Miscellaneous Corrections, Clarifications, and Improvements, 6046-6064 [2020-01628]

Agencies

• Pension Benefit Guaranty Corporation

[Federal Register Volume 85, Number 23 (Tuesday, February 4, 2020)]
[Rules and Regulations]
[Pages 6046-6064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01628]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4001, 4006, 4010, 4041, 4043, and 4233

RIN 1212-AB34


Miscellaneous Corrections, Clarifications, and Improvements

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) is making 
miscellaneous technical corrections, clarifications, and improvements 
to its regulations on Reportable Events and Certain Other Notification 
Requirements, Annual Financial and Actuarial Information Reporting, 
Termination of Single-Employer Plans, and Premium Rates. These changes 
are a result of PBGC's ongoing retrospective review of the 
effectiveness and clarity of its rules as well as input from 
stakeholders.

DATES: 
    Effective date: This rule is effective on March 5, 2020.
    Applicability dates: Certain amendments made by this rule are 
applicable as described below.
     The changes in 29 CFR 4006.5(f)(3), which deal with 
premium proration for short plan years where the plan's assets are 
distributed in a termination, are applicable to plan years beginning in 
or after 2020.
     The changes in 29 CFR 4010.7(a)(2), Sec.  4010.9(b)(2), 
and Sec.  4010.11(a)(1)(i), (which deal with identifying legal 
relationships of controlled group members, consolidated financial 
statements, and calculating the funding target for purposes of the 4010 
funding shortfall waiver, respectively) are applicable to 4010 filings 
due or amended on or after April 15, 2020. The changes in Sec.  
4010.8(d)(2) for valuing benefit liabilities in cash balance plan 
account conversions are applicable to plan years beginning on or after 
January 1, 2020.
     The changes in 29 CFR 4041.29 are applicable to plan 
terminations for which, as of March 5, 2020, the statutory deadline for 
certifying that plan assets have been distributed as required, has not 
passed.
     The changes in 29 CFR 4043.23, Sec.  4043.27(d)(3), Sec.  
4043.29, Sec.  4043.30, 4043.31(c)(6), Sec.  4043.32(c)(4), and Sec.  
4043.35(b)(3) (which deal with active participant reductions, changes 
in contributing sponsor or controlled group, liquidation, insolvency or 
similar settlement, and the public company waiver) are applicable to 
post-event reports for those reportable events occurring on or after 
March 5, 2020.

FOR FURTHER INFORMATION CONTACT: Stephanie Cibinic 
([email protected]), Deputy Assistant General Counsel for 
Regulatory Affairs, Office of the General Counsel, Pension Benefit 
Guaranty Corporation, 1200 K Street NW, Washington, DC 20005-4026; 202-
229-6352. TTY users may call the Federal relay service toll-free at 
800-877-8339 and ask to be connected to 202-229-6352.

SUPPLEMENTARY INFORMATION: 

Executive Summary

Purpose and Authority

    The purpose of this regulatory action is to make miscellaneous 
technical corrections, clarifications, and improvements to several 
Pension Benefit Guaranty Corporation (PBGC) regulations. These changes 
are based on PBGC's ongoing retrospective review of the effectiveness 
and clarity of its rules, which includes input from stakeholders on 
PBGC's programs.
    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. It also comes from section 4006 of ERISA, which gives PBGC 
the authority to prescribe schedules of premium rates and bases for the 
application of those rates; section 4010 of ERISA, which gives PBGC 
authority to prescribe information to be provided and the timing of 
reports; section 4041 of ERISA (Termination of Single-Employer Plans); 
and section 4043 of ERISA, which gives PBGC authority to define 
reportable events and waive reporting.

Major Provisions

    The major provisions of this rulemaking amend PBGC's regulations 
on:
     Reportable Events and Certain Other Notification 
Requirements, by eliminating possible duplicative reporting of active 
participant reductions, clarifying when a liquidation event occurs and 
providing additional examples for active participant reduction, 
liquidation, and change in controlled group events.
     Annual Financial and Actuarial Information Reporting, by 
eliminating a requirement to submit individual financial information 
for each controlled group member, clarifying reporting waivers, and 
providing

[[Page 6047]]

guidance on assumptions for valuing benefit liabilities for cash 
balance plans.
     Termination of Single-Employer Plans, by providing more 
time to submit a complete PBGC Form 501 in the standard termination 
process.
     Premium Rates, by expressly stating that a plan does not 
qualify for the variable-rate premium exemption for the year in which 
it completes a standard termination if it engages in a spinoff in the 
same year, clarifying the participant count date special rule for 
transactions (e.g., mergers and spinoffs), and modifying the 
circumstances under which the premium is prorated for a short plan year 
resulting from a plan's termination.

Background

    The Pension Benefit Guaranty Corporation (PBGC) administers two 
insurance programs for private-sector defined benefit pension plans 
under title IV of the Employee Retirement Income Security Act of 1974 
(ERISA)--one for single-employer pension plans and one for 
multiemployer pension plans. The amendments proposed in this rulemaking 
apply primarily to the single-employer program.
    This rulemaking arises from PBGC's ongoing retrospective regulatory 
review program to identify and correct unintended effects, 
inconsistencies, inaccuracies, and requirements made irrelevant over 
time. It also responds to suggestions and questions from stakeholders 
that PBGC receives on an ongoing basis and through public outreach, 
such as PBGC's July 2017 ``Regulatory Planning and Review of Existing 
Regulations'' Request for Information.\1\
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    \1\ 82 FR 34619 (July 26, 2017).
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Proposed Rule

    PBGC published a proposed rule on June 27, 2019,\2\ and received 
five written comments. The commenters were supportive of PBGC's 
regulatory review efforts and expressed that the clarifications and 
updates proposed would improve filer compliance and reduce reporting 
burden. Commenters also made helpful observations and suggestions for 
further clarification that PBGC incorporated in the final rule, 
particularly with respect to the regulations on ``Annual Financial and 
Actuarial Information Reporting'' and ``Reportable Events and Certain 
Other Notification Requirements.'' Otherwise the final rule is 
substantially the same as the proposed with minor editorial changes. 
The public comments, PBGC's responses, and the provisions of this final 
rule are discussed with respect to each of the regulations as 
identified below.
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    \2\ 84 FR 30666.
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Terminology--29 CFR Part 4001

    The final rule, like the proposed, amends the general 
``Definitions'' section (29 CFR 4001.2) for terms used in regulations 
under title IV of ERISA to include the terms ``Ultimate parent'' and 
``U.S. entity.'' Those terms are currently defined in PBGC's 
``Reportable Events and Certain Other Notification Requirements'' 
regulation (29 CFR part 4043), ``reportable events regulation,'' at 
Sec. Sec.  4043.2 and 4043.81(c) respectively. Because amendments to 
PBGC's Annual Financial and Actuarial Information Reporting regulation 
(29 CFR part 4010), ``4010 reporting regulation,'' use those same two 
terms, it is appropriate to move them to the common definitions section 
in Sec.  4001.2.

Reportable Events and Certain Other Notification Requirements--29 CFR 
Part 4043

    Section 4043 of ERISA requires that PBGC be notified of the 
occurrence of certain ``reportable events'' that may signal financial 
issues with the plan or a contributing employer. The statute provides 
for both post-event and advance reporting. PBGC's reportable events 
regulation implements section 4043 of ERISA.
    Reportable events include such plan events as missed contributions, 
insufficient funds, large pay-outs, and such sponsor events as loan 
defaults and controlled group changes--events that may present a risk 
to a sponsor's ability to continue to maintain a plan. When PBGC has 
timely information about a reportable event, it can take steps to 
encourage plan continuation. Without timely information about a 
reportable event, PBGC typically learns that a plan is in danger of 
failing only when the time has passed for PBGC to work with the sponsor 
to protect participants and the pension insurance system.
    On September 11, 2015, PBGC issued a final rule,\3\ the ``2015 
Final Rule,'' implementing changes to the reportable events regulation. 
The rule revised longstanding procedures governing when administrators 
and sponsors of single-employer defined benefit pension plans are 
required to report certain events to PBGC. The major changes in the 
2015 Final Rule tied reporting waivers more closely to situations where 
a contributing sponsor is at risk of not being able to continue to 
maintain a plan (i.e., risk of default), revised definitions and 
descriptions of several reportable events, and required electronic 
filing. The goal of the 2015 Final Rule was to ease reporting 
requirements where notice to PBGC is unnecessary but to allow for 
possible earlier PBGC intervention where there is an opportunity to 
help sponsors maintain a plan or otherwise preserve benefits for 
participants.
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    \3\ 80 FR 54980 (Sept. 11, 2015).
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    Since publication of the 2015 Final Rule, PBGC has further 
identified some opportunities to improve the reportable events and 
notification requirements by filling in gaps where guidance is needed, 
simplifying or removing language, codifying policies, providing 
examples, and further reducing unnecessary reporting. Those 
improvements are contained in this final rule.

Company Low-Default-Risk Safe Harbor--Commercial Measures Criterion

    Section 4043.9(e) of the reportable events regulation describes the 
standards for the low-default-risk safe harbor that is available for 
five events.\4\ The low-default-risk safe harbor is available where a 
company that is a contributing sponsor of a plan has adequate capacity 
to meet its obligations as evidenced by satisfying a combination of 
certain criteria. Among the criteria listed, the commercial measures 
criterion requires that the company's probability of default on its 
financial obligations be no more than 4 percent over the next 5 years 
or 0.4 percent over the next year, as ``determined on the basis of 
widely available financial information on the company's credit 
quality.''
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    \4\ The five events are: Active participant reduction, 
substantial owner distributions, controlled group changes, 
extraordinary dividends, and benefit liabilities transfers.
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    The preamble to the 2015 Final Rule made clear that the commercial 
measures criterion was to be met by looking to third-party information 
and not, for example, information that a company itself generates but 
that might be considered ``widely available'' because the information 
is posted on the company's website.\5\ However, the regulatory text in 
the 2015 Final Rule did not explicitly mention third party information. 
To remove any ambiguity, the final rule, like the proposed, amends 
Sec.  4043.9(e)(2)(i) to make clear that a plan must use third-party 
financial information to satisfy the criterion for the company 
financial soundness safe harbor.
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    \5\ See 80 FR 54986.

