loan agreement provisions that 
might have reflected lenders' sensitivity to the significance of 
reportable events. The limited scope of this study reflects the 
practical difficulty of obtaining and reviewing a statistically 
significant sample of loan agreements (the vast majority of which 
are not publicly available) involving sponsors of the more than 
27,500 single-employer plans covered by Title IV of ERISA. PBGC 
nonetheless believes that the loan agreements that were reviewed do 
offer some insight into loan agreement drafting practices that is 
relevant to the concerns expressed by commenters.
---------------------------------------------------------------------------

     An event of default would not be automatically triggered 
by a reportable event in any of the 25 agreements reviewed, and 17 of 
the agreements would not have been affected at all by the changes in 
the 2009 proposed rule. For each of the eight agreements with event-of-
default provisions that would have been affected by the 2009 proposal, 
an event of default would occur only when a reportable event was 
accompanied by some other significant condition, such as incurring 
actual liability, creation of grounds for termination, or the 
occurrence of a material adverse effect.
     Nine of the agreements PBGC reviewed had no requirement 
that the borrower notify the lender of a reportable event. Six 
agreements required notice only if some other condition was present (as 
for events of default). Five defined ``reportable event'' without 
regard to whether reporting was waived.
     Fewer than half of the agreements surveyed required 
representations or warranties about reportable events as a condition to 
future advances.
    The results of examining these loan agreements are consistent with 
PBGC's experience from reviewing loan documents as part of its direct 
monitoring of corporate events and transactions of plan sponsors. PBGC 
has been unable to find a record of any case where the filing of a 
reportable event notice has resulted in a default under a credit 
agreement. These observations suggest that the elimination of reporting 
waivers would not adversely affect most plan sponsors with loan 
agreements.
    Because PBGC's current proposal provides more waivers than the 2009 
proposal, commenters' concerns in this area should be lessened. And 
PBGC's proposed deferral of the applicability date for the final 
regulation should give plan sponsors time to consult with loan 
providers about appropriate amendments to loan agreements. However, if 
this concern is raised in a comment about the current proposal, PBGC 
requests that the commenter document the basis for the comment by 
providing copies of relevant loan agreements and information about the 
number and circumstances of plan sponsors that have experienced default 
or suffered other adverse consequences

[[Page 20048]]

related to loan agreements as a result of a reportable event.

Advance Reporting Threshold

    In general, reportable events must be reported to PBGC within 30 
days after they occur. But section 4043(b) of ERISA requires advance 
reporting by a contributing sponsor for certain reportable events if a 
``threshold test'' is met, unless the contributing sponsor or 
controlled group member to which an event relates is a public company. 
The advance reporting threshold test is based on the aggregate funding 
level of plans maintained by the contributing sponsor and members of 
the contributing sponsor's controlled group. The funding level criteria 
are expressed by reference to calculated values that are used to 
determine VRPs under section 4006 of ERISA. The reportable events 
regulation ties the statutory threshold test to the related provisions 
of the premium rates regulation.
    The advance reporting threshold test in ERISA section 4043(b)(1) 
provides that the advance reporting requirements of section 4043(b) are 
to be applicable to a contributing sponsor if, as of the close of the 
preceding plan year--
     The aggregate unfunded vested benefits (UVBs) (as 
determined under ERISA section 4006(a)(3)(E)(iii)) of plans subject to 
title IV of ERISA which are maintained by such sponsor and members of 
such sponsor's controlled groups (disregarding plans with no unfunded 
vested benefits) exceed $50,000,000, and
     The funded vested benefit percentage for such plans is 
less than 90 percent.

    For this purpose, the funded vested benefit percentage means the 
percentage which the aggregate value of the assets of such plans bears 
to the aggregate vested benefits of such plans (determined in 
accordance with ERISA section 4006(a)(3)(E)(iii)).
    PPA 2006 revised ERISA section 4006(a)(3)(E)(iii) to say that UVBs 
means, for a plan year, the excess (if any) of the funding target of 
the plan as determined under ERISA section 303(d) for the plan year by 
only taking into account vested benefits and by using the interest rate 
described in ERISA section 4006(a)(3)(E)(iv), over the fair market 
value of plan assets for the plan year which are held by the plan on 
the valuation date.
    The section 303 of ERISA referred to here is a completely new 
section added by PPA 2006.\29\ Under new ERISA section 303(g)(1), the 
value of plan assets and the funding target of a plan for a plan year 
are determined as of the valuation date of the plan for the plan year. 
Under new ERISA section 303(g)(2), the valuation date for virtually all 
plans subject to advance reporting under ERISA section 4043 will be the 
first day of the plan year. Thus, while ERISA section 4043(b)(1) refers 
to UVBs, assets, and vested benefits ``as of the close of the preceding 
plan year,'' in nearly all cases these quantities must, with respect to 
plan years beginning after 2007, be calculated as of the beginning of a 
plan year. This creates an ambiguity with regard to the date as of 
which the advance reporting threshold test is to be applied.
---------------------------------------------------------------------------

    \29\ Section 303 of ERISA corresponds to section 430 of the 
Code.
---------------------------------------------------------------------------

    This proposed rule, like the prior proposal, would resolve this 
ambiguity by requiring that the advance reporting threshold test be 
applied as of the valuation date for ``the preceding plan year.'' That 
is the same date as of which UVBs, assets, and vested benefits must be 
determined for premium purposes for the preceding plan year under the 
premium rates regulation as amended by PBGC's final rule on VRPs under 
PPA 2006. Measuring these quantities as of that date for purposes of 
the advanced reporting threshold test will thus be less burdensome than 
requiring that separate computations be made as of the close of that 
year. It will also enable a plan to determine before a reportable event 
occurs (and before an advance report is due) whether it is subject to 
the advance reporting requirement.
    The new proposed rule (like the prior proposal) would make a number 
of editorial changes to the advance reporting threshold provisions with 
a view to improving clarity and simplicity as well as accommodating the 
changes discussed above. It would also provide that the plans whose 
funding status is taken into account in applying the threshold test are 
determined as of the due date for the report, and that the ``public 
company'' status of a contributing sponsor or controlled group member 
to which the event relates is also determined as of that date. Although 
the existing regulation does not explicitly address this issue, PBGC 
believes it is implicit that these determinations be current. Requiring 
that they be made as of the due date for the report ensures currency.

Active Participant Reduction

    In general, a reportable active participant reduction occurs when 
the number of active participants is reduced below 80 percent of the 
number at the beginning of the year or below 75 percent of the number 
at the beginning of the prior year.
    Several commenters remarked that a loss of more than 20 percent of 
active participants within a year (or more than 25 percent within two 
years) may result from gradual attrition and that if no waiver is 
applicable, constant vigilance is required to catch the moment when the 
threshold for reporting is crossed. Such vigilance could be burdensome 
for a large plan and might simply not be exercised for a small one. 
PBGC is sympathetic to this issue and is proposing to modify the 
definition of the active participant reduction event to address it.
    Under the proposed change, a reportable event would occur during 
the plan year only when the reporting threshold was crossed either 
within a single 30-day period or as a result of a single cause like the 
discontinuance of an operation, a natural disaster, a reorganization, a 
mass layoff, or an early retirement incentive program. Such 
circumstances should be easy to spot without exercising unusual 
vigilance. To capture events arising from gradual attrition, the 
proposed regulation would require that plans measure active participant 
reductions at the end of each year and report if the threshold has been 
crossed. Fluctuations within the year would be ignored. If the active 
participant count at the end of the year were more than 20 percent 
below the count at the beginning of the year, or more than 25 percent 
below the count at the beginning of the prior year, reporting would be 
required. To provide time to count active participants as of the end of 
the year, the notice date for attrition events would be extended to 120 
days after year end, by which time PBGC expects many or most plans to 
have a final count.\30\
---------------------------------------------------------------------------

    \30\ In most situations, a rough estimate will be sufficient to 
determine if the threshold has been crossed.
---------------------------------------------------------------------------

    For convenience, if a plan counted participants, for purposes of 
the following year's premiums, as of a day other than the last day of 
the year for which active participant loss was being measured (such as 
where there was a qualifying merger or spinoff), the plan could use the 
active participant count on that other day as the year-end count for 
determining whether active participant attrition had exceeded the 
threshold. However, the reduction in active participants would still be 
considered to have occurred at the end of the measurement year.
    Because this change would render unnecessary the waiver in the 2009 
proposed rule for a report within one

[[Page 20049]]

year of a prior report, that provision is absent from the current 
proposal. However, the changes now being proposed include the provision 
from 2009 that dealt with substantial cessations of operations under 
ERISA section 4062(e) and substantial employer withdrawals under ERISA 
section 4063(a). Events covered by section 4062(e) or 4063(a) must be 
reported to PBGC under section 4063(a). With a view to avoiding 
duplicative reporting, this proposal, like the 2009 proposal, would 
limit the active participant reduction event by excluding from 
consideration--in determining whether a reportable active-participant-
reduction event has occurred--active participant reductions to the 
extent that they (1) fall within the provisions of section 4062(e) or 
4063(a) and (2) are timely reported to PBGC as required under ERISA 
section 4063(a).
    One commenter expressed satisfaction with this provision; two 
others raised issues about the interplay of this event and a section 
4062(e) event, suggesting, for example, that there was opportunity for 
confusion between the 30-day notice requirement under section 4043 and 
the 60-day notice requirement for 4062(e) events. PBGC does not see how 
this provision would exacerbate any such problems (and indeed believes 
that it would tend to ameliorate them).\31\
---------------------------------------------------------------------------

    \31\ On August 10, 2010 (at 75 FR 48283), PBGC published a 
proposed rule to provide guidance on the applicability and 
enforcement of ERISA section 4062(e). PBGC is currently giving 
careful consideration to the comments on that proposed rule.
---------------------------------------------------------------------------

    Finally, one commenter requested clarification that participants do 
not cease to be active if they leave employment with one member of a 
plan's controlled group to become employed by another controlled group 
member. PBGC proposes to add a provision to make this point clear.