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[[Page 6048]]

Active Participant Reduction

    Under Sec.  4043.23 of the reportable events regulation, an active 
participant reduction reportable event generally occurs when, as a 
result of a single-cause event or through normal attrition of employees 
(described below), the number of active participants in a plan is 
reduced below 80 percent of the number at the beginning of the year 
(one-year lookback) or below 75 percent of the number at the beginning 
of the prior year (two-year lookback). The regulation distinguishes 
between reductions caused by single-cause events and normal attrition 
events. If a plan loses more than 20 percent of its active participants 
due to a single-cause event, such as a reorganization or layoff, the 
plan administrator and contributing sponsor must file a notice with 
PBGC within 30 days after the reduction, unless a waiver applies. 
Conversely, if the active participant reduction is caused by the normal 
comings and goings of employees or other smaller scale reductions 
(i.e., normal attrition), notice of the event is extended until the 
premium filing due date for the plan year following the event year.
    Since publication of the 2015 Final Rule, PBGC has received 
questions from practitioners, including in a comment to its 2017 RFI on 
Regulatory Planning and Review of Existing Regulations (see the 
``Background'' section of this preamble), about whether a plan 
administrator or contributing sponsor that files a single-cause event 
notice must also file an attrition event notice at a later date due to 
the same active participant reduction. Upon review, PBGC recognizes 
that Sec.  4043.23 could be interpreted in this manner, although this 
was not PBGC's intent.\6\
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    \6\ In PBGC Technical Update 17-1, issued September 15, 2017, 
PBGC provided interim guidance on reporting under Sec.  4043.23 by 
providing an alternative method for determining whether an active 
participant reduction due to attrition must be reported to PBGC 
under Sec.  4043.23(a)(2).
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    To address this issue, the final rule, like the proposed, amends 
Sec.  4043.23(a)(2) to alter the way active participants are counted at 
the end of the plan year when determining whether an attrition event 
has occurred by taking into account the number of active participants 
that had already been the subject of a single-cause event report in the 
same plan year. Thus, to determine whether an attrition event has 
occurred, the number of participants who ceased to be active and were 
covered by a single-cause event reported in the same year are included 
in the year-end count (even though such participants are not active at 
year-end). This new method of counting would prevent duplicative 
reporting by disregarding the earlier single-cause event if already 
reported to PBGC.
    PBGC received one comment stating the rule as proposed could 
suggest that an active participant reduction report due to attrition 
could be required even if an earlier single-cause event had occurred, 
but had not been reported to PBGC (e.g., a reporting waiver applied). 
The commenter recommended clarifying the language in the final rule if 
that wasn't PBGC's intent. It is PBGC's intent that an active 
participant reduction because of a single-cause event can only be 
disregarded for purposes of the attrition count if it was previously 
reported to PBGC. The purpose of the new counting method is to address 
and prevent situations of duplicative reporting, so no change was made 
in the final rule.
    The final rule, like the proposed, also clarifies that multiple 
single-cause events during the plan year must be reported separately. 
Thus, each time a new single-cause event results in an active 
participant reduction greater than 20 percent over the number of active 
participants at the beginning of the plan year, a new Form 10 would be 
required to be filed. PBGC is making this clarification because 
dramatic reductions due to different events in the same year could 
signal that the plan sponsor's ability to maintain the plan is rapidly 
deteriorating.
    The final rule, like the proposed, includes examples showing the 
interplay between single-cause and attrition events, as well as a 
single-cause event that occurs over a period of time.
    The final rule also adopts the proposed rule's non-substantive 
changes to the formula for counting a single-cause event in Sec.  
4043.23(a)(1) that PBGC believes is clearer, more aligned to the 
language in Sec.  4043.23(a)(2) described above, and easier to use.
    To further reduce reporting burden, the final rule, like the 
proposed, eliminates the two-year/75 percent lookback requirement. Two 
commenters to the proposed rule supported this change. With a few 
years' experience under the 2015 Final Rule, PBGC concluded that the 
one-year/80 percent test provides sufficient information and 
undertaking the additional burden of conducting the two-year/75 percent 
lookback is not necessary. To address the statutory requirement, the 
final rule, like the proposed, waives notice of the two-year lookback 
provided under section 4043(c)(3) of ERISA.
    The final rule, like the proposed, also clarifies the definition of 
``active participant'' in Sec.  4043.23(b)(2). That definition provides 
that an active participant for purposes of the active participant 
reduction event means, among other things, a participant who ``is 
receiving compensation for work performed,'' but does not address 
whether a participant is considered active or inactive if the 
participant ceases employment with one of the contributing sponsors of 
the plan, and begins working for another member of the same controlled 
group. The final rule clarifies that a participant is considered 
``active'' for this purpose if the participant receives compensation 
from any member of the plan's controlled group for work performed for 
any member of the plan's controlled group.
    Finally, the existing regulation provides that a reduction in the 
number of active participants may be disregarded if the reduction is 
timely reported to PBGC under section 4063(a) of ERISA, but does not 
specify when such report must be made in relation to a Form 10 report 
under Sec.  4043.23 for the disregard provision to be available. PBGC's 
intent in providing the waiver was to prevent duplicative reporting for 
the same event where notice had previously been filed.\7\ To codify 
PBGC's intent, the final rule, like the proposed, clarifies that 
reporting a reduction in the number of active participants under Sec.  
4043.23 may be disregarded if the reduction is timely reported under 
section 4062(e) and/or 4063(a) of ERISA \8\ before the filing of a 
notice is due under Sec.  4043.23.
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    \7\ See the proposed rule, Reportable Events and Certain Other 
Notification Requirements, 64 FR 20039 (April 3, 2013) for a 
discussion of improving the waiver structure. The final rule was 
published on September 11, 2015 (80 FR 54980).
    \8\ PBGC created a new forms series for reporting under section 
4062(e) of ERISA in September 2019 intended to clarify and simplify 
the process for providing PBGC the required notifications following 
a substantial cessation of operations and election to make 
additional annual contributions to satisfy resulting liability. The 
forms are available on PBGC's website at https://www.pbgc.gov/prac/reporting-and-disclosure/erisa-section-4062-e.
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Inability To Pay Benefits When Due

    In general, a reportable event occurs under Sec.  4043.26 of the 
reportable events regulation 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. The 2015 Final Rule modified 
Sec.  4043.26(a)(1)(iii) so that a plan is not treated as having a 
``current inability'' to pay benefits when due if, among other things, 
the failure to pay is caused solely by ``any other administrative 
delay, including the need to verify a person's eligibility for 
benefits, to the

[[Page 6049]]

extent that the delay is for less than the shorter of two months or two 
full benefit payment periods.'' In modifying the regulation, the 2015 
Final Rule inadvertently imposed a time limit for verification of a 
person's eligibility for benefits. PBGC recognizes that employers may 
need more than the specified time limit to verify a person's 
eligibility for benefits and that such a circumstance is not indicative 
of a possible need for plan termination.
    To resolve this issue, the final rule, like the proposed, amends 
Sec.  4043.26 to clarify that an inability to pay benefits when due 
caused by the need to verify eligibility is not subject to the time 
limit imposed for other administrative delays.

Change in Contributing Sponsor or Controlled Group

    Under Sec.  4043.29 of the reportable events regulation, 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. PBGC had received inquiries about when 
a reportable event is triggered under this section. For instance, 
although the heading of Sec.  4043.29 includes ``a change in 
contributing sponsor,'' the regulatory text does not.
    In response to the questions PBGC had received, the proposed rule 
would have modified the description of the event so that the event and 
the heading were consistent (i.e., to require reporting when a 
transaction results in one or more persons ceasing to be a contributing 
sponsor of a plan, or ceasing to be a member of the plan's controlled 
group (other than by merger involving members of the same controlled 
group).
    PBGC received two comments to this proposal. Both commenters 
suggested that the proposed modification would broaden the event by 
requiring plan administrators and sponsors to report changes in a 
contributing sponsor even where the former contributing sponsor remains 
within the controlled group. One commenter added that this type of 
change in contributing sponsor could be determined through other 
regular PBGC filings, such as annual premium filings. The other 
commenter stated that actuaries, who identify reportable events to plan 
sponsors and administrators, are unlikely to know about contributing 
sponsor changes within a controlled group, so the event could be easily 
missed. The commenters suggested narrowing the proposed event 
definition so that it does not apply to a change in contributing 
sponsor within the controlled group.
    PBGC considered the comments, and after further reviewing risk to 
the insurance program, decided not to adopt the proposed amendment in 
the final rule. Changes in a contributing sponsor to the plan may raise 
concerns, since contributing sponsors support the pension plan. 
However, if a change does not result in a contributing sponsor ceasing 
to be a member of the plan's controlled group,\9\ PBGC believes the 
risk to the plan's participants and to the insurance program doesn't 
rise to the level of a reportable event. All members of a controlled 
group are jointly and severally liable under ERISA and the Code for 
obligations to the pension plan,\10\ and PBGC believes the current 
statutory rules adequately ensure that PBGC has the tools to protect 
the pension plan where the controlled group doesn't change.\11\
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    \9\ 29 CFR 4001.2 provides that ``controlled group'' means, in 
connection with any person, a group consisting of such person and 
all other persons under common control with such person, determined 
under Sec.  4001.3 of this part. For purposes of determining the 
persons liable for contributions under section 412(b)(2) of the Code 
or section 302(b)(2) of ERISA, or for premiums under section 
4007(e)(2) of ERISA, a controlled group also includes any group 
treated as a single employer under section 414(m) or (o) of the 
Code. Any reference to a plan's controlled group means all 
contributing sponsors of the plan and all members of each 
contributing sponsor's controlled group. [emphasis added]
    \10\ 29 U.S.C. 1082(b)(2) and 26 U.S.C. 412(b)(2).
    \11\ Controlled group members are liable under section 4062(a) 
of ERISA for termination liability, section 4068 of ERISA for net 
worth and liens, section 430(k) of the Code for liens for missed 
contributions, and section 4007(e)(2) of ERISA for premium payments.
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    Where there is a transaction that causes the controlled group to 
change, including by a change in contributing sponsor, where one or 
more members ceases to be a member of the controlled group, that event 
must be reported to PBGC under Sec.  4043.29. PBGC clarifies this 
section by adding the parenthetical ``(including any person who is or 
was a contributing sponsor)'' to modify ``one or more persons''' in the 
event definition in paragraph (a)(1). The final rule also changes the 
event heading to read ``Change in controlled group.'' While headings do 
not have the force of law, PBGC believes modifying the heading will 
help minimize confusion.
    The final rule, like the proposed, also revises the examples in 
this section. The first example is revised to provide greater clarity 
on the timing of, and responsibility for, filing a report. Two new 
examples--one regarding dissolution of a controlled group member and 
one describing a merger of controlled group members illustrate some 
common situations implicated by the requirements in Sec.  4043.29.