Missed Contributions

    A missed contribution event occurs when a plan sponsor fails to 
make any required plan contribution by its due date.
    PBGC proposes (as it did in 2009) to clarify the language in Sec.  
4043.25, dealing with the reportable event of failure to make required 
contributions. This reportable event does not apply only to 
contributions required by statute (including quarterly contributions 
under ERISA section 303(j)(3) and Code section 430(j)(3), liquidity 
shortfall contributions under ERISA section 303(j)(4) and Code section 
430(j)(4), and contributions to amortize funding waivers under ERISA 
section 303(e) and Code section 430(e)). It also applies to 
contributions required as a condition of a funding waiver that do not 
fall within the statutory provisions on waiver amortization charges. 
The proposed revision would make this point clearer.\32\
---------------------------------------------------------------------------

    \32\ Such ``non-statutory'' contributions are not taken into 
account under ERISA section 303(k) and Code section 430(k), dealing 
with liens that arise because of large missed contributions, and are 
therefore disregarded under Sec.  4043.81, which implements those 
provisions. However, violating the conditions of a funding waiver 
typically means that contributions that were waived become 
retroactively due and unpaid and are counted for purposes of Sec.  
4043.81.
---------------------------------------------------------------------------

    The 2009 proposed rule called for eliminating all reporting waivers 
for missed contributions. PBGC now proposes to provide waivers for this 
event.
    Some commenters urged PBGC to retain the grace-period waiver in the 
current regulation (where payment is made within 30 days after the due 
date). Commenters pointed out that contributions are sometimes missed 
through administrative error and that the availability of the grace-
period waiver gives sponsors an incentive to make up missed 
contributions. Commenters also suggested that because new rules require 
a sponsor to elect to apply a funding balance towards a quarterly 
installment, a late installment often results from a late election due 
to administrative error.
    PBGC is persuaded that missed contributions that are made up within 
30 days do not generally pose excessive risk to the pension insurance 
system. Form 5500 filings provide another (albeit somewhat later) 
source of information about late contributions, and there is an 
independent reporting requirement for large cumulative missed 
contributions under ERISA section 303(k)(4) and Code section 430(k)(4) 
(implemented by Sec.  4043.81 of the reportable events regulation). 
Accordingly, the current proposal would restore the grace-period waiver 
in the existing regulation that the 2009 proposal would have 
eliminated.
    Commenters also urged PBGC to provide small-plan missed-quarterly 
reporting relief like that which has for years been provided by 
Technical Update, and PBGC proposes to do so. Commenters said that 
small plans often forgo or delay quarterly contributions to 
strategically manage cash flow or until valuations are completed (a 
practice that does not accord with the law and that PBGC does not 
condone). Commenters suggested that late quarterly installments often 
do not signal a plan sponsor's actual financial distress or a plan's 
imminent termination.
    PBGC believes that a small-plan missed-quarterly waiver can strike 
an effective balance between PBGC's need for information on potentially 
troubled plans and the reporting challenges faced by small entities. 
Furthermore, since annual reports on Form 5500 are now filed 
electronically, PBGC believes that contribution information on Schedule 
SB to Form 5500 can help round out the information submitted under the 
reportable events regulation. Thus, PBGC is proposing to add to the 
regulation a simplified small-plan missed-quarterly waiver to replace 
the Technical Update waivers. The codified waiver would apply to any 
failure to make a quarterly contribution to a plan considered small for 
purposes of the premium filing rules (i.e., having fewer than 100 
participants; the waiver under Technical Update 11-1 applies only to 
plans with fewer than 25 participants). Unlike the grace-period waiver, 
the small-plan waiver would apply only to quarterly contributions.

Inability To Pay Benefits When Due

    In general, a reportable event occurs 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.
    As in 2009, PBGC proposes to clarify the large-plan waiver of the 
reporting requirement for inability to pay benefits when due. This 
waiver provision reflects PBGC's judgment that it need not require 
reporting of this event by larger plans that are subject to the 
``liquidity shortfall'' rules imposing more stringent contribution 
requirements where liquid assets are insufficient to cover anticipated 
disbursement requirements. For these larger plans, (1) if the 
contributions required by the liquidity shortfall rules are made, the 
inability to pay benefits when due is resolved, and (2) if the required 
contributions are not made, that fact is reportable to PBGC as a 
failure to make required contributions. Accordingly, this provision 
waives reporting unless the plan is exempt from the liquidity shortfall 
provisions.

Distribution to Substantial Owner

    Distributions to substantial owners must generally be reported if 
they exceed $10,000 in a year unless the plan is fully funded for 
nonforfeitable benefits.
    One commenter on the 2009 proposal argued that distributions to 
substantial owners tend to be thought of as routine and may ``creep'' 
beyond the $10,000 reporting threshold unremarked and unreported. In 
response, PBGC proposes to make two changes to the regulation.

[[Page 20050]]

    First, PBGC proposes to add to the description of this event a 
provision limiting the event to circumstances where the distributions 
to one substantial owner exceed one percent of plan assets or the 
distributions to all substantial owners exceed five percent of plan 
assets. (The one-percent provision echoes a waiver for this event that 
is in the existing regulation but that PBGC proposes to eliminate.) In 
either case, assets would be end-of-year current value of assets as 
required to be reported on Schedule H or I to Form 5500, and the one 
percent or five percent threshold would have to be exceeded for each of 
the two prior years. By requiring notices only for larger distributions 
that should be noticeable and thus not challenging to detect and 
report, PBGC believes that it would strike an acceptable balance 
between the burden of reporting and PBGC's need for timely information 
about such events.
    In addition, PBGC proposes to limit reporting for distributions in 
the form of annuities to one notice: The first notice required under 
the normal reporting rules would be the only notice required so long as 
the annuity did not increase. Once notified that an annuity was being 
paid to a substantial owner, PBGC would need no further notices that 
the annuity was continuing to be paid.

Controlled Group Change

    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. For this purpose, the term 
``transaction'' includes a written or unwritten legally binding 
agreement to transfer ownership or an actual transfer or change of 
ownership. However, a transaction is not reportable if it will result 
solely in a reorganization involving a mere change in identity, form, 
or place of organization, however effected.
    One commenter asked PBGC to clarify that a reportable event does 
not occur when there is a reorganization within an employer's 
controlled group in which a member ceases to exist because it is merged 
into another member. The example in Sec.  4043.29(e)(3) of the current 
regulation indicates that such a merger is a reportable event because 
the disappearing member has ceased to be a member of the controlled 
group. After consideration, PBGC has decided to delete this example 
from the proposed rule to clarify that such a change solely within a 
controlled group is not a reportable event for purposes of the 
regulation.
    PBGC has also from time to time received requests to clarify 
whether an agreement that is not to be effective unless some condition 
is met, such as the obtaining of some governmental approval or the 
occurrence of some other event, is nonetheless legally binding within 
the meaning of the regulation. The proposed rule would provide that 
whether an agreement is legally binding is to be determined without 
reference to any conditions in the agreement. PBGC's administration of 
the pension insurance system may be impaired if reporting is not 
required until all conditions are met. As for all reportable events, 
case-by-case waivers may be granted.

Extraordinary Dividends

    An extraordinary dividend or stock redemption occurs when a member 
of a plan's controlled group declares a distribution (a dividend or 
stock redemption) that alone or in combination with previous 
distributions exceeds a level specified in the regulation. The current 
regulation specifies different threshold levels for cash and non-cash 
distributions and provides a method for aggregating cash and non-cash 
distributions in order to determine whether in combination they exceed 
the reporting threshold. Cash distributions must be tested over both a 
one-year and a four-year period, non-cash distributions only over a 
one-year period. The cash distribution threshold is 100 percent of net 
income; the non-cash distribution threshold is ten percent of net 
assets. Distributions within a controlled group are treated the same as 
any other distributions.
    PBGC proposes to simplify the description of this event. The 
simplified event would occur when a controlled group member declared a 
dividend or redeemed its stock and the (cash or non-cash) distribution, 
alone or together with other cash and non-cash distributions, exceeded 
100 percent of net income for the prior fiscal year. Testing would be 
over a one-year period only. The new formulation would eliminate much 
of the computational detail that the existing regulation prescribes for 
determining whether a reportable event has occurred by providing that 
the computations be done in accordance with generally accepted 
accounting principles. Distributions within a controlled group would be 
disregarded.
    Eliminating the four-year test for cash distributions would tend to 
make more events of this kind reportable. Disregarding intra-group 
distributions would have the opposite effect. The effect of using only 
a net income figure as a threshold is harder to assess. But PBGC 
expects the effects of all of these changes to be modest. And 
elimination of much of the detail for combining the effects of cash and 
non-cash distributions should reduce the administrative burden of 
compliance with the requirement to report such events.

Transfer of Benefit Liabilities

    Section 4043(c)(12) of ERISA requires reporting to PBGC when, in 
any 12-month period, three percent or more of a plan's benefit 
liabilities are transferred to a person outside the transferor plan's 
controlled group or to a plan or plans maintained by a person or 
persons outside the transferor plan's controlled group. Transfers of 
benefit liabilities are of concern to PBGC because they may reduce the 
transferor plan's funded percentage and because the transferee may not 
be as financially healthy as the transferor.
    The existing reportable events regulation does not make clear 
whether the satisfaction of benefit liabilities through the payment of 
a lump sum or the purchase of an irrevocable commitment to provide an 
annuity constitutes a transfer of benefit liabilities for purposes of 
this reporting requirement. PBGC has received inquiries seeking 
clarification of this point and now proposes (as in 2009) to provide 
that such cashouts and annuitizations do not constitute transfers of 
benefit liabilities that must be reported under the regulation.
    Section 436 of the Code and section 206(g) of ERISA (as added by 
PPA 2006) prohibit or limit cashouts and annuitizations by 
significantly underfunded plans. These provisions thus tend to prevent 
cashouts and annuitizations that would most seriously reduce a 
transferor plan's funded percentage. And since cashouts and 
annuitizations satisfy benefit liabilities (rather than transferring 
them to another plan), there is no concern about a transferee plan's 
financial health.
    Section 4043.32(a) of the existing reportable events regulation 
requires post-event reporting not only for a plan that transfers 
benefit liabilities, but also for every other plan maintained by a 
member of the transferor plan's controlled group. However, existing 
Sec.  4043.32(d) provides a waiver that in effect limits the post-event 
reporting obligation to the transferor plan. Existing Sec.  4043.65 
(dealing with advance reporting of benefit liability transfers) does 
not provide a similar waiver.
    PBGC has concluded--as the preamble to the 2009 proposed rule 
indicated--that it is unnecessary to

[[Page 20051]]

extend the advance reporting requirement for benefit liability 
transfers beyond the transferor plan. PBGC thus proposes to revise 
Sec.  4043.32(a) to narrow the reporting requirement to the transferor 
plan; to remove Sec.  4043.32(d) (which would be redundant); and to 
revise Sec.  4043.65(a) to remove the provision requiring that Sec.  
4043.32(d) be disregarded. The effect of these changes would be to 
leave the post-event notice requirement unchanged and to limit the 
advance notice requirement to the transferor plan.

Loan Default

    Under the existing regulation, a loan default reportable event 
occurs when a loan payment is more than 30 days late (10 days in the 
case of advance reporting), when the lender accelerates the loan, or 
when there is a written notice of default based on a drop in cash 
reserves, an unusual or catastrophic event, or the debtor's persistent 
failure to meet agreed-on performance levels.
    PBGC believes that the significance of loan defaults is so great 
that reporting should not be restricted to the current list of 
defaults. Rather, PBGC believes that any default on a loan of $10 
million or more--even a default on a loan within a controlled group--
should be reported unless a reportable event waiver applies. 
Accordingly, PBGC proposes to revise the definition of the loan default 
event so that it covers acceleration by the lender and default of any 
kind by the debtor.
    In addition, PBGC proposes to expand this event to encompass any 
amendment or waiver by a lender of any loan agreement covenant for the 
purpose of avoiding a default. PBGC believes that a debtor can often 
anticipate a default situation, and that when it does, it may typically 
initiate discussions with its lender with a view to obtaining the 
lender's waiver of the covenant it expects to breach or an amendment of 
the loan agreement to obviate the default. In PBGC's view, such actions 
may reflect financial difficulty and thus, like actual defaults, pose 
serious challenges for the pension insurance system. These changes 
would apply for both post-event notices and advance notices.
    PBGC believes that the treatment of loan defaults under the 
proposed rule is comparable to the treatment that would be experienced 
with a typical creditor. PBGC seeks the views of the public as to 
whether that belief is well-founded. PBGC further seeks public comment 
as to how it might better approximate such a model in its treatment of 
loan default events, whether there should be a materiality threshold 
with respect to events of default, and whether there is a category of 
``technical'' defaults that should not be reportable events.

Bankruptcy and Insolvency

    The existing regulation defines the bankruptcy reportable event to 
include bankruptcy under the Bankruptcy Code and any other similar 
judicial or nonjudicial proceeding. Notice of bankruptcies under the 
Bankruptcy Code can be (and routinely is) reliably obtained by other 
means. Accordingly, PBGC proposes to limit the reporting requirement to 
exclude bankruptcies under the Bankruptcy Code.