Liquidation

    Section 4043.30(a)(1) of the reportable events regulation states 
that a reportable event occurs for a plan when a member of the plan's 
controlled group ``is involved in any transaction to implement its 
complete liquidation (including liquidation into another controlled 
group member).'' In discussing this provision with practitioners over 
the years, it has become clear that this event description could 
benefit from greater clarity and precision, particularly with respect 
to what ``involved in any transaction to implement'' a liquidation 
means and when the event occurs. In particular, one such liquidation 
scenario that commonly results in increased risk of plan termination 
involves a company that ceases operations and sells substantially all 
of its assets over a period of time. As described in the preamble to 
the proposed rule, the company continues to sponsor a plan, but there 
is no new business income and any existing company assets may be used 
to cover other financial obligations, such as business wind-down costs 
and settlement of debts with other creditors.
    When a company fails to notify PBGC that the company ceased 
business operations and began a liquidation, PBGC encounters greater 
difficulties in effectively intervening to protect plan assets and 
participant benefits, thereby increasing the potential for loss of 
employer funding for the plan and greater potential strain on the 
pension insurance system. In some cases, PBGC did not become aware of 
the process of liquidation until years later, when the best opportunity 
for protecting plan assets and participant benefits had passed.
    The type of liquidations that concern PBGC may take a myriad of 
forms and be implemented over long periods of time (like the example 
above). To alleviate confusion and improve precision, the final rule, 
like the proposed, clarifies the definition of liquidation to state 
that a liquidation event occurs when a member of the plan's controlled 
group ``resolves to cease all revenue-generating business operations, 
sell substantially all its assets, or otherwise effect or implement its 
complete liquidation (including liquidation into another controlled 
group member) by decision of the member's board of directors (or 
equivalent body such as the managing partners or owners) or other actor 
with the power to authorize such cessation of operations or a 
liquidation.'' Hence, a cessation of operations, such as the

[[Page 6050]]

example above, would trigger a reportable event under Sec.  4043.30.
    The final rule, like the proposed, includes the word ``revenue-
generating'' to qualify a cessation of business operations in 
acknowledgement of the fact that various administrative activities may 
continue during the winding down of a business. The use of the word 
``revenue-generating'' is therefore designed to capture the fact that a 
company is not earning revenue to enable it to support the pension 
plan.
    The decision to liquidate can have serious implications for 
participants and the pension insurance system. Given that PBGC's 
success in such cases is often directly correlated with finding out 
about an event when there is still time to preserve plan assets, PBGC 
believes requiring reporting close to the time a decision to liquidate 
the company is made by the person(s) or body (such as a board of 
directors) that has the authority to make that decision will be most 
protective of participants and the pension insurance system. Since a 
liquidation may or may not involve a formal plan, a written agreement 
to sell assets to a single buyer, or a series of sales over time to 
maximize proceeds, the language in the final rule represents as close 
as possible to a uniform trigger for reporting of liquidation events. 
PBGC believes that in the vast majority of cases, the decision to 
liquidate must go through a formal approval or authorization process. 
Even in cases where the plan sponsor is a company owned by a single 
person and board formalities do not exist, a moment occurs when that 
owner has made the decision to move forward with a liquidation. This 
decision is the common point of departure for liquidations to move 
forward. For reference and further clarity, PBGC included in the final 
rule the three additional examples it proposed regarding a liquidation 
within a controlled group, occurring by cessation of operations, and 
through an asset sale.
    Companies that liquidate as a result of insolvency are required to 
report both events to PBGC under Sec.  [thinsp]4043.30 and Sec.  
[thinsp]4043.35 of the reportable events regulation. However, given the 
similarities between the two events, PBGC believes that reporting to 
PBGC under either section (instead of both) would be sufficient 
notification. Thus, PBGC is adding a waiver to provide relief from the 
possibility of duplicative reporting under a Sec.  [thinsp]4043.30 
liquidation or a Sec.  [thinsp]4043.35 insolvency. The final rule, like 
the proposed, provides parallel waivers in both Sec.  [thinsp]4043.30 
and Sec.  [thinsp]4043.35 to clarify that notice is waived if notice 
has already been provided to PBGC for the same event under the other 
section.

Public Company Extension--Liquidation Events

    PBGC does not intend to compel public company sponsors to disclose 
liquidations on a Form 10 before notifying the public. Thus, the final 
rule includes an extension under Sec.  4043.30(c) to file the post-
event reportable events notice until the earlier of the timely filing 
of a SEC Form 8-K disclosing the event or the issuance of a press 
release discussing it.
    PBGC requested comment on whether the public company extension 
should be available for foreign private issuers and if so, how. For 
example, should the regulation allow an extension to file a reportable 
events notice involving a foreign private issuer that is a plan sponsor 
until the earlier of the timely filing of a SEC Form 6-K disclosing the 
event or the issuance of a press release discussing it, even if the 
country of incorporation for the foreign private issuer would not 
require reporting as timely as is required on a Form 8-K for the same 
event had the issuer been a U.S. filer? \12\
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    \12\ For more information on Securities and Exchange Commission 
filing obligations for foreign private issuers, see the discussion 
at https://www.sec.gov/divisions/corpfin/internatl/foreign-private-issuers-overview.shtml (including Form 6-K under section III.B.3. 
Periodic and Ongoing Reporting Obligations; Other Reports).
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    PBGC received no comments and has determined that the public 
company extension should not be available with respect to a SEC Form 6-
K filing. As noted above, a Form 6-K may not require the same 
disclosure or be filed as soon after an event as a SEC Form 8-K.\13\ 
However, the final rule clarifies that the public company extension is 
available to a foreign private issuer that is a public company where an 
English language press release relating to the event is issued in the 
U.S.
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    \13\ See 17 CFR 240.13a-16, Reports of foreign private issuers 
on Form 6-K (17 CFR 249.306), which provides that the Form 6-K 
report is required to be transmitted promptly after the information 
required by Form 6-K is made public by the issuer, by the country of 
its domicile or under the laws of which it was incorporated or 
organized, or by a foreign securities exchange with which the issuer 
has filed the information.
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    PBGC in this final rule also applies the public company extension 
for liquidations to the parent company of a contributing sponsor within 
the same controlled group. The final rule provides that where a 
contributing sponsor's parent is a public company within the same 
controlled group, and files a Form 8-K or issues a press release 
disclosing the liquidation event, the due date for reporting the event 
to PBGC is extended to the earlier of either of those public 
disclosures. PBGC extended the public company waiver in the same manner 
as described below.

Public Company Waiver

    Reporting for five reportable events \14\ is waived if any 
contributing sponsor of the plan (before the transaction that caused 
the event) is a public company, and the contributing sponsor timely 
files a SEC Form 8-K sufficiently disclosing the event under an item of 
the Form 8-K, except under Item 2.02 (Results of Operations and 
Financial Condition) or in financial statements under Item 9.01 
(Financial Statements and Exhibits). As explained in the 2015 Final 
Rule, PBGC found that SEC filings provide timely and adequate 
information with respect to the five events because these events are 
either required to be reported under a specific Form 8-K item or 
because they are material information for investors. Therefore, PBGC 
didn't need to compel reporting of these events via a Form 10 under the 
reportable events regulation.
---------------------------------------------------------------------------

    \14\ These five post-event filings are (1) active participant 
reduction, (2) distribution to a substantial owner, (3) change in 
contributing sponsor or controlled group, (4) extraordinary dividend 
or stock redemption, and (5) transfer of benefit liabilities.
---------------------------------------------------------------------------

    PBGC requested comment in the proposed rule on whether the public 
company waiver should be expanded to apply in situations where a parent 
company that is not a contributing sponsor to the plan timely files a 
SEC Form 8-K disclosing the event. PBGC received two comments that 
supported expanding the waiver. One stated that if a Form 8-K 
disclosing an event filed by a contributing sponsor is appropriate to 
waive reporting, then substantially the same information disclosed on a 
Form 8-K, but filed by a parent company, should also suffice. The other 
commenter suggested that reportable event notices generally should be 
waived where information required by PBGC is already publicly 
available.
    In the interest of avoiding duplicative reporting where appropriate 
and possible, the final rule expands the public company waiver for the 
five events to apply where the contributing sponsor to the plan or the 
parent company (if not the contributing sponsor) files a Form 8-K 
adequately disclosing the event under an item of the Form 8-K other 
than under Item 2.02 or in financial statements under Item 9.01. Where 
a Form 8-K provides timely and sufficient information to PBGC with 
respect to the reportable event, PBGC sees no reason to make a 
distinction as to who makes the filing

[[Page 6051]]

between the contributing sponsor or the sponsor's parent company.
    In this regard, PBGC is also clarifying in the Form 10 instructions 
what information is sufficient with respect to a particular reportable 
event for the public company waiver to apply. In general, for all five 
events, information should include the plan name, a brief description 
of the pertinent facts relating to each event, and the date and type of 
event being disclosed. As an example of information that would be 
relevant to a specific event, for an active participant reduction 
notice required because of a single-cause event, this information would 
include a statement explaining the cause of the reduction, such as 
facility shutdown or sale, discontinued operations, winding down of the 
company, or reduction in force. Plan administrators and sponsors should 
refer to the revised instructions and description of the public company 
waiver for the information relevant for each of the five events.
    As stated in the DATES section of this preamble, this expansion of 
the public company waiver is applicable to post-event reports for those 
reportable events occurring on or after March 5, 2020.

Annual Financial and Actuarial Information Reporting--29 CFR Part 4010

    Section 4010 of ERISA requires the reporting of actuarial and 
financial information by controlled groups with single-employer pension 
plans that have significant funding problems. It also requires PBGC to 
provide an annual summary report to Congress containing aggregate 
information filed with PBGC under that section. PBGC's ``4010 reporting 
regulation'' (29 CFR part 4010) implements section 4010 of ERISA.

Definitions

    Section 4010.2 of PBGC's 4010 reporting regulation contains the 
terms used in part 4010 and their definitions. The final rule, like the 
proposed, amends this ``Definitions'' section to include the term 
``Foreign entity,'' which is used in amendments to Sec.  4010.9 
describing the financial information a filer is required to provide to 
PBGC. This definition is similar to the definition of ``Foreign 
entity'' in Sec.  4043.2 of PBGC's reportable events regulation. The 
only difference is that ``information year'' replaces ``date the 
reportable event occurs'' in part (3) of the definition so that part 
(3) is satisfied for 4010 purposes if one of three tests are met for 
the fiscal year that includes the information year.
    The final rule, like the proposed, also adds to the list of common 
terms referenced in Sec.  4010.2 the two terms it defines in the 
general definitions section of PBGC's regulations (Sec.  4001.2). As 
explained above, under ``Terminology--29 CFR part 4001,'' those terms 
are ``Ultimate parent,'' and ``U.S. entity.''

Filers

    Section 4010.4 of the 4010 reporting regulation prescribes who is a 
filer. Paragraph (e) of this section explains how reporting is 
applicable to plans to which special funding rules apply. This 
paragraph provides that except in connection with the actuarial 
valuation report, the special funding rules under sections 104 and 
402(b) of the Pension Protection Act of 2006, Public Law 109-280 (PPA) 
(applicable to multiple employer plans of cooperatives and charities, 
and plans of commercial passenger airlines and airline caterers, 
respectively) and under the Cooperative and Small Employer Charity 
Pension Flexibility Act of 2013, Public Law 113-97, are disregarded for 
all other 4010 purposes. The final rule, like the proposed, removes 
from paragraph (e) the reference to PPA section 104 because it has 
expired.

Identifying Information

    Section 4010.7 of the 4010 reporting regulation describes what 
types of identifying information each filer must provide as part of its 
reporting. Paragraph (a)(1) of this section specifies what information 
is required to be included about current members of the filer's 
controlled group, such as identifying the legal relationships of each 
controlled group member to the other members. Filers identify the legal 
relationships by entering a description, e.g., parent, subsidiary, for 
each member. Identifying the legal relationships of controlled group 
members in this way can be burdensome to filers in larger controlled 
groups and does not provide a clear picture of the controlled group 
structure, frustrating the intent of this information.
    The final rule, like the proposed, provides a simple method for 
filers in larger controlled groups to satisfy the requirement in 
paragraph (a) of this section. Instead of manually entering ``parent,'' 
``subsidiary,'' or other relationship, filers with more than 10 
controlled group members would just submit with their filing an 
organizational chart or other diagram showing the relationship of the 
controlled group members to each other.
    Three commenters to the proposed rule suggested that PBGC permit 
filers to include an organizational chart with their filing before the 
final rule is effective, citing the reduced burden and streamlining of 
requirements. Two of the three noted that while many filers have such 
diagrams readily available, some do not, and requested that the 
organizational chart be an optional method for filers to satisfy the 
legal relationship requirement.
    PBGC considered these suggestions to make the chart an optional 
method to satisfy the legal relationship requirement and decided not to 
make the suggested change in the final rule.\15\ Submitting a chart, 
which commenters agreed is something most companies already have, 
reduces burden by streamlining this reporting requirement for most 
filers. While it may add some burden for a minority of filers that do 
not have such diagrams, having controlled group member relationships 
more clearly presented overall benefits filers and PBGC by reducing the 
number of follow up questions to clarify the information as well as 
errors in data entry of information.
---------------------------------------------------------------------------

    \15\ PBGC did not issue guidance at the suggestion of two 
commenters to permit plans to submit a chart before a final rule is 
effective. As noted above, some comments suggested that PBGC change 
its proposed provision, therefore it would not be appropriate to 
issue guidance before publishing a final rule informing the public 
of PBGC's decision and the basis for it.
---------------------------------------------------------------------------

    PBGC also clarifies in the final rule that for purposes of 
determining whether the requirement to provide an organizational chart 
applies, exempt entities are disregarded, (i.e., the requirement 
applies only to controlled groups with more than 10 non-exempt 
entities). For these filers, exempt entities may, but need not be, 
included in the organizational chart.

Plan Actuarial Information

    Section 4010.8 of the 4010 reporting regulation prescribes the plan 
actuarial information a filer must provide. Paragraph (d)(2) of this 
section sets the actuarial assumptions and methods to use for 
determining a plan's benefit liabilities. PBGC had heard from 
practitioners that the assumptions in paragraph (d)(2) as they apply to 
cash balance pension plans are not clear and don't specify how a lump 
sum payment (which is the assumption used by most cash balance plans) 
under such a plan should be converted to an annuity form. The final 
rule provides needed guidance with respect to cash balance plans on 
these assumptions and changes the paragraph's structure to improve 
clarity.
    The final rule, like the proposed, reorganizes Sec.  4010.8(d)(2) 
by combining the actuarial assumptions of this section into a table and 
includes an assumption

[[Page 6052]]

that was inadvertently left out of the table in the proposed rule. The 
table includes the assumptions to use for valuing benefit liabilities 
for cash balance plans. Cash balance plan filers must convert account 
balances to annuity forms of payment using the rules under section 
411(b)(5)(B)(vi) of the Code and 26 CFR 1.411(b)(5)-1(e)(2) that 
specify the interest crediting rate and annuity conversion rate upon 
plan termination. In other words, for purposes of reporting benefit 
liabilities, a cash balance plan would be treated as if terminated and 
lump sums converted to annuity payments using the assumptions in the 
applicable U.S. Department of the Treasury regulation cited above.
    Two commenters asked PBGC to clarify how benefit liabilities should 
be determined for cash balance plans if the annuity conversion basis 
includes a mortality table that is automatically updated each year to 
reflect expected improvements in mortality experience (such as the 
applicable mortality table in section 417(e)(3) of the Code), and notes 
that 26 CFR 1.411(b)(5)-1(e)(2)(iii)(A)(2) provides that the mortality 
table that applies as of the annuity starting date is used if the 
annuity starting date is after the date of plan termination. The 
commenters recommended that PBGC permit use of the mortality table for 
the information year for 4010 reporting.
    PBGC agrees that for 4010 reporting purposes expected improvements 
in mortality experience that apply under a cash balance plan for years 
after the information year need not be reflected in the calculation of 
benefit liabilities. Accordingly, the final rule provides that filers 
may disregard the updates to reflect expected improvements in mortality 
experience that are described in 26 CFR 1.411(b)(5)-1(e)(2)(iii)(A)(2) 
for the purpose of valuing benefit liabilities under Sec.  
4010.8(d)(2).
    The same commenters requested that PBGC make this provision 
applicable for 4010 filings from cash balance plans due for the second 
information year (i.e., 2020) after the year in which the final rule is 
effective. The commenters stated that by the time a final rule is 
effective, filers are likely to have already valued benefit liabilities 
using different assumptions for the 2019 information year. PBGC 
recognizes that some filers may have already begun or completed such 
valuations for the 2019 information year using alternative methods and 
that modifications may need to be made to valuation software to 
implement the final rule. In addition, PBGC recognizes that having the 
new rule apply for all 2020 information year filings may pose problems 
for some filers (e.g., a plan with a 7/1/2019-6/30/2020 plan year 
reported in a filing for a 1/1/2020-12/31/2020 information year). 
Therefore, as stated in the ``Dates'' section above, PBGC is making 
this valuation method applicable to plan years beginning on or after 
January 1, 2020. Cash balance plan filers may use the method prescribed 
in the final rule for valuing benefit liabilities for plan years 
beginning before 2020, regardless of which information year the filing 
is for, but they are not required to do so.
    Another commenter stated that it assumed under the proposed rule 
that pre-retirement mortality could still be disregarded in determining 
benefit liabilities for 4010 purposes if the plan actuary does not use 
an assumption of pre-retirement mortality for funding purposes (as is 
permitted under Treasury regulations).\16\ The commenters requested 
that this be clarified in the final rule. PBGC did not consider this 
comment because for purposes of determining benefit liabilities using 
the assumptions under section 4044 of ERISA and PBGC's regulation (as 
prescribed in section 4010(d) of ERISA), pre-retirement mortality was 
never disregarded.
---------------------------------------------------------------------------

    \16\ See 26 CFR 1.430(d)(1)(f)(2).
---------------------------------------------------------------------------

    The final rule, like the proposed, also includes edits to Sec.  
4010.8(d)(3) to conform citations to ERISA and the Code and includes an 
additional edit to improve readability.

Financial Information

    Section 4010.9 of the 4010 reporting regulation prescribes the 
financial information a filer must submit to PBGC for each member of 
the filer's controlled group. Paragraph (b) of this section permits a 
filer to submit consolidated financial statements if the financial 
information of a controlled group member is combined with the 
information of other members in a consolidated statement. However, if 
consolidated information is reported, paragraph (b)(2) had also 
required filers to report revenues, operating income, and net assets 
for each controlled group member.
    In PBGC's 2017 Request for Information (RFI) on Regulatory Planning 
and Review of Existing Regulations (noted in the ``Background'' section 
of this preamble), a commenter stated that some filers have difficulty 
trying to identify and collect the three types of information under 
Sec.  4010.9(b)(2) for each controlled group member and recommended 
that PBGC modify the regulation to request this detailed information 
only when necessary as part of reviewing the plan and controlled group 
financial statements.
    PBGC believes it can adequately assess risks to participants and 
plans without this detailed information, and with the ``off-the-shelf'' 
information on U.S. entities with foreign parents, as described 
below.\17\ Therefore, PBGC proposed to remove the regulatory 
requirement to provide controlled group member-specific detail. Two 
commenters to the proposed rule supported the removal, and PBGC is 
eliminating the requirement in the final rule.
---------------------------------------------------------------------------

    \17\ In PBGC Technical Update 19-1, issued October 16, 2019, 
PBGC waived the requirement in Sec.  4010.9(b)(2) to provide member-
specific financial information. See https://www.pbgc.gov/prac/other-guidance/4010-financial-information-reporting-waiver.
---------------------------------------------------------------------------

    As noted above, the final rule, like the proposed, also clarifies 
what financial information must be provided for controlled group 
members that are U.S. entities where the ultimate parent is a foreign 
entity. In addition to the consolidated statements for the whole 
controlled group, the filer must submit consolidated (audited or 
unaudited) financial statements on only the U.S. entities that are 
members of the controlled group. If consolidated information is not 
available, the filer must provide separate audited (or unaudited) 
financial statements, or tax returns if financial statements are not 
available, for controlled group members that are U.S. entities.
    Lastly, Sec.  4010.9 allows filers to indicate where PBGC can find 
required financial information that is publicly available (in lieu of 
submitting that information to PBGC). Paragraph (d) of this section on 
``submission of public information'' provides that a filer may submit a 
statement indicating when the financial information was made available 
to the public and where PBGC may obtain it. In PBGC's experience, these 
statements have led to general websites, but not specific web pages 
where the information required to be reported can be found. Therefore, 
the final rule, like the proposed, clarifies that filers must provide 
the exact URL for the web page where public financial information is 
located. The example of a Securities and Exchange Commission filing in 
paragraph (d) is clarified accordingly.

Waivers

    Reporting under section 4010 of ERISA is required if any one of 
three conditions is met. However, PBGC can waive reporting under its 
4010 reporting regulation and does so in three

[[Page 6053]]

situations (with discretion to waive in others) under Sec.  4010.11 of 
the regulation.
    PBGC automatically waives reporting where: (a) The aggregate 
funding shortfall is not in excess of $15 million; (b) the aggregate 
participant count is less than 500; or (c) the sole reason filing would 
otherwise be required is because of either a statutory lien resulting 
from missed contributions over $1 million or outstanding minimum 
funding waivers exceeding the same amount, provided the missed 
contributions or applications for minimum funding waivers were 
previously reported to PBGC.
    PBGC received questions from practitioners about which plans are 
considered when determining if either of the first two waivers apply. 
Practitioners noted that the regulation clearly states that for 
purposes of the below-80 percent 4010 funding target attainment 
percentage (FTAP) triggering event for 4010 reporting (the ``80% 4010 
FTAP Gateway Test'') only plans maintained by the controlled group on 
the last day of the information year are considered, but that the same 
is not clear under Sec.  4010.11 for purposes of determining whether 
either of the first two waivers apply. Without specifying ``on the last 
day of the information year,'' the language of the aggregate funding 
shortfall waiver in paragraph (a) and the waiver for smaller plans in 
paragraph (b) of Sec.  4010.11, could be interpreted to mean that plans 
maintained at any time during the plan year must be included in the 
determination of whether the waiver applies. This is not the 
interpretation that PBGC intended or believes is reasonable in light of 
the standard in the 80% 4010 FTAP Gateway Test. Therefore, the final 
rule, like the proposed, modifies paragraphs (a) and (b) of Sec.  
4010.11 to insert ``on the last day of the information year.''
    In response to practitioner questions, PBGC had addressed in the 
proposed rule when at-risk assumptions (under section 303(i) of ERISA 
and section 430(i) of the Code) are to be used to calculate the funding 
target for purposes of the 4010 funding shortfall and waiving reporting 
where a plan's aggregate funding shortfall is $15 million or less. The 
proposed rule would have revised paragraph (a)(1)(i) of Sec.  4010.11 
to provide that at-risk retirement and form of payment assumptions are 
not required to be used to determine the funding target used to 
calculate the 4010 funding shortfall for a plan unless the plan is in 
``at-risk status'' for funding purposes.
    Commenters suggested that additional guidance is needed with 
respect to how the 4010 funding shortfall should be determined for 
plans in at-risk status. For example, commenters questioned whether the 
phase-in rule provided in section 303(i)(5) of ERISA for plans that 
have been in at-risk status for fewer than five consecutive years 
applies. They suggested other clarifications with respect to the 
participant count date for the $700 per participant load, and the 4 
percent expense load on the not at-risk funding target.
    As the commenters note, PBGC intended for filers to be able to use 
already-calculated amounts for purposes of determining the 4010 funding 
shortfall. But on further review, and in light of the complications 
arising with respect to the at-risk transition rules, PBGC has decided 
to simplify a plan's calculations for determining whether the $15 
million aggregate funding shortfall waiver applies. In this regard, the 
final rule provides that the special rules for at-risk plans in section 
303(i) of ERISA and section 430(i) of the Code are disregarded for 
purposes of determining the funding target underlying the 4010 funding 
shortfall for a plan, even if the plan is in at-risk status. Based on 
PBGC's review of plans in at-risk status, disregarding the at-risk 
rules solely for purposes of determining whether the 4010 funding 
shortfall waiver applies is unlikely to extend the waiver to plans it 
wasn't intended to cover. PBGC believes it can reduce administrative 
burden on plans while maintaining the original intent and integrity of 
this waiver.