Advance-Notice Extensions

    The current reportable events regulation provides extensions of the 
advance-notice filing deadline for three events: funding waiver 
requests, loan defaults, and bankruptcy/insolvency. The extension for 
funding waiver requests avoids the need to give one government agency 
(PBGC) advance notice of a filing with another government agency (IRS). 
The extensions for notices of loan defaults and bankruptcies or 
insolvencies accommodate situations where such events occur without the 
debtors' advance knowledge.
    In general, however, a debtor is aware well in advance that a loan 
default or insolvency event is going to befall it, and indeed is 
actively engaged in preparation for the event. PBGC thinks it not 
unreasonable, therefore, that a debtor subject to advance reporting 
should generally give the advance notice provided for in the statute. 
Accordingly, PBGC proposes to eliminate reporting extensions for 
advance notice of loan default and insolvency events, except for events 
where insolvency proceedings are filed against a debtor by someone 
outside the plan's controlled group. In such adversarial filing cases, 
it is reasonable to expect that the debtor is unable to anticipate the 
event and thus unable to report it in advance.
    PBGC is aware that there may be loan defaults that (like 
adversarial insolvency filings) can come as a surprise to the debtor, 
making compliance with the advance notice requirement impossible. 
However, since PBGC believes such loan defaults are very infrequent, 
the proposed rule does not contain an automatic extension for such 
situations. If inability to anticipate a loan default event were to 
make it impossible to comply with the advance notice requirement, the 
delinquent filer could seek a retroactive filing extension from PBGC 
based on the facts and circumstances. (An extension may similarly be 
requested if a filer learns of an impending event such a short time 
before the advance notice deadline as to make timely filing difficult.) 
PBGC specifically invites comment on whether this approach represents 
an adequate solution to any problem of surprise loan defaults that may 
exist.

Forms and Instructions

    PBGC proposes to eliminate some of the documentation that must now 
be submitted with notices of two reportable events, but to require that 
filers submit with notices of most events some information not 
currently called for. Because the additional information to be 
submitted with notices is now typically requested by PBGC after notices 
are reviewed, the proposed changes would not significantly impact 
filers' total administrative burden.
    PBGC also proposes, as it did in 2009, to make use of prescribed 
reportable events forms mandatory and to eliminate from the regulation 
the lists of information items that must be reported. PBGC anticipates 
that as it gains experience with the new reporting requirements and 
engages in further regulatory review, it may find it appropriate to 
make changes in the information required to be submitted with 
reportable events notices. In particular, resolution of uncertainties 
about the operation of PPA 2006 provisions may call for changes in the 
data submission requirements for failures to make required 
contributions timely. Forms and instructions can be revised more 
quickly than regulations can in response to new developments or 
experience (and both processes are subject to public comment).
    PBGC issues three reporting forms for use under the reportable 
events regulation. Form 10 is for post-event reporting under subpart B 
of the regulation; Form 10-Advance is for advance reporting under 
subpart C of the regulation; and Form 200 is for reporting under 
subpart D of the regulation. Failure to report is subject to penalties 
under section 4071 of ERISA.
    Under the existing regulation, however, use of PBGC forms for 
reporting events under subparts B and C of the regulation is optional. 
The data items in the forms do not correspond exactly with those in the 
regulation, and the regulation recognizes that filers that use the 
forms may report different information from those that do not use the 
forms. PBGC believes that making use of prescribed reportable events 
forms mandatory would promote greater uniformity in the reporting 
process and attendant administrative simplicity for

[[Page 20052]]

PBGC. Eliminating lists of information items from the regulation would 
mean that the information to be reported would be described in the 
filing instructions only (rather than in both the filing instructions 
and the regulation).

Mandatory Electronic Filing

    PBGC encourages electronic filing under the existing regulation 
\33\ and now proposes to make it mandatory. This proposal is part of 
PBGC's ongoing implementation of the Government Paperwork Elimination 
Act.
---------------------------------------------------------------------------

    \33\ The existing regulation contains a ``partial electronic 
filing'' provision under which a filing is considered timely made if 
certain basic information (specified in PBGC's reporting 
instructions) is submitted on time electronically and followed up 
within one or two business days (depending on the type of report) 
with the remaining required information. PBGC's mandatory electronic 
filing proposal would make the ``partial electronic filing'' 
provision anachronistic, and it would be removed.
---------------------------------------------------------------------------

    Electronic filing has become the norm for PBGC's regulated 
community. Electronic filing is mandatory for reports under ERISA 
section 4010 (starting with 2005 information years), PBGC premiums 
(starting with 2007 plan years for all plans), and Form 5500 (starting 
with 2009 plan years).
    PBGC does not currently have a web-based filing application for 
reportable events as it does for section 4010 or premium filings. 
However, it has become common for documents to be created 
electronically in a variety of digital formats (such as WPD, DOC, and 
XLS) and easy to create electronic images (for example, in PDF format) 
of documents that do not exist in electronic form. PBGC proposes that 
filers be permitted to email filings using any one or more of a variety 
of electronic formats that PBGC is capable of reading as provided in 
the instructions on PBGC's Web site. (Forms 10 and 10-Advance do not 
require signatures, and PBGC already accepts imaged signatures for Form 
200 filings.) The current versions of PBGC Form 10, Form 10-Advance, 
and Form 200 are already available in ``fillable'' format; in 
connection with the change to electronic filing, new versions of these 
forms will be available in ``fillable'' format to facilitate electronic 
filing.
    PBGC would be able to waive electronic filing for voluminous paper 
documents to relieve filers of the need to scan them, pursuant to Sec.  
4043.4(d) (case-by-case waivers).
    PBGC would expect its reportable events e-filing methodology to 
evolve as Internet capabilities and standards change, consistent with 
resource effectiveness. Such developments would be reflected in PBGC's 
reportable events e-filing instructions.
    PBGC seeks public comment on its proposal to require electronic 
filing. For example, PBGC would like to know whether there are 
differences commenters might see between Form 5500 filings and premium 
filings (which are submitted electronically) and reportable events 
filings that would make the latter less suited to electronic filing. 
PBGC would also like to know whether there are particular categories of 
plans or sponsors that would find electronic filing sufficiently 
difficult that PBGC should by regulation either exempt them from e-
filing (rather than just providing case-by-case exceptions) or defer 
the applicability of mandatory e-filing to them (i.e., provide for 
phase-in of the e-filing requirement, and if so, over what period of 
time). Finally, PBGC seeks comment on e-filing methodology, such as the 
convenience of submitting documents in the form of data rather than 
images and the usefulness of pre-filled data fields. Commenters are 
encouraged to describe actual rather than hypothetical circumstances 
and to provide comparisons between the burdens that would be associated 
with e-filing versus paper filing or with one e-filing method versus 
another. This information will help PBGC evaluate both the 
appropriateness of e-filing for reportable events in general and the 
need for special rules to accommodate specific categories of filers.

Other Changes

    PBGC's 2009 proposed rule on reportable events would have added two 
new events to the reportable events regulation. One event would have 
occurred when a plan's adjusted funding target attainment percentage 
(AFTAP) was found or presumed to be less than 60 percent. The other 
event would have occurred when a transfer of $10 million or more was 
made to a plan's health benefits account under section 420(f) of the 
Code (as added by PPA 2006) or when plan funding thereafter 
deteriorated below a prescribed level. Commenters seemed generally 
accepting of the appropriateness of the former event but questioned the 
value to PBGC of the latter event. PBGC is not including either event 
in this proposal. AFTAPs under 60 percent trigger significant 
restrictions on plans that to some degree provide remediation that 
serves the same kind of function as the action that PBGC might take 
upon getting a low AFTAP notice. And PBGC has concluded that its need 
for health benefit account notices is not great enough to make it 
clearly appropriate to require them at this time.
    PBGC recognizes that the changes made by PPA 2006 in the statutory 
provisions dealing with missed contributions--which are reportable 
under Sec. Sec.  4043.25 and 4043.81--affect the computation of 
interest on missed contributions, a circumstance that in turn affects 
the reporting requirements. This proposed rule includes no amendment to 
the reportable events regulation dealing with such issues, but PBGC is 
providing guidance on this subject in the filing instructions. The 
guidance will be revised if and when necessary to take into account as 
appropriate any relevant guidance from the Internal Revenue Service.
    The proposed rule would clarify that if an event is subject to both 
post-event and advance notice requirements, the notice filed first 
satisfies both requirements. (In unusual circumstances, the post-event 
notice required in connection with a transaction may be due before the 
advance notice required in connection with the same transaction.)
    To conform to the statute, the proposed rule would limit the 
applicability of the confidentiality provisions in ERISA section 
4043(f) to submissions under subparts B and C of the reportable events 
regulation.
    The proposed rule would make a number of editorial and clarifying 
changes to part 4043 and would add definitional cross-references, 
change statutory cross-references to track changes made by PPA 2006, 
and update language to conform to usage in PPA 2006 and regulations and 
reporting requirements thereunder.\34\ Where a defined term is used in 
only one section of the regulation, the definition would be moved from 
Sec.  4043.2 to the section where the term is used.
---------------------------------------------------------------------------

    \34\ Section 4043.62(b)(1) of the existing regulation, headed 
``Small plan,'' provides a waiver where a plan has 500 or fewer 
participants. The premium payment regulation keys filing due dates 
to whether a plan is small (fewer than 100 participants, mid-size 
(100 or more but fewer than 500 participants), or large (500 or more 
participants). In the interest of uniformity, PBGC proposes to 
change Sec.  4043.62(b)(1) to provide a waiver where a plan has 
fewer than 500 participants and to change the heading to read 
``Small and mid-size plans.''
---------------------------------------------------------------------------

    The proposed changes to the reportable events regulation make it 
unnecessary to define a number of terms at the beginning of the 
regulation. Accordingly, the definitions of ``fair market value of the 
plan's assets,'' ``Form 5500 due date,'' ``public company,'' ``testing 
date,'' ``ultimate parent,'' ``unfunded vested benefits,'' ``variable-
rate premium,'' and ``vested

[[Page 20053]]

benefits amount'' would be removed from Sec.  4043.2.

Summary Chart

    The following table summarizes waiver and safe harbor provisions 
for reportable events for which post-event reporting is required under 
the current regulation, the 2009 proposal, and this proposed rule. (As 
explained in detail above, the current proposal also provides filing 
relief--like the relief provided by waivers--through changes to the 
definitions of certain reportable events, including substantial owner 
distributions and active participant reductions and through the 
provision of filing extensions such as for active participant 
reductions that occur by attrition.)
BILLING CODE 7709-01-P

[[Page 20054]]

[GRAPHIC] [TIFF OMITTED] TP03AP13.000


[[Page 20055]]


[GRAPHIC] [TIFF OMITTED] TP03AP13.001

BILLING CODE 7709-01-C

[[Page 20056]]

Other Regulations

    Several other PBGC regulations also refer to plan funding concepts 
using citations outmoded by PPA 2006: The regulations on Filing, 
Issuance, Computation of Time, and Record Retention (29 CFR part 4000); 
Terminology (29 CFR part 4001); Variances for Sale of Assets (29 CFR 
part 4204); Adjustment of Liability for a Withdrawal Subsequent to a 
Partial Withdrawal (29 CFR part 4206); and Mergers and Transfers 
Between Multiemployer Plans (29 CFR part 4231). Thus, these regulations 
must also be revised to be consistent with ERISA and the Code as 
amended by PPA 2006 and with the revised premium regulations. This 
proposed rule would make the necessary conforming revisions.