Proposed Waiver

    The primary condition triggering reporting is that the 4010 FTAP of 
a plan maintained by the contributing sponsor or any member of its 
controlled group, is less than 80 percent (the ``80% 4010 FTAP Gateway 
Test'' mentioned above). Section 303(d)(2) of ERISA and section 
430(d)(2) of the Code provide that in determining the FTAP of a plan 
for a plan year, plan assets are reduced by the amount of the plan's 
prefunding and funding standard carryover balances. Plan sponsors are 
permitted under section 303(f) of ERISA and section 430(f) of the Code 
to elect to reduce (i.e., waive) some or all of such funding balances, 
and by doing so increase the plan's FTAP.\18\
---------------------------------------------------------------------------

    \18\ See 26 CFR 1.430(f)-1(f)(2) for rules on timing of 
elections.
---------------------------------------------------------------------------

    PBGC is aware of situations where a plan's 4010 FTAP was below 80 
percent but would have been at least 80 percent if such an election had 
been made timely with respect to 4010 reporting. To the extent the plan 
sponsor of these plans are willing to waive funding balances at a later 
date and thereby commit not to use the funding balances to satisfy the 
following year's funding requirement, PBGC believes it would be 
appropriate to waive the 4010 reporting requirement. Therefore, PBGC 
had proposed to create an automatic 4010 reporting waiver where a plan 
sponsor makes a ``late'' election to reduce a funding balance, and the 
plan's FTAP for 4010 purposes would have been greater than or equal to 
80 percent had the election been timely made.
    However, commenters raised issues with how this automatic waiver 
would work in practice. Some stated that such a waiver could be useful, 
but only in limited circumstances, and suggested technical 
clarifications around its application. Others requested clarity 
specifically about what is a ``late election'' to reduce a funding 
balance for 4010 reporting purposes because, for minimum funding 
purposes, ``late elections'' do not take effect for the plan year for 
which they are nominally made. Additional questions concerned whether a 
``late election'' could be made only if the funding balance existed on 
the valuation date for the 4010 FTAP and had not been used against 
required minimum contributions, and the amount by which funding 
balances must be reduced.
    PBGC considered these technical questions and concurs with the 
commenters that, as drafted, the automatic waiver leaves many questions 
unanswered. In light of this, and because it is likely that this 
automatic waiver would help only a few, if any, filers, PBGC is not 
adopting the proposed waiver in this final rule. PBGC encourages the 
plan sponsor of a plan with a 4010 FTAP below 80 percent solely because 
of an administrative error with respect to the timing of a funding 
balance election to request a case-specific waiver pursuant to Sec.  
4010.11(d).
    Commenters suggested that PBGC in the final rule automatically 
waive 4010 reporting in other situations, such as where a plan's 4010 
FTAP would have been 80 percent or more (or the 4010 funding shortfall 
would have been less than $15 million) if not for the timing of a 
contribution that was made too late to count as a prior year 
contribution (i.e., more than 8\1/2\ months after the end of the prior 
plan year), as well as in situations where 4010 reporting is triggered 
by an acquisition. Creating additional reporting waivers is beyond the 
scope of this final rule, and PBGC has not included automatic waivers 
for the suggested situations. Where

[[Page 6054]]

extenuating circumstances come into play (e.g., a contribution was late 
because it was inadvertently wired to the wrong account), plan sponsors 
may request a case-specific waiver pursuant to Sec.  4010.11(d). PBGC 
reviews such requests based on the facts and circumstances of specific 
cases.

Termination of Single-Employer Plans--29 CFR Part 4041

    A single-employer plan covered by PBGC's insurance program may be 
voluntarily terminated only in a standard or distress termination. The 
rules governing voluntary terminations are in section 4041 of ERISA and 
PBGC's regulation on Termination of Single-Employer Plans (29 CFR part 
4041), ``termination of single-employer plans regulation.''

Post-Distribution Certification

    ERISA requires the plan administrator of a plan terminating in a 
standard termination to certify to PBGC that the plan's assets have 
been distributed to pay all benefits under the plan. Certification 
under section 4041(b)(3)(B) of ERISA must be made within 30 days after 
the final distribution of assets is completed.
    Section 4041.29 of the termination of single-employer plans 
regulation requires a plan administrator to submit by the 30-day 
statutory deadline a ``post-distribution certification'' (i.e., PBGC 
Form 501). PBGC has heard from practitioners that it is sometimes 
challenging to collect all of the information required to be submitted 
as an attachment to Form 501 within the prescribed timeframe (e.g., 
documentation that benefit obligations were settled for all 
participants including copies of cancelled checks in the case of lump 
sum distributions) and have asked whether PBGC could extend the 
certification deadline.
    While PBGC cannot extend the statutory deadline for certifications, 
the final rule, like the proposed, amends Sec.  4041.29(a) to provide 
an alternative filing option for plan administrators who need more time 
to complete the PBGC Form 501. This alternative permits a plan 
administrator to submit a completed PBGC Form 501 within 60 days after 
the last distribution date for any affected party if the plan 
administrator certifies to PBGC that all assets have been distributed 
in accordance with section 4044 of ERISA and 29 CFR part 4044 (in an 
email or otherwise, as described in the instructions to the Form 501) 
within 30 days after the last distribution date for any affected party.
    The proposed rule revised Sec.  4041.29(b) and paragraph (d)(2) of 
Sec.  4041.30 (requests for deadline extensions) only to account for 
the proposed changes to Sec.  4041.29(a).
    One commenter expressed support for the additional time to file a 
Form 501 in Sec.  4041.29(a)(2).
    The same commenter suggested that PBGC modify proposed Sec.  
4041.29(b) in the final rule to clarify when PBGC would begin assessing 
penalties for required information not received by the deadlines in 
Sec.  4041.29(a). Penalties under section 4071 of ERISA apply where 
there is a failure to timely provide required information. Thus, 
penalties may be assessed where a filing (e.g., the Form 501) is not 
filed by the stated deadline, or where a filing is submitted on time, 
but some or all required information is omitted or wrong. The commenter 
suggested the language of proposed Sec.  4041.29(b)--that PBGC will 
assess a penalty ``only to the extent a completed Form 501 is filed 
more than 90 days after the distribution deadline (including 
extensions) under Sec.  4041.28(a)''--could imply that PBGC may assess 
a penalty on an incomplete Form 501 before the 90-day threshold is 
reached. The commenter suggested replacing the words ``only to the 
extent'' with the words ``only if'' to clarify that penalties may only 
be assessed if required filings are submitted more than 90 days after 
the distribution deadline.
    PBGC's proposed changes in Sec.  4041.29 to provide an alternative 
filing deadline for the Form 501 were not intended to alter the long-
standing penalty relief provided for in Sec.  4041.29(b). Therefore, 
the final rule modifies the language in paragraph (b) to make clear 
that PBGC will not assess a penalty if the required information (e.g., 
the certification or Form 501) is filed within 90 days after the 
distribution deadline.

Premium Rates--29 CFR Part 4006

    Under sections 4006 and 4007 of ERISA, plans covered by the 
termination insurance program under title IV of ERISA must pay premiums 
to PBGC. Section 4006 of ERISA deals with premium rates, including the 
computation of premiums, and PBGC's regulation on Premium Rates in 29 
CFR part 4006, ``premium rates regulation,'' implements section 4006 of 
ERISA.

Determination of Unfunded Vested Benefits--Plans to Which Special 
Funding Rules Apply

    Section 4006.4 of the premium rates regulation, which provides 
rules for determining unfunded vested benefits, states in paragraph (f) 
that plans subject to special funding rules must disregard those rules 
and determine unfunded vested benefits for premium purposes in the same 
manner as all other plans. Section 4006.4(f) referred to the special 
funding rules under sections 104, 105, 106, and 402(b) of the Pension 
Protection Act of 2006, Public Law 109-280 (PPA), that are applicable 
to multiple employer plans of cooperatives and charities, PBGC 
settlement plans, plans of government contractors, and plans of 
commercial passenger airlines and airline caterers.
    The final rule, like the proposed, removes references to PPA 
sections 104, 105, and 106 because those provisions have expired. It 
adds a reference to the special funding rules of section 306 of ERISA 
and section 433 of the Code that apply to certain multiple-employer 
defined benefit pension plans maintained by certain cooperatives and 
charities, and that were added in 2014.\19\
---------------------------------------------------------------------------

    \19\ Cooperative and Small Employer Charity Pension Flexibility 
Act, Public Law 113-97 (Apr. 7, 2014).
---------------------------------------------------------------------------

Variable-Rate Premium Exemptions; Plans Terminating in Standard 
Terminations

    In general, a single-employer plan pays a variable-rate premium 
(VRP) for the plan year ten-and-a-half months after the plan year 
begins based on the level of the plan's underfunding at the beginning 
of the plan year. In 2014, as part of PBGC's regulatory review process, 
PBGC amended its premium rates regulation to provide for a VRP 
exemption for the year in which a standard termination of a plan is 
completed (``2014 rule''). PBGC adopted this exemption because it did 
not seem appropriate to require a VRP of a terminating plan based on 
the underfunding at the beginning of the year when, by the time the 
premium was due (or shortly thereafter), the sponsor had fully funded 
the plan and distributed all accrued benefits (i.e., purchased 
annuities or paid lump sums) and PBGC coverage had ceased.\20\
---------------------------------------------------------------------------

    \20\ Before 2014, the standard termination VRP exemption in 
Sec.  4006.5(a)(3) was available only if the proposed date of 
termination was in a prior year, but the plan had not yet completed 
the close-out by the end of that year. The 2014 rule expanded that 
exemption to include plans that are able to complete the termination 
within one plan year. See 79 FR 13547, 13553 (March 11, 2014).
---------------------------------------------------------------------------

    PBGC has received questions from practitioners as to whether a plan 
qualifies for this ``final year'' exemption if a large number of 
participants are spun off to a new plan or transferred to another 
existing plan during the year in which the termination is completed. It 
had been suggested that, if the

[[Page 6055]]

exemption applies, a plan sponsor could significantly reduce its VRP 
because the transferor plan would not owe any VRP for its final year 
and the transferee plan would owe, at most, a pro-rata VRP for the plan 
year in which the transfer occurs.\21\ However, the VRP exemption does 
not apply in this type of transaction because the benefits of most of 
the participants who were in the plan at the beginning of the year 
would not be fully funded or paid in full, and for those participants, 
PBGC coverage would still be in effect. PBGC added language to the 2018 
premium filing instructions to highlight to filers that the VRP 
exemption does not apply in such cases.
---------------------------------------------------------------------------

    \21\ If the transferee plan is an existing plan, the additional 
underfunding resulting from the transfer would not be reflected in 
its VRP because underfunding for VRP purposes is measured at the 
beginning of the year. If the transferee plan is a new plan, it 
would owe only a pro-rata VRP (see Sec.  4006.5(f)(1)).
---------------------------------------------------------------------------

    In light of these questions, the final rule, like the proposed, 
amends Sec.  4006.5(a)(3) of the premium rates regulation to expressly 
state that a plan does not qualify for the VRP exemption for the year 
in which a standard termination of the plan is completed if the plan 
engages in a spinoff during the premium payment year. In addition, the 
final rule provides an exception where the spinoff is de minimis 
pursuant to the regulations under section 414(l) of the Code, i.e., 
generally fewer than 3 percent of the assets are spun off. In other 
words, the VRP exemption applies for the year in which a standard 
termination for the plan is completed even if the plan engages in a de 
minimis spinoff during the year.
    To distinguish cases where the termination has not yet been 
completed, the final rule, like the proposed, moves the exemption for 
certain plans in the process of completing a standard termination 
initiated in a prior year from Sec.  4006.5(a)(3) to Sec.  4006.5(a)(4) 
of the premium rates regulation.
    PBGC received three comments with respect to its proposed amendment 
to Sec.  4006.5(a)(3). Two commenters acknowledged that this provision 
is ``clear and workable.'' Three commenters suggested that it 
represents a change to the current provision and requested that it 
apply only prospectively. PBGC disagrees that the amendment represents 
a change to the provision. PBGC believes its interpretation of the 2014 
rule is the only reasonable one. It is based directly on the 
regulation's application to a plan that ``makes a final distribution of 
assets in a standard termination during the premium payment year.'' The 
preamble to the 2014 rule states plainly that the exemption applies 
only when all benefits are fully satisfied in accordance with the 
standard termination rules. A plan that first transfers benefits (and 
associated assets) to another plan before completing a standard 
termination does not make a final distribution of assets in 
satisfaction of all benefits. As explained in the proposed rule, the 
amendment to Sec.  4006.5(a)(3) is merely to expressly state the 
circumstances in which a plan does not qualify for the VRP exemption. 
Therefore, the final rule does not provide an applicability date for 
this provision.

Participant Count Date; Certain Transactions

    To determine the flat-rate premium for a plan year, participants 
are counted on the ``participant count date,'' generally the day before 
the plan year begins. Changes in the participant count during the plan 
year do not affect that year's flat-rate premium. Under the premium 
rates regulation, a special rule (Sec.  4006.5(e)) shifts the 
participant count date to the first day of the plan year in specified 
situations that take place at the beginning of a plan year so that the 
change in participant count is recognized immediately rather than a 
year later (i.e., the ``special rule''). Situations where this special 
rule applies include:
     The first plan year a plan exists.
     A plan year in which a plan is the transferor plan in the 
case of a beginning of year non-de minimis spinoff.
     A plan year in which a plan is the transferee plan in the 
case of a beginning of year non-de minimis merger.
    For example, consider a scenario where Plan A, a calendar year 
plan, spins off a group of participants (and the corresponding assets 
and liabilities) into new Plan B at the beginning of Plan A's 2018 plan 
year (assume the spinoff is not de minimis). Because of the special 
rule, both plans count participants on the first day of the year which 
means Plan B owes a 2018 flat-rate premium on behalf of the transferred 
participants, but Plan A does not.
    PBGC received questions from practitioners as to whether the 
special rule applies to the transferee plan in a situation where spun 
off participants are transferred to an existing plan instead of a new 
plan. These practitioners believed the premium filing instructions 
could be interpreted to provide that the special rule does not apply to 
the transferee plan in this plan-to-plan transfer.
    As explained in the proposed rule, that interpretation would lead 
to an inconsistent result. For example, assume that instead of spinning 
off participants into a new plan, Plan A (in the above example) had 
transferred those participants to a pre-existing Plan C (also a 
calendar year plan) at the beginning of Plan C's 2018 plan year. As 
noted above, the special rule would apply to Plan A, so Plan A would 
not include the transferred participants in its participant count. But, 
if the special rule does not apply to Plan C (i.e., to the transferee 
plan), Plan C would count participants on the day before the transfer. 
That would mean that neither Plan A nor Plan C would owe flat-rate 
premiums on behalf of the transferred participants for 2018.
    Therefore, PBGC is adopting in the final rule its proposed 
clarifications to the special rule in paragraph (e) of Sec.  4006.5 to 
clarify that, in such plan-to-plan transfers, the participant count 
date of the transferee plan shifts to the first day of its plan year. 
Doing so makes clear that the transferee plan, in such a transaction, 
owes flat-rate premiums on behalf of the transferred participants. This 
provision generally operates where both plans have the same plan year 
and the transfer takes place at the beginning of the plan year.
    As noted above, the special rule also applies where a plan is the 
transferee plan in the case of a beginning-of-year non-de minimis 
merger. For example, if two calendar year plans merge at the beginning 
of 2018, the surviving plan's participant count date is shifted to 
January 1, 2018. As a result, the surviving plan owes 2018 flat-rate 
premiums on behalf of the participants who were previously in the 
transferor plan.
    PBGC exempted de minimis mergers from this special rule because 
PBGC felt the burden resulting from shifting the participant count date 
was not justified in the case of a de minimis merger because the number 
of participants for whom neither plan would owe a flat-rate premium 
would be relatively small (i.e., the regulations under section 414(l) 
of the Code provide that a merger is de minimis where the liabilities 
of the smaller plan are less than 3 percent of the assets of the larger 
plan).
    PBGC received questions from practitioners as to whether this de 
minimis exemption applies where the surviving plan is the smaller plan. 
It had been suggested that, if the exemption applies, a plan sponsor 
could avoid paying flat-rate premiums on behalf of the large plan 
participants simply by merging it into a much smaller plan. In one 
case, a consultant reported that a plan sponsor was considering a 
strategy to establish a new plan covering only a

[[Page 6056]]

few employees so that it could merge a large plan into the new small 
plan at the beginning of the next year and avoid paying flat-rate 
premiums on behalf of the large plan participants. These results are 
inconsistent with the intent of the special rule and de minimis 
exception.
    The final rule, like the proposed, clarifies that the special rule 
in paragraph (e) of Sec.  4006.5 applies in the case of a beginning-of-
year merger where a large plan is merged into a smaller plan (i.e., the 
exception for de minimis mergers does not apply if the transaction is 
structured such that the smaller plan is the surviving plan).
    PBGC received four comments with respect to the proposed provisions 
clarifying the special participant count date rule. While the 
commenters appreciated clarification of the rules, they believed the 
clarifications represented changes and should be applied only 
prospectively. Two of these commenters stated that some sponsors had 
completed transactions (e.g., plan mergers) in reliance on their 
interpretation of how the special participant count date rules work. 
PBGC considered these comments. However, the provisions do not affect 
whether a transaction was (or was not) permissible. Rather, they simply 
set forth when the special rules apply in determining the participant 
count date. And as explained in the proposed rule, the provisions are 
merely clarifications of the existing special rules and as such, the 
final rule does not provide an applicability date for these provisions.
    Two commenters recommended that PBGC eliminate the exceptions to 
the special rule for de minimis transactions (e.g., spinoffs, mergers) 
and three commenters recommended that the special rule, which currently 
applies only to transactions that occur at the beginning of a plan 
year, also apply to transactions that occur on the last day of the 
prior plan year. PBGC considered the comments and believes it would not 
be appropriate to implement either change without providing an 
opportunity for public comment. PBGC believes both suggestions merit 
consideration and intends to do additional research and analysis to 
determine if such changes are warranted and/or appropriate. In 
particular, PBGC is concerned that eliminating the de minimis exception 
could result in some plans owing larger premiums than under the current 
rule.

Premium Proration for Certain Short Plan Years

    The special rule in Sec.  4006.5(f) of PBGC's premium rates 
regulation allows plan administrators to pay prorated VRP and flat-rate 
premiums for a short plan year and lists the four circumstances that 
would create a short plan year. One of those circumstances is where the 
plan's assets are distributed pursuant to the plan's termination. For 
example, if a plan distributed its assets in a standard termination 
with a final short plan year covering nine months (i.e., 75 percent of 
a full year), the calculated premium would be reduced by 25 percent.
    This rule makes sense where all accrued benefits are distributed 
(i.e., purchased annuities or paid lump sums) and PBGC's coverage ends. 
However, where a completed termination is preceded in the same year by 
a spinoff of a group of the plan's participants to another plan, the 
transferred participants remain in the insurance program and PBGC 
coverage of their benefits is still in effect. It has been suggested 
that a plan sponsor could use this rule to significantly reduce its 
premium obligation for the year simply by transferring most of its 
participants to another plan early in the plan year and then 
terminating what's left of the transferor plan (and, thus, owing only a 
pro-rata premium for its final short plan year).
    In view of these considerations, the final rule, like the proposed, 
changes the circumstances under which the premium is prorated for a 
short plan year resulting from a plan's termination to exclude 
situations where the plan engages in a spinoff in that same year, 
unless the spinoff is de minimis pursuant to the regulations under 
section 414(l) of the Code, (i.e., generally fewer than 3 percent of 
the assets are spun off). As stated in the Dates section above, this 
provision is applicable for plan years beginning in or after 2020. In 
addition, the final rule, like the proposed, replaces the words 
``excess assets'' in Sec.  4006.5(f)(3) with ``residual assets under 
section 4044(d) of ERISA'' to be consistent with the statutory 
language.

Miscellaneous

    This final rule corrects and updates the phone numbers for the PBGC 
multiemployer program division contact and the PBGC Participant and 
Plan Sponsor Advocate in the model notices contained in Appendix A to 
part 4233, the Partitions of Eligible Multiemployer Plans regulation.