Applicability

    PBGC proposes to make the changes to the reportable events 
regulation in this proposed rule applicable to post-event reports for 
reportable events occurring on or after January 1, 2014, and to advance 
reports due on or after that date. Deferral of the applicability date 
would provide time for plans and plan sponsors to institute any 
necessary event monitoring programs to comply with the new rules. PBGC 
is also giving consideration to making the waiver and safe harbor 
provisions in the final regulation available (in addition to the 
waivers in the current regulation) during the period from the effective 
date of the final rule (30 days after publication in the Federal 
Register) to January 1, 2014.

Public Participation

    PBGC welcomes comments from the public on all matters relating to 
the proposed rule. In particular, PBGC seeks public comments on the 
following specific questions:
    (1) What are the advantages and disadvantages of the proposed safe 
harbor for financially sound plan sponsors?
    (2) What are commenters' experiences with commercial credit 
reporting companies that might be relevant to developing a reportable 
events safe harbor? Do credit report scores change when reportable 
events occur? How often or easily are changes in credit report scores 
provided to users and the public? Can companies obtain timely updates 
that allow for an accurate assessment of financial soundness at a 
particular time?
    (3) Does the proposal provide an appropriate way to assess 
financial soundness of plan sponsors? Is a commercial credit report 
score an appropriate basis for measuring financial strength for 
purposes of the safe harbor? Does the secured debt test for financial 
soundness include and exclude appropriate categories of debt from the 
test criteria? For example, should receivables financing be excluded 
from the test? Is the net income test too stringent or too lenient? Do 
the debt service and plan contribution tests include and exclude 
appropriate events? Are the proposed standards for the sponsor safe 
harbor too complex?
    (4) Regarding the number and stringency of the criteria for the 
financially sound company safe harbor:
     Should there be more or fewer criteria than the five 
proposed in this rule? If more, what should the additional ones be? If 
fewer, which ones should be eliminated?
     Are the relative stringencies of the criteria appropriate 
for determining company financial soundness?
     Should alternative combinations of a subset of the five 
criteria be permissible?
     Should financial soundness criteria for companies and 
plans be combined?
    (5) Are there standard, commonly used metrics that could be applied 
to determine financial soundness that do not rely on third party 
commercial credit reporting companies (e.g., based on balance sheet or 
cash-flow ratios, such as current assets to current liabilities, debt 
to equity, or some form of debt-service to cash-flow ratio)? Would such 
metrics be available and appropriate for all plan sponsors? What would 
be the advantages or disadvantages of using such an approach? Are there 
other alternatives to determining financial soundness?
    (6) Should PBGC adopt other standards of creditworthiness?
    (7) For the proposed safe harbor via plans, what alternative 
funding percentage(s) (on a termination basis or premium basis) should 
be permitted, and why?
    (8) Should PBGC provide other alternative waivers? Should such 
alternatives be in addition to, or in place of, the proposed financial 
soundness safe harbors for companies and plans?
    (9) How can PBGC implement safe harbors, whether based on financial 
soundness or other factors, in a consistent, transparent, well-defined, 
and replicable or verifiable way?
    In responding to the above questions, to the extent possible, 
commenters are requested to provide quantitative as well as qualitative 
support or analysis where applicable.
    A public hearing has been scheduled for June 18, 2013, beginning at 
2:00 p.m., in the PBGC Training Institute, Washington, DC, shortly 
after the close of the comment period. Pursuant to building security 
procedures, visitors must arrive at 1200 K Street not more than 30 
minutes before the hearing starts and present government-issued photo 
identification to enter the building.
    PBGC requests that any person who wishes to present oral comments 
at the hearing file written comments on this proposed rule (see DATES 
and ADDRESSES above). Such persons also must submit by June 4, 2013, an 
outline of topics to be discussed and the amount of time to be devoted 
to each topic. The outline of topics to be discussed must be submitted 
by email to regs.comments@pbgc.gov or by mail or courier to Regulatory 
Affairs Group, Office of the General Counsel, Pension Benefit Guaranty 
Corporation, 1200 K Street NW., Washington, DC 20005-4026. An agenda 
identifying the speakers will be prepared after the deadline for 
receiving outlines. Copies of the agenda will be available free of 
charge at the hearing.

Regulatory Procedures

Executive Order 12866 ``Regulatory Planning and Review'' and Executive 
Order 13563 ``Improving Regulation and Regulatory Review''

    PBGC has determined, in consultation with the Office of Management 
and Budget, that this rule is a ``significant regulatory action'' under 
Executive Order 12866. The Office of Management and Budget has 
therefore reviewed this notice under Executive Order 12866.
    Executive Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. Executive Orders 12866 and 13563 require a comprehensive 
regulatory impact analysis be performed for any economically 
significant regulatory action, defined as an action that would result 
in an annual effect of $100 million or more on the national economy or 
which would have other substantial impacts. In accordance with OMB 
Circular A-4, PBGC has examined

[[Page 20057]]

the economic and policy implications of this proposed rule and has 
concluded that the action's benefits justify its costs.
    As discussed above, some reportable events present little or no 
risk to the pension insurance system--where, for example, the plan 
sponsor is financially sound and the risk of plan termination low. 
Reports of such events are unnecessary in the sense that PBGC typically 
reviews but takes no action on them. PBGC analyzed 2011 records to 
determine how many such reports it received for events to which the 
proposed sponsor safe harbor would apply, then reanalyzed the data to 
see how many unnecessary reports would have been received if the plan 
sponsor safe harbor in the proposed rule had been in effect (that is, 
excluding reports that would have been waived under the plan sponsor 
safe harbor test).\37\ It found that the proportion of unnecessary 
filings would be much lower under the proposed regulation than under 
the existing regulation--5 percent (10 filings) compared to 42 percent 
(79 filings). Thus, although the total number of filings may be a 
little higher under the proposed rule, the proportion of unnecessary 
reports, and the regulatory burden on financially sound sponsors and 
plans, would be dramatically reduced.
---------------------------------------------------------------------------

    \37\ Filings that involve section 4062(e) events always result 
in the opening of cases and were excluded from the analysis.
---------------------------------------------------------------------------

    Under Section 3(f)(1) of Executive Order 12866, a regulatory action 
is economically significant if ``it is likely to result in a rule that 
may * * * [h]ave an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities.'' PBGC has determined that this proposed rule does not 
cross the $100 million threshold for economic significance and is not 
otherwise economically significant.
    This action is associated with retrospective review and analysis in 
PBGC's Plan for Regulatory Review \38\ issued in accordance with 
Executive Order 13563 on ``Improving Regulation and Regulatory 
Review.''
---------------------------------------------------------------------------

    \38\ See www.pbgc.gov/documents/plan-for-regulatory-review.pdf.
---------------------------------------------------------------------------

Regulatory Flexibility Act

    The Regulatory Flexibility Act 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 proposed 
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 an initial regulatory 
flexibility analysis at the time of the publication of the proposed 
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.
    For purposes of the Regulatory Flexibility Act requirements with 
respect to the proposed amendments to the reportable events regulation, 
PBGC considers a small entity to be a plan with fewer than 100 
participants. This is the same criterion used to determine the 
availability of the ``small plan'' waiver under the proposal, and is 
consistent with certain requirements in Title I of ERISA \39\ and the 
Internal Revenue Code,\40\ as well as the definition of a small entity 
that the Department of Labor (DOL) has used for purposes of the 
Regulatory Flexibility Act.\41\ Using this proposed definition, about 
64 percent (16,700 of 26,100) of plans covered by Title IV of ERISA in 
2010 were small plans.\42\
---------------------------------------------------------------------------

    \39\ See, e.g., ERISA section 104(a)(2), which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \40\ See, e.g., Code section 430(g)(2)(B), which permits plans 
with 100 or fewer participants to use valuation dates other than the 
first day of the plan year.
    \41\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66,637, 66,644 (Oct. 27, 2011).
    \42\ See PBGC 2010 pension insurance data table S-31, https://www.pbgc.gov/Documents/pension-insurance-data-tables-2010.pdf.
---------------------------------------------------------------------------

    Further, while some large employers may have small plans, in 
general most small plans are maintained by small employers. Thus, PBGC 
believes that assessing the impact of the proposal 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 (13 CFR 
121.201) pursuant to the Small Business Act. PBGC therefore requests 
comments on the appropriateness of the size standard used in evaluating 
the impact on small entities of the proposed amendments to the 
reportable events regulation.
    On the basis of its proposed definition of small entity, PBGC 
certifies under section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.) that the amendments in this rule will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, as provided in section 605 of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.), sections 603 and 604 do not apply. This 
certification is based on the fact that the reportable events 
regulation requires only the filing of one-time notices on the 
occurrence of unusual events that affect only certain plans and that 
the economic impact of filing is not significant. The average burden of 
submitting a notice--based on the estimates discussed under Paperwork 
Reduction Act, below--is less than 5\1/2\ hours and $800 (virtually the 
same as under the current regulation). PBGC invites public comment on 
this burden estimate.

Paperwork Reduction Act

    PBGC is submitting the information requirements under this proposed 
rule to the Office of Management and Budget for review and approval 
under the Paperwork Reduction Act. There are two information 
collections under the reportable events regulation, approved under OMB 
control number 1212-0013 (covering subparts B and C) and OMB control 
number 1212-0041 (covering subpart D), both of which expire March 31, 
2015. Copies of PBGC's requests may be obtained free of charge by 
contacting the Disclosure Division of the Office of the General Counsel 
of PBGC, 1200 K Street NW., Washington, DC 20005, 202-326-4040.
    PBGC is proposing the following changes to these information 
requirements:
     PBGC's experience is that in order to assess the 
significance of virtually every post-event filing for a missed 
contribution, inability to pay benefits, loan default, liquidation, or 
insolvency, it must obtain from the filer certain actuarial, financial, 
and controlled group information. Filers are currently required to 
submit some of this information for some events, but PBGC wants to make 
its information collection for all these events more uniform. 
Accordingly, PBGC proposes to require that every post-event filing for 
one of these events include these items (except that financial 
information is unnecessary for reports of insolvency because PBGC can 
typically obtain most of the information from court records). Actuarial 
information would no longer have to be submitted with post-event 
notices of other events. (1) The actuarial information required would 
be a copy of the most recent actuarial valuation report for the plan, a 
statement of