Executive Orders 12866, 13563, and 13771

    The Office of Management and Budget (OMB) has determined that this 
rulemaking is not a ``significant regulatory action'' under Executive 
Order 12866. Accordingly, this final rule is exempt from Executive 
Order 13771, and OMB has not reviewed it under Executive Order 12866.
    Executive Order 12866 directs 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).
    Although this is not a significant regulatory action under 
Executive Order 12866, PBGC has examined the economic and policy 
implications of this final rule. Most of the final rule amendments 
clarify regulations and remove outdated provisions, which are neutral 
in their impact. A few would minimally affect the time and cost of 
reporting for plans and sponsors, which is discussed in the Paperwork 
Reduction Act section below.
    Section 6 of Executive Order 13563 requires agencies to rethink 
existing regulations by periodically reviewing their regulatory program 
for rules that ``may be outmoded, ineffective, insufficient, or 
excessively burdensome.'' These rules should be modified, streamlined, 
expanded, or repealed as appropriate. PBGC has identified technical 
corrections, clarifications, and improvements to some of its 
regulations and has included those amendments in this final rule. PBGC 
expects to propose periodic rulemakings of this nature to revise its 
regulations as necessary for minor technical corrections and 
clarifications to rules.

Regulatory Flexibility Act

    The Regulatory Flexibility Act \22\ 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 final rule 
is not likely to have a significant economic impact on a substantial 
number of small entities, section 604 of the Regulatory Flexibility Act 
requires that the agency present a final regulatory flexibility 
analysis at the time of the publication of the final rule describing 
the impact of the rule on small entities and steps taken to minimize 
the impact. Small entities include small businesses, organizations, and 
governmental jurisdictions.
---------------------------------------------------------------------------

    \22\ 5 U.S.C. 601 et seq.

---------------------------------------------------------------------------

[[Page 6057]]

Small Entities

    For purposes of the Regulatory Flexibility Act requirements with 
respect to this final rule, PBGC considers a small entity to be a plan 
with fewer than 100 participants. This is substantially the same 
criterion PBGC uses in other regulations \23\ and is consistent with 
certain requirements in title I of ERISA \24\ and the Code,\25\ as well 
as the definition of a small entity that the Department of Labor has 
used for purposes of the Regulatory Flexibility Act.\26\
---------------------------------------------------------------------------

    \23\ See, e.g., special rules for small plans under part 4007 
(Payment of Premiums).
    \24\ See, e.g., section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \25\ See, e.g., section 430(g)(2)(B) of the Code, which permits 
single-employer plans with 100 or fewer participants to use 
valuation dates other than the first day of the plan year.
    \26\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
---------------------------------------------------------------------------

    Thus, PBGC believes that assessing the impact of this final rule 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 \27\ under the Small Business Act. Therefore, PBGC 
requested comments on the appropriateness of the size standard used in 
evaluating the impact of the amendments in this proposed rule on small 
entities. PBGC received no comments on this point.
---------------------------------------------------------------------------

    \27\ See, 13 CFR 121.201.
---------------------------------------------------------------------------

Certification

    Based on its definition of small entity, PBGC certifies under 
section 605(b) of the Regulatory Flexibility Act that the amendments in 
this final rule would not have a significant economic impact on a 
substantial number of small entities. As explained above under 
``Executive Orders 12866, 13563, and 13771,'' some of the amendments 
reduce requirements for plans and sponsors, including for small plans, 
resulting in administrative savings, or have a very minimal cost impact 
as discussed in the Paperwork Reduction Act section below. Most of the 
amendments clarify regulations and remove outdated provisions, which 
are neutral in their impact. Accordingly, as provided in section 605 of 
the Regulatory Flexibility Act, sections 603 and 604 do not apply.

Paperwork Reduction Act

    PBGC is submitting changes to the information requirements under 
this final rule to the Office of Management and Budget (OMB) for review 
and approval under the Paperwork Reduction Act (PRA). An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number. Most of the changes PBGC is making are revisions to 
filing instructions, where necessary or helpful, to incorporate the 
clarifications in the final rule. Therefore, PBGC estimates the final 
rule would have a minimal impact on the hour and cost burden of 
reporting as described below.

Reportable Events Regulation

    The collection of information in part 4043 is approved under 
control number 1212-0013 (expires February 28, 2022). The current 
information collection requirements in part 4043 have an estimated 
annual hour burden of approximately 1,855 hours and a cost burden of 
$439,500. PBGC's instructions for Form 10 and Form 10-Advance are being 
updated to describe, as necessary or helpful, the clarifications made 
by the final rule and for other informational purposes. The 
clarifications incorporated in the instructions would replace or 
augment existing language but would not create additional filing 
burden. However, the final rule would reduce reporting of active 
participant reduction events by eliminating the two-year lookback 
requirement. PBGC estimates that the approximately 180 filings it 
receives for active participant reduction events per year would be 
reduced by approximately 38 percent. Therefore, PBGC estimates that the 
total average annual hour burden under the final rule would be 
approximately 1,641 hours and the cost burden $388,890.

Annual Financial and Actuarial Information Reporting Regulation

    The collection of information in part 4010 is approved under 
control number 1212-0049 (expires May 31, 2022). The current 
information collection requirements have an estimated annual hour 
burden of 532 hours and a cost burden of $12,871,040.
    PBGC's 4010 reporting e-filing instructions are being updated, as 
necessary or helpful, to describe the clarifications made by the final 
rule. The clarifications incorporated in the instructions replace 
existing language, and therefore would not create additional filing 
burden in these instances. With respect to the requirement in Sec.  
4010.7 to submit an organizational chart or other diagram in place of 
information describing legal relationships of controlled group members, 
PBGC expects this change will reduce burden for most filers, but may 
increase burden for filers that do not have an organizational chart 
readily available. Overall, PBGC estimates that this requirement will 
not change the aggregate hour and cost burden.
    However, PBGC estimates that the final rule would reduce filer 
burden by eliminating the requirement of Sec.  4010.9(b)(2) to provide 
the revenues, operating income, and net assets for each controlled 
group member if a filer is submitting consolidated financial 
information. (Former Question 2 on Schedule F, Section II, of the e-
4010 module of PBGC's e-filing portal.) PBGC estimates that 
approximately 62 percent of a projected 560 filers per year (347.2 
filers) are required to file Question 2 financial information. Based on 
estimates of the average hour and cost burden of this requirement, PBGC 
estimates that by eliminating it, the final rule would reduce total 
average annual filer burden by approximately 17 hours and $7,742. 
Therefore, PBGC estimates the aggregate annual hour burden under the 
final rule would be approximately 515 hours and the cost burden 
$12,863,298.

Termination of Single-Employer Plans Regulation

    The collection of information in part 4041 is approved under 
control number 1212-0036 (expires March 31, 2021). The current 
information collection requirements in part 4041 (which includes 
standard and distress terminations) have an estimated annual hour 
burden of 29,890 hours and a cost burden of $5,963,400.
    The final rule would revise Sec.  4041.29 to provide plan 
administrators of plans terminating in a standard termination the 
option of more time to complete a PBGC Form 501. PBGC estimates up to 5 
minutes of time--for those plan administrators who would choose this 
option--to review the instructions and send an email to PBGC's standard 
termination filings email address to certify that distributions have 
been made timely. There is no change in the information requirements 
contained in the PBGC Form 501.
    PBGC estimates that approximately 25 percent of standard 
termination filers per year would choose this option. With a projected 
average increase in standard terminations over the current inventory, 
the total additional average hourly burden for this information 
collection

[[Page 6058]]

would be approximately 31 hours (25 percent of 1,503 plans = 375 plans 
x 5 minutes per plan (0.083 hours) = 31 hours). While PBGC projects 
this minimal additional time to review and send an email under the new 
option, overall compliance for plan administrators would be eased by 
extending the time to file.

Premium Rates Regulation

    The collection of information with respect to premiums is approved 
under control number 1212-0009 (expires February 28, 2022). PBGC's 
Comprehensive Premium Filing Instructions are being updated to reflect 
the changes made by the final rule to the premium provisions. The 
updates incorporated in the instructions replace existing language and 
therefore would not create additional filing burden.

List of Subjects

29 CFR Part 4001

    Business and industry, Organization and functions (Government 
agencies), Pension insurance, Pensions, Small businesses.

29 CFR Part 4006

    Employee benefit plans, Pension insurance.

29 CFR Part 4010

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

29 CFR Part 4041

    Employee benefit plans, Pension insurance, Pensions.

29 CFR Part 4043

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

29 CFR Part 4233

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

    For the reasons stated in the preamble, PBGC amends 29 CFR parts 
4001, 4006, 4010, 4041, 4043, and 4233 as follows:

PART 4001--TERMINOLOGY

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

    Authority:  29 U.S.C. 1301, 1302(b)(3).


0
2. Amend Sec.  4001.2 by adding in alphabetical order definitions for 
``U.S. entity'' and ``Ultimate parent'' to read as follows:


Sec.  4001.2   Definitions

* * * * *
    U.S. entity means an entity subject to the personal jurisdiction of 
the U.S. district courts. 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 4006--PREMIUM RATES

0
3. The authority citation for part 4006 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1306, 1307.


0
4. Amend Sec.  4006.4 by revising paragraph (f) to read as follows:


Sec.  4006.4   Determination of unfunded vested benefits.

* * * * *
    (f) Plans to which special funding rules apply. The following 
statutory provisions are disregarded for purposes of determining 
unfunded vested benefits (whether the standard premium funding target 
or the alternative premium funding target is used):
    (1) Section 402(b) of the Pension Protection Act of 2006, Public 
Law 109-280, dealing with certain frozen plans of commercial passenger 
airlines and airline caterers.
    (2) Section 306 of ERISA and section 433 of the Code, dealing with 
certain defined benefit pension plans maintained by certain 
cooperatives and charities.

0
 5. In Sec.  4006.5:
0
 a. Revise paragraphs (a) introductory text and (a)(3);
0
b. Redesignate paragraph (a)(4) as paragraph (a)(5);
0
c. Add a new paragraph (a)(4); and
0
 d. Revise paragraphs (e) and (f)(3).
    The revisions and addition read as follows:


Sec.  4006.5   Exemptions and special rules.