[[Page 20058]]

subsequent material changes, and the most recent month-end market value 
of plan assets. (2) The financial information required would be copies 
of audited financial statements for the most recent fiscal year. (If 
audited statements were not immediately available, copies of unaudited 
financial statements (if available) or tax returns would be required, 
to be followed up with required financial statements when available.) 
(3) The controlled group information required would be tailored to the 
event being reported and would generally include identifying 
information for each plan maintained by any member of the controlled 
group, a description of the controlled group with members' names, and 
the status of members (for example, liquidating or in bankruptcy).
     Similarly, PBGC has found that it needs the same 
actuarial, financial, and controlled group information for advance-
notice filings. For notices of funding waiver requests, the information 
can typically be gleaned from the copy of the request that accompanies 
the reportable event notice. And financial information is unnecessary 
for reports of insolvency because PBGC can typically obtain most of the 
information from court records. With these exceptions, PBGC proposes to 
require that every advance notice filing include these items.
     Controlled group changes and benefit liability transfers 
involve both an ``old'' controlled group and a ``new'' controlled 
group. PBGC already requires submission of controlled group information 
with notices of controlled group changes, and now proposes to do the 
same for benefit liability transfers.
     Because extraordinary distributions raise questions about 
controlled group finances, PBGC proposes to require submission of 
financial information with notices of events of this type.
     Inability to pay benefits and liquidation both raise the 
specter of imminent sponsor shutdown and plan termination. Accordingly, 
for notices of these two events (including advance notices of 
liquidation events), PBGC proposes to require submission of copies of 
the most recent plan documents and IRS qualification letter, the date 
or expected date of shutdown, and the identity of the plan actuary if 
different from the actuary reported on the most recent Form 5500 
Schedule SB. Plan documents would no longer be required with notices 
for other events.
     PBGC proposes to require email addresses for plan 
administrators, sponsors, and designated contact persons.
     PBGC proposes to require that both post-event and advance 
report filings state explicitly the date of the event or the actual or 
anticipated effective date of the event (as applicable). This 
requirement will avoid the potential for confusion or ambiguity in the 
description of the event regarding this date.
     PBGC has found that it often does not need the actuarial 
valuation report that must currently be included with notice of a 
substantial owner distribution and thus proposes to eliminate that 
requirement. However, PBGC proposes to add a requirement that notices 
of this event give the reason for the distribution to help PBGC analyze 
its significance.
     For both post-event and advance notices of loan defaults, 
PBGC proposes to require that any cross-defaults or anticipated cross-
defaults be described.
     PBGC has found that some filers that should file Form 200 
under Sec.  4043.81 of the reportable events regulation (missed 
contributions totaling over $1 million) file only Form 10 under Sec.  
4043.25 (missed contributions of any amount). This has led to delays in 
enforcing liens under ERISA section 302(f) and Code section 412(n) 
(corresponding to ERISA section 303(k) and Code section 430(k) as 
amended by PPA 2006). To address this issue, PBGC proposes that Form 10 
filings for missed contributions include the amount and date of all 
missed contributions since the most recent Schedule SB.
     PBGC proposes to eliminate Form 200 information submission 
requirements for documents that PBGC typically can now obtain timely on 
its own and to add new information submission requirements to help it 
analyze the seriousness of the plan's status and perfect statutory 
liens triggered by large missed contributions. Documentation to be 
eliminated would be copies of Form 5500 Schedule SB, SEC filings, and 
documents connected with insolvency, liquidation, receivership, and 
similar proceedings. New information to be required would be a 
statement of material changes in liabilities since the most recent 
actuarial valuation report, most recent month-end market value of plan 
assets, description of each controlled group member's status (for 
example, liquidating or in bankruptcy), information about all 
controlled group real property, and identity of controlled group head 
offices.
     PBGC Form 10 currently requires for the bankruptcy/
insolvency event that the bankruptcy petition and docket (or similar 
documents) be submitted. Form 10-Advance requires that all documents 
filed in the relevant proceeding be submitted. Both forms require that 
the last date for filing claims be reported if known. PBGC proposes to 
replace these requirements with a requirement that filers simply 
identify the court where the insolvency proceeding was filed or will be 
filed and the docket number of the filing (if known).
    PBGC needs the information in reportable events filings under 
subparts B and C of part 4043 (Forms 10 and 10-Advance) to determine 
whether it should terminate plans that experience events that indicate 
plan or contributing sponsor financial problems. PBGC estimates that it 
will receive such filings from about 1,085 respondents each year and 
that the total annual burden of the collection of information will be 
about 5,744 hours and $857,195. This represents a burden comparable to 
that under the existing regulation, as the following table shows:

------------------------------------------------------------------------
                                    Under existing      Under proposed
         Annual burden:               regulation:            rule:
------------------------------------------------------------------------
Number of responses.............  1,026.............  1,085.
Hour burden.....................  5,400 hours.......  5,744 hours.
Dollar burden...................  $821,826..........  $857,195.
------------------------------------------------------------------------

    As discussed above, however, the proposal is designed to reduce 
burden dramatically on financially sound plans and sponsors (which 
present a low degree of risk); thus, burden under the proposed rule 
would be substantially associated with higher-risk events, which are 
much more likely to deserve PBGC's attention. PBGC separately estimated 
the average burden changes for low-risk and high-risk entities. The 
burden for low-risk sponsors would go down from 417 hours and $121,725 
to zero. The burden for high-risk sponsors

[[Page 20059]]

would go up by approximately 760 hours and $157,100.

----------------------------------------------------------------------------------------------------------------
                            Low-risk                                  Volume           Hours           Cost
----------------------------------------------------------------------------------------------------------------
Current.........................................................             144             417        $121,725
Proposed........................................................               0               0              $0
Change..........................................................           (144)           (417)       (121,725)
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                            High-risk                                 Volume           Hours           Cost
----------------------------------------------------------------------------------------------------------------
Current.........................................................             882           4,983        $700,101
Proposed........................................................           1,085           5,744         857,195
Change..........................................................             203             761         157,094
----------------------------------------------------------------------------------------------------------------

    PBGC needs the information in missed contribution filings under 
subpart D of part 4043 (Form 200) to determine the amounts of statutory 
liens arising under ERISA section 303(k) and Code section 430(k) and to 
evaluate the funding status of plans with respect to which such liens 
arise and the financial condition of the persons responsible for their 
funding. PBGC estimates that it will receive such filings from about 
136 respondents each year and that the total annual burden of the 
collection of information will be about 816 hours and $125,000.\43\
---------------------------------------------------------------------------

    \43\ In comparison, PBGC's most recent annual burden estimate 
for this information collection was 110 responses, 670 hours, and 
$102,000.
---------------------------------------------------------------------------

    Comments on the paperwork provisions under this proposed rule 
should be sent to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for Pension 
Benefit Guaranty Corporation, via electronic mail at OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974. Although comments may 
be submitted through June 3, 2013, the Office of Management and Budget 
requests that comments be received on or before May 3, 2013 to ensure 
their consideration. Comments may address (among other things)--
     Whether each proposed collection of information is needed 
for the proper performance of PBGC's functions and will have practical 
utility;
     The accuracy of PBGC's estimate of the burden of each 
proposed collection of information, including the validity of the 
methodology and assumptions used;
     Enhancement of the quality, utility, and clarity of the 
information to be collected; and
     Minimizing the burden of each collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.

List of Subjects

29 CFR Part 4000

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

29 CFR Part 4001

    Employee benefit plans, Pension insurance.

29 CFR Part 4043

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

29 CFR Part 4204

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

29 CFR Part 4206

    Employee benefit plans, Pension insurance.

29 CFR Part 4231

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

0
For the reasons given above, PBGC proposes to amend 29 CFR parts 4000, 
4001, 4043, 4204, 4206, and 4231 as follows.

PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD 
RETENTION

0
1. The authority citation for part 4000 is revised to read as follows:

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

0
2. In Sec.  4000.3, new paragraph (b)(3) is added to read as follows:


Sec.  4000.3  What methods of filing may I use?

* * * * *
    (b) * * *
    (3) You must file notices under part 4043 of this chapter 
electronically in accordance with the instructions on PBGC's Web site, 
except as otherwise provided by PBGC.
* * * * *
0
3. In Sec.  4000.53, paragraphs (c) and (d) are amended by removing the 
words ``section 302(f)(4), section 307(e), or'' where they occur in 
each paragraph and adding in their place the words ``section 101(f), 
section 303(k)(4), or''.

PART 4001--TERMINOLOGY

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

    Authority: 29 U.S.C. 1301, 1302(b)(3).
0
5. In Sec.  4001.2:
0
a. The definition of ``controlled group'' is amended by removing the 
words ``section 412(c)(11)(B) of the Code or section 302(c)(11)(B) of 
ERISA'' and adding in their place the words ``section 412(b)(2) of the 
Code or section 302(b)(2) of ERISA''.
0
b. The definition of ``funding standard account'' is amended by 
removing the words ``section 302(b) of ERISA or section 412(b) of the 
Code'' and adding in their place the words ``section 304(b) of ERISA or 
section 431(b) of the Code''.
0
c. The definition of ``substantial owner'' is amended by removing the 
words ``section 4022(b)(5)(A)'' and adding in their place the words 
``section 4021(d)''.
0
6. Part 4043 is revised to read as follows:

PART 4043--REPORTABLE EVENTS AND CERTAIN OTHER NOTIFICATION 
REQUIREMENTS

Subpart A--General Provisions
Sec.
4043.1 Purpose and scope.
4043.2 Definitions.
4043.3 Requirement of notice.
4043.4 Waivers and extensions.
4043.5 How and where to file.
4043.6 Date of filing.
4043.7 Computation of time.
4043.8 Confidentiality.
4043.9 Financial soundness.

[[Page 20060]]

Subpart B--Post-Event Notice of Reportable Events
4043.20 Post-event filing obligation.
4043.21 Tax disqualification and Title I noncompliance.
4043.22 Amendment decreasing benefits payable.
4043.23 Active participant reduction.
4043.24 Termination or partial termination.
4043.25 Failure to make required minimum funding payment.
4043.26 Inability to pay benefits when due.
4043.27 Distribution to a substantial owner.
4043.28 Plan merger, consolidation, or transfer.
4043.29 Change in contributing sponsor or controlled group.
4043.30 Liquidation.
4043.31 Extraordinary dividend or stock redemption.
4043.32 Transfer of benefit liabilities.
4043.33 Application for minimum funding waiver.
4043.34 Loan default.
4043.35 Insolvency or similar settlement.
Subpart C--Advance Notice of Reportable Events
4043.61 Advance reporting filing obligation.
4043.62 Change in contributing sponsor or controlled group.
4043.63 Liquidation.
4043.64 Extraordinary dividend or stock redemption.
4043.65 Transfer of benefit liabilities.
4043.66 Application for minimum funding waiver.
4043.67 Loan default.
4043.68 Insolvency or similar settlement.
Subpart D--Notice of Failure to Make Required Contributions
4043.81 PBGC Form 200, notice of failure to make required 
contributions; supplementary information.


    Authority: 29 U.S.C. 1082(f), 1302(b)(3), 1343.

Subpart A--General Provisions


Sec.  4043.1  Purpose and scope.

    This part prescribes the requirements for notifying PBGC of a 
reportable event under section 4043 of ERISA or of a failure to make 
certain required contributions under section 303(k)(4) of ERISA or 
section 430(k)(4) of the Code. Subpart A contains definitions and 
general rules. Subpart B contains rules for post-event notice of a 
reportable event. Subpart C contains rules for advance notice of a 
reportable event. Subpart D contains rules for notifying PBGC of a 
failure to make certain required contributions.


Sec.  4043.2  Definitions.

    The following terms are defined in Sec.  4001.2 of this chapter: 
benefit liabilities, Code, contributing sponsor, controlled group, 
ERISA, fair market value, irrevocable commitment, multiemployer plan, 
PBGC, person, plan, plan administrator, plan year, single-employer 
plan, and substantial owner.
    In addition, for purposes of this part:
    De minimis 10-percent segment means, in connection with a plan's 
controlled group, one or more entities that in the aggregate have for a 
fiscal year--
    (1) Revenue not exceeding 10 percent of the controlled group's 
revenue;
    (2) Annual operating income not exceeding the greater of--
    (i) 10 percent of the controlled group's annual operating income; 
or
    (ii) $5 million; and
    (3) Net tangible assets at the end of the fiscal year(s) not 
exceeding the greater of--
    (i) 10 percent of the controlled group's net tangible assets at the 
end of the fiscal year(s); or
    (ii) $5 million.
    De minimis 5-percent segment has the same meaning as de minimis 10-
percent segment, except that ``5 percent'' is substituted for ``10 
percent'' each time it appears.
    Event year means the plan year in which a reportable event occurs.
    Financially sound has the meaning described in Sec.  4043.9.
    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 date the reportable event 
occurs, 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 tax returns for 
employee withholding.
    Foreign parent means a foreign entity that is a direct or indirect 
parent of a person that is a contributing sponsor of a plan.
    Notice date means the deadline (including extensions) for filing 
notice of a reportable event with PBGC.
    Participant means a participant as defined in Sec.  4006.2 of this 
chapter.
    U.S. entity means an entity subject to the personal jurisdiction of 
the U.S. district court.


Sec.  4043.3  Requirement of notice.

    (a) Obligation to file--(1) In general. Each person that is 
required to file a notice under this part, or a duly authorized 
representative, must submit the information required under this part by 
the time specified in Sec.  4043.20 (for post-event notice), Sec.  
4043.61 (for advance notice), or Sec.  4043.81 (for Form 200 filings). 
Any information filed with PBGC in connection with another matter may 
be incorporated by reference. If an event is subject to both post-event 
and advance notice requirements, the notice filed first satisfies both 
filing requirements.
    (2) Multiple plans. If a reportable event occurs for more than one 
plan, the filing obligation with respect to each plan is independent of 
the filing obligation with respect to any other plan.
    (3) Optional consolidated filing. A filing of a notice with respect 
to a reportable event by any person required to file will be deemed to 
be a filing by all persons required to give PBGC notice of the event 
under this part. If notices are required for two or more events, the 
notices may be combined in one filing.
    (b) Contents of reportable event notice. A person required to file 
a reportable event notice under subpart B or C of this part must file, 
by the notice date, the form specified by PBGC for that purpose, with 
the information specified in PBGC's reportable events instructions.
    (c) Reportable event forms and instructions. PBGC will issue 
reportable events forms and instructions and make them available on its 
Web site (www.pbgc.gov).
    (d) Requests for additional information. PBGC may, in any case, 
require the submission of additional relevant information not specified 
in its forms and instructions. Any such information must be submitted 
for subpart B of this part within 30 days, and for subpart C or D of 
this part within 7 days, after the date of a written request by PBGC, 
or within a different time period specified therein. PBGC may in its 
discretion shorten the time period where it determines that the 
interests of PBGC or participants may be prejudiced by a delay in 
receipt of the information.
    (e) Effect of failure to file. If a notice (or any other 
information required under this part) is not provided within the 
specified time limit, PBGC may assess against each person required to 
provide the notice a separate penalty under section 4071 of ERISA. PBGC 
may pursue any other equitable or legal remedies available to it under 
the law.

[[Page 20061]]

Sec.  4043.4  Waivers and extensions.

    (a) Waivers and extensions--in general. PBGC may extend any 
deadline or waive any other requirement under this part where it finds 
convincing evidence that the waiver or extension is appropriate under 
the circumstances. Any waiver or extension may be subject to 
conditions. A request for a waiver or extension must be filed with PBGC 
in writing (which may be in electronic form) and must state the facts 
and circumstances on which the request is based.
    (b) Waivers and extensions--specific events. For some reportable 
events, automatic waivers from reporting and information requirements 
and extensions of time are provided in subparts B and C of this part. 
If an occurrence constitutes two or more reportable events, reporting 
requirements for each event are determined independently. For example, 
reporting is automatically waived for an occurrence that constitutes a 
reportable event under more than one section only if the requirements 
for an automatic waiver under each section are satisfied.
    (c) Multiemployer plans. The requirements of section 4043 of ERISA 
are waived with respect to multiemployer plans.
    (d) Terminating plans. No notice is required from the plan 
administrator or contributing sponsor of a plan if the notice date is 
on or after the date on which--
    (1) All of the plan's assets (other than any excess assets) are 
distributed pursuant to a termination under part 4041 of this chapter; 
or
    (2) A trustee is appointed for the plan under section 4042(c) of 
ERISA.


Sec.  4043.5  How and where to file.

    Reportable event notices required under this part must be filed 
electronically using the forms and in accordance with the instructions 
promulgated by PBGC, which are posted on PBGC's Web site. Filing 
guidance is provided by the instructions and by subpart A of part 4000 
of this chapter.


Sec.  4043.6  Date of filing.

    (a) Post-event notice filings. PBGC applies the rules in subpart C 
of part 4000 of this chapter to determine the date that a submission 
under subpart B of this part was filed with PBGC.
    (b) Advance notice and Form 200 filings. Information filed under 
subpart C or D of this part is treated as filed on the date it is 
received by PBGC. Subpart C of part 4000 of this chapter provides rules 
for determining when PBGC receives a submission.


Sec.  4043.7  Computation of time.

    PBGC applies the rules in subpart D of part 4000 of this chapter to 
compute any time period under this part.


Sec.  4043.8  Confidentiality.

    In accordance with section 4043(f) of ERISA and Sec.  4901.21(a)(3) 
of this chapter, any information or documentary material that is not 
publicly available and is submitted to PBGC pursuant to subpart B or C 
of this part will not be made public, except as may be relevant to any 
administrative or judicial action or proceeding or for disclosures to 
either body of Congress or to any duly authorized committee or 
subcommittee of the Congress.


Sec.  4043.9  Financial soundness.

    (a) In general. The term ``financially sound'' is defined in 
paragraph (b) of this section for an entity that is a plan sponsor or 
member of a plan sponsor's controlled group and in paragraph (c) of 
this section for a plan.
    (b) Financially sound sponsor or controlled group member. For 
purposes of this part, an entity that is a plan sponsor or member of a 
plan sponsor's controlled group is ``financially sound'' as of any date 
(the determination date) if on the determination date it has adequate 
capacity to meet its obligations in full and on time as evidenced by 
its satisfaction of all of the five criteria described in paragraphs 
(b)(1) through (b)(5) of this section.
    (1) The entity is scored by a commercial credit reporting company 
that is commonly used in the business community, and the score 
indicates a low likelihood that the entity will default on its 
obligations.
    (2) The entity has no secured debt, disregarding leases or debt 
incurred to acquire or improve property and secured only by that 
property.
    (3) For the most recent two fiscal years, the entity has positive 
net income under generally accepted accounting principles (GAAP) or 
International Financial Reporting Standards (IFRS). For purposes of 
this provision, net income of a tax-exempt entity is the excess of 
total revenue over total expenses as required to be reported on 
Internal Revenue Service Form 990.
    (4) For the two-year period ending on the determination date, no 
event described in Sec.  4043.34(a)(1) or (2) (dealing with a default 
on loan with an outstanding balance of $10 million or more) has 
occurred with respect to any loan to the entity, regardless of whether 
reporting was waived under Sec.  4043.34(c).
    (5) For the two-year period ending on the determination date, the 
entity has not failed to make when due any contribution described in 
Sec.  4043.25(a)(1) or (2) (dealing with failure to make required 
minimum funding payments), unless reporting is waived under Sec.  
4043.25(c) for failure to make the contribution.
    (c) Financially sound plan. For purposes of this part, 
``financially sound'' means, with respect to a plan for a plan year, 
that the plan meets the requirements of either paragraph (c)(1) or 
paragraph (c)(2) of this section.
    (1) A plan meets the requirements of this paragraph (c)(1) if, as 
of the last day of the prior plan year, the plan had no unfunded 
benefit liabilities (within the meaning of section 4062(b)(1)(A) of 
ERISA) as determined in accordance with Sec. Sec.  4044.51 through 
4044.57 of this chapter (dealing with valuation of benefits and assets 
in trusteed terminating plans) and Sec.  4010.8(d)(1)(ii) of this 
chapter.
    (2) A plan meets the requirements of this paragraph (c)(2) if for 
the prior plan year, the ratio of the value of the plan's assets as 
determined for premium purposes in accordance with part 4006 of this 
chapter to the amount of the plan's premium funding target as so 
determined was not less than 120 percent.

Subpart B--Post-Event Notice of Reportable Events


Sec.  4043.20  Post-event filing obligation.

    (a) In general. The plan administrator and each contributing 
sponsor of a plan for which a reportable event under this subpart has 
occurred are required to notify PBGC within 30 days after that person 
knows or has reason to know that the reportable event has occurred, 
unless a waiver or extension applies. If there is a change in plan 
administrator or contributing sponsor, the reporting obligation applies 
to the person who is the plan administrator or contributing sponsor of 
the plan on the 30th day after the reportable event occurs.
    (b) Extension for certain events. For the events described in 
Sec. Sec.  4043.23, 4043.27, 4043.29, 4043.31, and 4043.32, if the 
plan's premium due date for the plan year preceding the event year was 
determined under Sec.  4007.11(a)(1) (dealing with small plans) or 
Sec.  4007.11(c) (dealing with new and newly covered plans) of this 
chapter, the notice date is extended until the last day of the 
seventeenth full calendar month that began on or after the first day of 
such preceding plan year (the effective date, in the case of a new 
plan).

[[Page 20062]]

Sec.  4043.21  Tax disqualification and Title I noncompliance.

    (a) Reportable event. A reportable event occurs when the Secretary 
of the Treasury issues notice that a plan has ceased to be a plan 
described in section 4021(a)(2) of ERISA, or when the Secretary of 
Labor determines that a plan is not in compliance with title I of 
ERISA.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.22  Amendment decreasing benefits payable.

    (a) Reportable event. A reportable event occurs when an amendment 
to a plan is adopted under which the retirement benefit payable from 
employer contributions with respect to any participant may be 
decreased.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.23  Active participant reduction.

    (a) Reportable event. A reportable event occurs:
    (1) Single-cause event. When the reductions in the number of active 
participants under a plan due to a single cause--such as a 
reorganization, the discontinuance of an operation, a natural disaster, 
a mass layoff, or an early retirement incentive program--are more than 
20 percent of the number of active participants at the beginning of the 
plan year or more than 25 percent of the number of active participants 
at the beginning of the previous plan year.
    (2) Short-period event. When the reductions in the number of active 
participants under a plan over a short period (disregarding reductions 
reported under paragraph (a)(1) of this section) are more than 20 
percent of the number of active participants at the beginning of the 
plan year, or more than 25 percent of the number of active participants 
at the beginning of the previous plan year. For this purpose, a short 
period is a period of 30 days or less that does not include any part of 
a prior short period for which an active participant reduction is 
reported under this section.
    (3) Attrition event. On the last day of a plan year if the number 
of active participants under a plan are reduced by more than 20 percent 
of the number of active participants at the beginning of the plan year, 
or by more than 25 percent of the number of active participants at the 
beginning of the previous plan year. The reduction may be measured by 
using the number of active participants on either the last day of the 
plan year or the participant count date (as defined in Sec.  4006.2 of 
this chapter) for the next plan year, but in either case is considered 
to occur on the last day of the 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.
    (2) Active participant. ``Active participant'' means a participant 
who--
    (i) Is receiving compensation for work performed;
    (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. The employment relationship referred 
to in this paragraph (b) is between the participant and all members of 
the plan's controlled group.
    (c) Reductions due to cessations and withdrawals. For purposes of 
paragraphs (a)(1) and (a)(2) 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 ERISA section 4062(e) 
or 4063(a), and
    (2) Is timely reported to PBGC under ERISA section 4063(a).
    (d) Waivers--(1) Current-year small plan. Notice under this section 
is waived if the plan had fewer than 100 participants for whom flat-
rate premiums were payable for the plan year preceding the event year.
    (2) Financial soundness. Notice under this section is waived if--
    (i) For each contributing sponsor of the plan, either the sponsor 
or the sponsor's highest level controlled group parent that is a U.S. 
entity is financially sound when the event occurs, or
    (ii) The plan is financially sound for the plan year in which the 
event occurs.
    (e) Extension--attrition event. For an event described in paragraph 
(a)(3) of this section, the notice date is extended until 120 days 
after the end of the event year.


Sec.  4043.24  Termination or partial termination.

    (a) Reportable event. A reportable event occurs when the Secretary 
of the Treasury determines that there has been a termination or partial 
termination of a plan within the meaning of section 411(d)(3) of the 
Code.
    (b) Waiver. Notice is waived for this event.


Sec.  4043.25  Failure to make required minimum funding payment.

    (a) Reportable event. A reportable event occurs when--
    (1) A contribution required under sections 302 and 303 of ERISA or 
sections 412 and 430 of the Code is not made by the due date for the 
payment under ERISA section 303(j) or Code section 430(j), or
    (2) Any other contribution required as a condition of a funding 
waiver is not made when due.
    (b) Alternative method of compliance--Form 200 filed. If, with 
respect to the same failure, a filing is made in accordance with Sec.  
4043.81, that filing satisfies the requirements of this section.
    (c) Waivers--(1) Current-year small plan. Notice under this section 
is waived with respect to a failure to make a required quarterly 
contribution under section 303(j)(3) of ERISA or section 430(j)(3) of 
the Code if the plan had fewer than 100 participants for whom flat-rate 
premiums were payable for the plan year preceding the event year.
    (2) 30-day grace period. Notice under this section is waived if the 
missed contribution is made by the 30th day after its due date.


Sec.  4043.26  Inability to pay benefits when due.

    (a) Reportable event. A reportable event occurs when a plan is 
currently unable or projected to be unable to pay benefits.
    (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), or
    (ii) The need to verify a person's eligibility for benefits; the 
inability to locate a person; or any other administrative delay if the 
delay is for less than the shorter of two months or two full benefit 
payment periods.
    (2) Projected inability. A plan is projected to be unable to pay 
benefits when, as of the last day of any quarter of a plan year, the 
plan's ``liquid assets'' are less than two times the amount of the 
``disbursements from the plan'' for such quarter. ``Liquid assets'' and 
``disbursements from the plan'' have the same meaning as under section

[[Page 20063]]

303(j)(4)(E) of ERISA and section 430(j)(4)(E) of the Code.
    (b) Waiver--plans subject to liquidity shortfall rules. Notice 
under this section is waived unless the reportable event occurs during 
a plan year for which the plan is exempt from the liquidity shortfall 
rules in section 303(j)(4) of ERISA and section 430(j)(4) of the Code 
because it is described in section 303(g)(2)(B) of ERISA and section 
430(g)(2)(B) of the Code.


Sec.  4043.27  Distribution to a substantial owner.

    (a) Reportable event. A reportable event occurs for a plan when--
    (1) There is a distribution to a substantial owner of a 
contributing sponsor of the plan;
    (2) The total of all distributions made to the substantial owner 
within the one-year period ending with the date of such distribution 
exceeds $10,000;
    (3) The distribution is not made by reason of the substantial 
owner's death;
    (4) Immediately after the distribution, the plan has nonforfeitable 
benefits (as provided in Sec.  4022.5 of this chapter) that are not 
funded; and
    (5) Either--
    (i) The sum of the values of all distributions to any one 
substantial owner within the one-year period ending with the date of 
the distribution is more than one percent of the end-of-year total 
amount of the plan's assets (as required to be reported on Schedule H 
or Schedule I to Form 5500) for each of the two plan years immediately 
preceding the event year, or
    (ii) The sum of the values of all distributions to all substantial 
owners within the one-year period ending with the date of the 
distribution is more than five percent of the end-of-year total amount 
of the plan's assets (as required to be reported on Schedule H or 
Schedule I to Form 5500) for each of the two plan years immediately 
preceding the event year.
    (b) Determination rules--(1) Valuation of distribution. The value 
of a distribution under this section is the sum of--
    (i) The cash amounts actually received by the substantial owner;
    (ii) The purchase price of any irrevocable commitment; and
    (iii) The fair market value of any other assets distributed, 
determined as of the date of distribution to the substantial owner.
    (2) Date of substantial owner distribution. The date of 
distribution to a substantial owner of a cash distribution is the date 
it is received by the substantial owner. The date of distribution to a 
substantial owner of an irrevocable commitment is the date on which the 
obligation to provide benefits passes from the plan to the insurer. The 
date of any other distribution to a substantial owner is the date when 
the plan relinquishes control over the assets transferred directly or 
indirectly to the substantial owner.
    (3) Determination date. The determination of whether a participant 
is (or has been in the preceding 60 months) a substantial owner is made 
on the date when there has been a distribution that would be reportable 
under this section if made to a substantial owner.
    (c) Alternative method of compliance--non-increasing annuity. In 
the case of a non-increasing annuity for a substantial owner, a filing 
that satisfies the requirements of this section with respect to any 
payment under the annuity and that discloses the period, periodic 
amount, and duration of the annuity satisfies the requirements of this 
section with respect to all subsequent payments under the annuity.
    (d) Waivers--financial soundness. Notice under this section is 
waived if--
    (1) For each contributing sponsor of the plan, either the sponsor 
or the sponsor's highest level controlled group parent that is a U.S. 
entity is financially sound when the event occurs, or
    (2) The plan is financially sound for the plan year in which the 
event occurs.


Sec.  4043.28  Plan merger, consolidation or transfer.

    (a) Reportable event. A reportable event occurs when a plan merges, 
consolidates, or transfers its assets or liabilities under section 208 
of ERISA or section 414(l) of the Code.
    (b) Waiver. Notice under this section is waived for this event. 
However, notice may be required under Sec.  4043.29 (for a controlled 
group change) or Sec.  4043.32 (for a transfer of benefit liabilities).


Sec.  4043.29  Change in contributing sponsor or controlled group.

    (a) Reportable event. 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. 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 is not reportable if it will result solely 
in a reorganization involving a mere change in identity, form, or place 
of organization, however effected.
    (b) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the person or persons that will cease to be 
members of the plan's controlled group represent a de minimis 10-
percent segment of the plan's old 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 will cease to be a member of the plan's controlled group is 
a foreign entity other than a foreign parent.
    (3) Current-year small plan. Notice under this section is waived if 
the plan had fewer than 100 participants for whom flat-rate premiums 
were payable for the plan year preceding the event year.
    (4) Financial soundness. Notice under this section is waived if--
    (i) For each post-event contributing sponsor of the plan, either 
the sponsor or the sponsor's highest level controlled group parent that 
is a U.S. entity is financially sound when the event occurs, or
    (ii) The plan is financially sound for the plan year in which the 
event occurs.
    (c) Examples. The following examples assume that no waiver applies.
    (1) Controlled group breakup. Plan A's controlled group consists of 
Company A (its contributing sponsor), Company B (which maintains Plan 
B), and Company C. As a result of a transaction, the controlled group 
will break into two separate controlled groups--one segment consisting 
of Company A and the other segment consisting of Companies B and C. 
Both Company A (Plan A's contributing sponsor) and the plan 
administrator of Plan A are required to report that Companies B and C 
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 will leave Plan B's controlled group. Company C is not 
required to report because it is not a contributing sponsor or a plan 
administrator.
    (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

[[Page 20064]]

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 binding contract), 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. If, on the 30th 
day after Company Q and Company R enter into the binding contract, 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 30th day, Company R 
has the reporting obligation.


Sec.  4043.30  Liquidation.

    (a) Reportable event. A reportable event occurs for a plan when a 
member of the plan's controlled group--
    (1) Is involved in any transaction to implement its complete 
liquidation (including liquidation into another controlled group 
member);
    (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 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 is a foreign entity other than a foreign parent.


Sec.  4043.31  Extraordinary dividend or stock redemption.

    (a) Reportable event. A reportable event occurs for a plan when any 
member of the plan's controlled group declares a dividend or redeems 
its own stock and the amount or net value of the distribution, when 
combined with other such distributions during the same fiscal year of 
the person, exceeds the person's net income before after-tax gain or 
loss on any sale of assets, as determined in accordance with generally 
accepted accounting principles, for the prior fiscal year. A 
distribution by a person to a member of its controlled group is 
disregarded.
    (b) Determination rules. For purposes of paragraph (a) of this 
section, the net value of a non-cash distribution is the fair market 
value of assets transferred by the person making the distribution, 
reduced by the fair market value of any liabilities assumed or 
consideration given by the recipient in connection with the 
distribution. Net value determinations should be based on readily 
available fair market value(s) or independent appraisal(s) performed 
within one year before the distribution is made. To the extent that 
fair market values are not readily available and no such appraisals 
exist, the fair market value of an asset transferred in connection with 
a distribution or a liability assumed by a recipient of a distribution 
is deemed to be equal to 200 percent of the book value of the asset or 
liability on the books of the person making the distribution. Stock 
redeemed is deemed to have no value.
    (c) Waivers--(1) Extraordinary dividends and stock redemptions. 
Notice under this section of the reportable event described in section 
4043(c)(11) of ERISA related to extraordinary dividends and stock 
redemptions is waived except to the extent reporting is required under 
this section.
    (2) De minimis 10-percent segment. Notice under this section is 
waived if the person making the distribution is 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.
    (3) Foreign entity. Notice under this section is waived if the 
person making the distribution is a foreign entity other than a foreign 
parent.
    (4) Current-year small plan. Notice under this section is waived if 
the plan had fewer than 100 participants for whom flat-rate premiums 
were payable for the plan year preceding the event year.
    (5) Financial soundness. Notice under this section is waived if--
    (i) For each contributing sponsor of the plan, either the sponsor 
or the sponsor's highest level controlled group parent that is a U.S. 
entity is financially sound when the event occurs, or
    (ii) The plan is financially sound for the plan year in which the 
event occurs.


Sec.  4043.32  Transfer of benefit liabilities.

    (a) Reportable event. A reportable event occurs for a plan when--
    (1) The plan makes a transfer of benefit liabilities to a person, 
or to a plan or plans maintained by a person or persons, that are not 
members of the transferor plan's controlled group; and
    (2) The amount of benefit liabilities transferred, in conjunction 
with other benefit liabilities transferred during the 12-month period 
ending on the date of the transfer, is 3 percent or more of the plan's 
total benefit liabilities. Both the benefit liabilities transferred and 
the plan's total benefit liabilities are to be valued as of any one 
date in the plan year in which the transfer occurs, using actuarial 
assumptions that comply with section 414(l) of the Code.
    (b) Determination rules--(1) Date of transfer. The date of transfer 
is to be determined on the basis of the facts and circumstances of the 
particular situation. For transfers subject to the requirements of 
section 414(l) of the Code, the date determined in accordance with 26 
CFR 1.414(l)-1(b)(11) will be considered the date of transfer.
    (2) Distributions of lump sums and annuities. For purposes of 
paragraph (a) of this section, the payment of a lump sum, or purchase 
of an irrevocable commitment to provide an annuity, in satisfaction of 
benefit liabilities is not a transfer of benefit liabilities.
    (c) Waivers--(1) Current-year small plan. Notice under this section 
is waived if the plan had fewer than 100 participants for whom flat-
rate premiums were payable for the plan year preceding the event year.
    (2) Financial soundness. Notice under this section is waived if, 
for both the transferor plan (if it survives the transfer) and the 
transferee plan--
    (i) For each contributing sponsor of the plan, either the sponsor 
or the sponsor's highest level controlled group parent that is a U.S. 
entity is financially sound when the transfer occurs, or
    (ii) The plan is financially sound for the plan year in which the 
transfer occurs.


Sec.  4043.33  Application for minimum funding waiver.

    A reportable event for a plan occurs when an application for a 
minimum funding waiver for the plan is submitted under section 302(c) 
of ERISA or section 412(c) of the Code.


Sec.  4043.34  Loan default.

    (a) Reportable event. A reportable event occurs for a plan when, 
with respect to a loan with an outstanding balance of $10 million or 
more to a member of the plan's controlled group--
    (1) There is an acceleration of payment or a default under the loan 
agreement, or
    (2) The lender waives or agrees to an amendment of any covenant in 
the loan agreement for the purpose of avoiding a default.
    (b) Notice date. The notice date is 30 days after the person 
required to report knows or has reason to know of an acceleration or 
default under paragraph

[[Page 20065]]

(a)(1) of this section, without regard to the time of any other 
conditions required for the acceleration or default to be reportable.
    (c) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the debtor is not a contributing sponsor of the 
plan and represents 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 the 
debtor is a foreign entity other than a foreign parent.


Sec.  4043.35  Insolvency or similar settlement.

    (a) Reportable event. A reportable event occurs for a plan when any 
member of the plan's controlled group--
    (1) Commences or has commenced against it any insolvency proceeding 
(including, but not limited to, the appointment of a receiver) other 
than a bankruptcy case under the Bankruptcy Code;
    (2) Commences, or has commenced against it, a proceeding to effect 
a composition, extension, or settlement with creditors;
    (3) Executes a general assignment for the benefit of creditors; or
    (4) Undertakes to effect any other nonjudicial composition, 
extension, or settlement with substantially all its creditors.
    (b) Waivers--(1) De minimis 10-percent segment. Notice under this 
section is waived if the person described in paragraph (a) of this 
section is not a contributing sponsor of the plan and represents 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 the 
person described in paragraph (a) of this section is a foreign entity 
other than a foreign parent.

Subpart C--Advance Notice of Reportable Events


Sec.  4043.61  Advance reporting filing obligation.

    (a) In general. Unless a waiver or extension applies with respect 
to the plan, each contributing sponsor of a plan is required to notify 
PBGC no later than 30 days before the effective date of a reportable 
event described in this subpart C if the contributing sponsor is 
subject to advance reporting for the reportable event. If there is a 
change in contributing sponsor, the reporting obligation applies to the 
person who is the contributing sponsor of the plan on the notice date.
    (b) Persons subject to advance reporting. A contributing sponsor of 
a plan is subject to the advance reporting requirement under paragraph 
(a) of this section for a reportable event if--
    (1) On the notice date, neither the contributing sponsor nor any 
member of the plan's controlled group to which the event relates is a 
person subject to the reporting requirements of section 13 or 15(d) of 
the Securities Exchange Act of 1934 or a subsidiary (as defined for 
purposes of the Securities Exchange Act of 1934) of a person subject to 
such reporting requirements; and
    (2) The aggregate unfunded vested benefits, determined in 
accordance with paragraph (c) of this section, are more than $50 
million; and
    (3) The aggregate value of plan assets, determined in accordance 
with paragraph (c) of this section, is less than 90 percent of the 
aggregate premium funding target, determined in accordance with 
paragraph (c) of this section.
    (c) Funding determinations. For purposes of paragraph (b) of this 
section, the aggregate unfunded vested benefits, aggregate value of 
plan assets, and aggregate premium funding target are determined by 
aggregating the unfunded vested benefits, values of plan assets, and 
premium funding targets (respectively), as determined for premium 
purposes in accordance with part 4006 of this chapter for the plan year 
preceding the effective date of the event, of plans maintained (on the 
notice date) by the contributing sponsor and any members of the 
contributing sponsor's controlled group, disregarding plans with no 
unfunded vested benefits (as so determined).
    (d) Shortening of 30-day period. Pursuant to Sec.  4043.3(d), PBGC 
may, upon review of an advance notice, shorten the notice period to 
allow for an earlier effective date.


Sec.  4043.62  Change in contributing sponsor or controlled group.

    (a) Reportable event. Advance notice is required for a change in a 
plan's contributing sponsor or controlled group, as described in Sec.  
4043.29(a).
    (b) Waivers--(1) Small and mid-size plans. Notice under this 
section is waived with respect to a change of contributing sponsor if 
the transferred plan has fewer than 500 participants.
    (2) De minimis 5-percent segment. Notice under this section is 
waived if the person or persons that will cease to be members of the 
plan's controlled group represent a de minimis 5-percent segment of the 
plan's old controlled group for the most recent fiscal year(s) ending 
on or before the effective date of the reportable event.


Sec.  4043.63  Liquidation.

    (a) Reportable event. Advance notice is required for a liquidation 
of a member of a plan's controlled group, as described in Sec.  
4043.30.
    (b) Waiver--de minimis 5-percent segment and ongoing plans. Notice 
under this section is waived if the person that liquidates is a de 
minimis 5-percent segment of the plan's controlled group for the most 
recent fiscal year(s) ending on or before the effective date of the 
reportable event, and each plan that was maintained by the liquidating 
member is maintained by another member of the plan's controlled group.


Sec.  4043.64  Extraordinary dividend or stock redemption.

    (a) Reportable event. Advance notice is required for a distribution 
by a member of a plan's controlled group, as described in Sec.  
4043.31(a).
    (b) Waiver--de minimis 5-percent segment. Notice under this section 
is waived if the person making the distribution is a de minimis 5-
percent segment of the plan's controlled group for the most recent 
fiscal year(s) ending on or before the effective date of the reportable 
event.


Sec.  4043.65  Transfer of benefit liabilities.

    (a) Reportable event. Advance notice is required for a transfer of 
benefit liabilities, as described in Sec.  4043.32(a).
    (b) Waivers--(1) Complete plan transfer. Notice under this section 
is waived if the transfer is a transfer of all of the transferor plan's 
benefit liabilities and assets to one other plan.
    (2) Transfer of less than 3 percent of assets. Notice under this 
section is waived if the value of the assets being transferred--
    (i) Equals the present value of the accrued benefits (whether or 
not vested) being transferred, using actuarial assumptions that comply 
with section 414(l) of the Code; and
    (ii) In conjunction with other assets transferred during the same 
plan year, is less than 3 percent of the assets of the transferor plan 
as of at least one day in that year.
    (3) Section 414(l) safe harbor. Notice under this section is waived 
if the benefit liabilities of 500 or fewer participants are transferred 
and the transfer complies with section 414(l) of the Code using the 
actuarial assumptions prescribed for valuing benefits in trusteed plans 
under Sec.  4044.51-57 of this chapter.

[[Page 20066]]

    (4) Fully funded plans. Notice under this section is waived if the 
transfer complies with section 414(l) of the Code using reasonable 
actuarial assumptions and, after the transfer, the transferor and 
transferee plans are fully funded as determined in accordance with 
Sec. Sec.  4044.51 through 4044.57 of this chapter (dealing with 
valuation of benefits and assets in trusteed terminating plans) and 
Sec.  4010.8(d)(1)(ii) of this chapter.


Sec.  4043.66  Application for minimum funding waiver.

    (a) Reportable event. Advance notice is required for an application 
for a minimum funding waiver, as described in Sec.  4043.33.
    (b) Extension. The notice date is extended until 10 days after the 
reportable event has occurred.


Sec.  4043.67  Loan default.

    Advance notice is required for an acceleration of payment, a 
default, a waiver, or an agreement to an amendment with respect to a 
loan agreement described in Sec.  4043.34(a).


Sec.  4043.68  Insolvency or similar settlement.

    (a) Reportable event. Advance notice is required for an insolvency 
or similar settlement, as described in Sec.  4043.35.
    (b) Extension. For a case or proceeding under Sec.  4043.35(a)(1) 
or (2) that is not commenced by a member of the plan's controlled 
group, the notice date is extended to 10 days after the commencement of 
the case or proceeding.

Subpart D--Notice of Failure to Make Required Contributions


Sec.  4043.81  PBGC Form 200, notice of failure to make required 
contributions; supplementary information.

    (a) General rules. To comply with the notification requirement in 
section 303(k)(4) of ERISA and section 430(k)(4) of the Code, a 
contributing sponsor of a single-employer plan that is covered under 
section 4021 of ERISA and, if that contributing sponsor is a member of 
a parent-subsidiary controlled group, the ultimate parent must complete 
and submit in accordance with this section a properly certified Form 
200 that includes all required documentation and other information, as 
described in the related filing instructions. Notice is required 
whenever the unpaid balance of a contribution payment required under 
sections 302 and 303 of ERISA and sections 412 and 430 of the Code 
(including interest), when added to the aggregate unpaid balance of all 
preceding such payments for which payment was not made when due 
(including interest), exceeds $1 million.
    (1) Form 200 must be filed with PBGC no later than 10 days after 
the due date for any required payment for which payment was not made 
when due.
    (2) If a contributing sponsor or the ultimate parent completes and 
submits Form 200 in accordance with this section, PBGC will consider 
the notification requirement in section 303(k)(4) of ERISA and section 
430(k)(4) of the Code to be satisfied by all members of a controlled 
group of which the person who has filed Form 200 is a member.
    (b) Supplementary information. If, upon review of a Form 200, PBGC 
concludes that it needs additional information in order to make 
decisions regarding enforcement of a lien imposed by section 303(k) of 
ERISA and section 430(k) of the Code, PBGC may require any member of 
the contributing sponsor's controlled group to supplement the Form 200 
in accordance with Sec.  4043.3(d).
    (c) Ultimate parent. For purposes of this section, the term 
``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 4204--VARIANCES FOR SALE OF ASSETS

0
7. The authority citation for part 4204 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1384(c).


Sec.  4204.12  [Amended]

0
8. Section 4204.12 is amended by removing the figures ``412(b)(3)(A)'' 
and adding in their place the figures ``431(b)(3)(A)''.

PART 4206--ADJUSTMENT OF LIABILITY FOR A WITHDRAWAL SUBSEQUENT TO A 
PARTIAL WITHDRAWAL

0
9. The authority citation for part 4206 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3) and 1386(b).


Sec.  4206.7  [Amended]

0
10. Section 4206.7 is amended by removing the figures ``412(b)(4)'' and 
adding in their place the figures ``431(b)(5)''.

PART 4231--MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS

0
11. The authority citation for part 4231 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1411.


Sec.  4231.2  [Amended]

0
12. In Sec.  4231.2, the definitions of ``actuarial valuation'' and 
``fair market value of assets'' are amended by removing the words 
``section 302 of ERISA and section 412 of the Code'' where they appear 
in each definition and adding in their place the words ``section 304 of 
ERISA and section 431 of the Code''.


Sec.  4231.6  [Amended]

0
13. In Sec.  4231.6:
0
a. Paragraph (b)(4)(ii) is amended by removing the figures 
``412(b)(4)'' and adding in their place the figures ``431(b)(5)''.
0
b. Paragraph (c)(2) is amended by removing the words ``section 412 of 
the Code (which requires that such assumptions be reasonable in the 
aggregate)'' and adding in their place the words ``section 431 of the 
Code (which requires that each such assumption be reasonable)''.
0
c. Paragraph (c)(5) is amended by removing the figures ``412'' and 
adding in their place the figures ``431''.

    Issued in Washington, DC, this 25th day of March 2013.
Joshua Gotbaum,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2013-07664 Filed 4-2-13; 8:45 am]
BILLING CODE 7709-01-P