    (a) Variable-rate premium exemptions. A plan described in any of 
paragraphs (a)(1) through (5) of this section is not required to 
determine or report its unfunded vested benefits under Sec.  4006.4 and 
does not owe a variable-rate premium under Sec.  4006.3(b).
* * * * *
    (3) Certain plans completing a standard termination. A plan is 
described in this paragraph if it--
    (i) Makes a final distribution of assets in a standard termination 
during the premium payment year, and
    (ii) Did not engage in a spinoff during the premium payment year, 
unless the spinoff is de minimis pursuant to the regulations under 
section 414(l) of the Code.
    (4) Certain plans in the process of completing a standard 
termination initiated in a prior year. A plan is described in this 
paragraph if --
    (i) The plan administrator has issued notices of intent to 
terminate the plan in a standard termination in accordance with section 
4041(a)(2) of ERISA;
    (ii) The proposed termination date set forth in the notice of 
intent to terminate is before the beginning of the premium payment 
year; and
    (iii) The plan ultimately makes a final distribution of plan assets 
in conjunction with the plan termination.
* * * * *
    (e) Participant count date; certain transactions. (1) The 
participant count date of a plan described in paragraph (e)(2) or (3) 
of this section is the first day of the premium payment year.
    (2) With respect to a transaction where some, but not all, of the 
assets and liabilities of one plan (the ``transferor plan'') are 
transferred into another plan (the ``transferee plan'')--
    (i) The transferor plan if the spinoff is not de minimis and is 
effective at the beginning of the transferor plan's premium payment 
year; and
    (ii) The transferee plan if the transferor plan meets the criteria 
in paragraph (e)(2)(i) of this section and the transfer occurs at the 
beginning of the transferee plan's premium payment year.
    (3) With respect to a merger effective at the beginning of the 
premium payment year, the transferee plan if--
    (i) The merger is not de minimis; or
    (ii) The assets of the transferee plan immediately before the 
merger are less than the total assets transferred to the transferee 
plan in the merger.
    (4) For purposes of this paragraph (e), ``de minimis'' has the 
meaning described in regulations under section 414(l) of the Code (for 
single-employer plans) or in part 4231 of this chapter (for 
multiemployer plans).
    (f) * * *
    (3) Distribution of assets. The plan's assets (other than any 
residual assets under section 4044(d) of ERISA) are distributed 
pursuant to the plan's termination, but only if the plan did not engage 
in a spinoff during the plan year, unless the spinoff is de minimis 
pursuant to the regulations under section 414(l) of the Code.
* * * * *

PART 4010--ANNUAL FINANCIAL AND ACTUARIAL INFORMATION REPORTING

0
6. The authority citation for part 4010 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1310.


[[Page 6059]]



0
7. In Sec.  4010.2:
0
 a. Amend the introductory text by removing ``and'' before 
``unreduced'' and adding at the end of the sentence ``, ultimate 
parent, and U.S. entity''; and
0
b. Add in alphabetical order a definition for ``Foreign entity''.
    The addition reads as follows:


Sec.  4010.2  Definitions.

* * * * *
    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 information year, 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 income tax returns for 
employee withholding.
* * * * *

0
 8. Amend Sec.  4010.4 by revising paragraph (e) to read as follows:


Sec.  4010.4   Filers.

* * * * *
    (e) Certain plans to which special funding rules apply. Except for 
purposes of determining the information to be submitted under Sec.  
4010.8(h) (in connection with the actuarial valuation report), the 
following statutory provisions are disregarded for purposes of this 
part:
    (1) Section 402(b) of the Pension Protection Act of 2006, Public 
Law 109-280, dealing with certain frozen plans of commercial passenger 
airlines and airline caterers.
    (2) Section 306 of ERISA and section 433 of the Code, dealing with 
certain defined benefit pension plans maintained by certain 
cooperatives and charities.

0
 9. Amend Sec.  4010.7 by revising paragraph (a) to read as follows:


Sec.  4010.7   Identifying information.

    (a) Filers. Each filer is required to provide, in accordance with 
the instructions on PBGC's website, https://www.pbgc.gov, the following 
identifying information with respect to each member of the filer's 
controlled group (excluding exempt entities)--
    (1) Current members; individual member information. For each entity 
that is a member of the controlled group as of the end of the filer's 
information year--
    (i) The name, address, and telephone number of the entity;
    (ii) The nine-digit Employer Identification Number (EIN) assigned 
by the IRS to the entity (or if there is no EIN for the entity, an 
explanation); and
    (iii) If the entity became a member of the controlled group during 
the information year, the date the entity became a member of the 
controlled group.
    (2) Current members; legal relationships of members. If, as of the 
end of the filer's information year, the filer's controlled group 
consists of--
    (i) Ten or fewer members (excluding exempt entities), the legal 
relationship of each entity to the plan sponsor (for example, parent, 
subsidiary).
    (ii) More than ten members (excluding exempt entities), an 
organizational chart or other diagram showing the members of the 
filer's controlled group as of the end of the filer's information year 
and the legal relationships of the members to each other. Exempt 
entities may, but need not, be included in this organizational chart or 
diagram.
    (3) Former members. For any entity that ceased to be a member of 
the controlled group during the filer's information year, the date the 
entity ceased to be a member of the controlled group and the 
identifying information required by paragraph (a)(1) of this section as 
of the day before the entity left the controlled group.
* * * * *

0
 10. Amend Sec.  4010.8 by revising paragraphs (d)(2) and (3) to read 
as follows:


Sec.  4010.8   Plan actuarial information.

* * * * *
    (d) * * *
    (2) Actuarial assumptions and methods. The value of benefit 
liabilities must be determined using the rules in paragraphs (d)(2)(i) 
through (iii) of this section.
    (i) Benefits to be valued. Benefits to be valued include all 
benefits earned or accrued under the plan as of the end of the plan 
year ending within the information year and other benefits payable from 
the plan including, but not limited to, ancillary benefits and 
retirement supplements, regardless of whether such benefits are 
protected by the anti-cutback provisions of section 411(d)(6) of the 
Code.
    (ii) Actuarial assumptions. The value of benefit liabilities must 
be determined using the actuarial assumptions described in the 
following table:

                     Table 1 to Paragraph (d)(2)(ii)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Assumptions:                  As prescribed in accordance with
    Interest................  Sec.   4044.52(a).
    Form of payment.........  Sec.   4044.51.
    Expenses................  Sec.   4044.52(d).
Decrements
     Mortality......  Sec.   4044.53.
     Retirement.....  Sec.  Sec.   4044.55-4044.57.
------------------------------------------------------------------------
     Other            Either Option 1 or
     decrements (e.g.,         Option 2--
     turnover, disability).
                              Option 1............  Option 2
                              Disregard (i.e.,      Use the same
                               assume 0%             assumptions as used
                               probability of        to determine the
                               decrements other      minimum required
                               than mortality or     contribution under
                               retirement            section 303 of
                               occurring).           ERISA and section
                                                     430 of the Code for
                                                     the plan year
                                                     ending within the
                                                     filer's information
                                                     year.
                                                    If there is no
                                                     distinction between
                                                     termination and
                                                     retirement
                                                     assumptions,
                                                     reflect only rates
                                                     for ages before the
                                                     Earliest PBGC
                                                     Retirement Date (as
                                                     defined in Sec.
                                                     4022.10 of this
                                                     chapter).

[[Page 6060]]

 
Cash balance plan account     Section 204(b)(5)(B)(vi) of ERISA and
 conversions.                  section 411(b)(5)(B)(vi) of the Code
                               (which deal with the interest crediting
                               rate and annuity conversion rates), as if
                               the plan terminated on the last day of
                               the plan year ending within the filer's
                               information year. Expected improvements
                               in mortality experience that apply under
                               the plan for periods after the
                               information year may be disregarded for
                               valuing benefit liabilities for 4010
                               reporting purposes.
------------------------------------------------------------------------
Other (e.g., cost-of-living   Use the same assumptions as used to
 increases, marital status).   determine the minimum required
                               contribution under section 303 of ERISA
                               and section 430 of the Code for the plan
                               year ending within the filer's
                               information year.
------------------------------------------------------------------------

    (iii) Future service. Future service expected to be accrued by an 
active participant in an ongoing plan during future employment (based 
on the assumptions used to determine benefit liabilities) must be 
included in determining the earliest and unreduced retirement ages used 
to determine the expected retirement age and in determining an active 
participant's entitlement to early retirement subsidies and supplements 
at the expected retirement age. See the examples in paragraph (e) of 
this section.
    (3) Special actuarial assumptions for exempt plan determination. 
Solely for purposes of determining whether a plan is an exempt plan for 
an information year, the value of benefit liabilities may be determined 
using the same retirement assumptions as used to determine the minimum 
required contribution under section 303 of ERISA and section 430 of the 
Code for the plan year ending within that information year without 
regard to the at-risk assumptions of section 303(i) of ERISA and 
section 430(i) of the Code.
* * * * *

0
 11. Amend Sec.  4010.9 by removing ``Web site'' and adding in its 
place ``website'' in paragraph (a) introductory text and revising 
paragraphs (b), (d), and (e).
    The revisions read as follows:


Sec.  4010.9   Financial information.

* * * * *
    (b) Consolidated financial statements. If the financial information 
of a controlled group member is combined with the information of other 
group members in consolidated financial statements, a filer may provide 
the following financial information in lieu of the information required 
in paragraph (a) of this section--
    (1) The audited consolidated financial statements for the 
controlled group for the filer's information year or, if the audited 
consolidated financial statements are not available by the date 
specified in Sec.  4010.10(a), unaudited consolidated financial 
statements for the fiscal year ending within the information year; and
    (2) If the ultimate parent of the controlled group is a foreign 
entity, financial information on the U.S. entities (other than an 
exempt entity) that are members of the controlled group. The 
information required by this paragraph (b)(2) may be provided in the 
form of consolidated financial statements if the financial information 
of each controlled group member that is a U.S. entity is combined with 
the information of other group members that are U.S. entities. 
Otherwise, for each U.S. entity that is a controlled group member, 
provide the financial information required in paragraph (a) of this 
section.
* * * * *
    (d) Submission of public information. If any of the financial 
information required by paragraphs (a) through (c) of this section is 
publicly available, the filer, in lieu of submitting such information 
to PBGC, may include a statement with the other information that is 
submitted to PBGC indicating when such financial information was made 
available to the public and where PBGC may obtain it (including the 
exact URL for the web page where the financial information is located). 
For example, if the controlled group member has filed audited financial 
statements with the Securities and Exchange Commission, it need not 
file the financial statements with PBGC but instead can identify the 
SEC filing and the exact URL for the web page where the filing can be 
retrieved as part of its submission under this part.
    (e) Inclusion of information about non-filers and exempt entities. 
Consolidated financial statements provided pursuant to paragraph (b) of 
this section may include financial information of persons who are not 
controlled group members (e.g., joint ventures) or are exempt entities.

0
 12. In Sec.  4010.11:
0
a. Revise paragraphs (a) introductory text and (a)(1);
0
b. Add ``on the last day of the information year'' after the words 
``controlled group'' in the first sentence in paragraph (b)(1);
    The revisions read as follows:


Sec.  4010.11   Waivers.

    (a) Aggregate funding shortfall not in excess of $15 million 
waiver. Unless reporting is required by Sec.  4010.4(a)(2) or (3), 
reporting is waived for a person (that would be a filer if not for the 
waiver) for an information year if, for the plan year ending within the 
information year, the aggregate 4010 funding shortfall for all plans 
(including any exempt plans) maintained by the person's controlled 
group on the last day of the information year (disregarding plans with 
no 4010 funding shortfall) does not exceed $15 million, as determined 
under paragraphs (a)(1) and (2) of this section.
    (1) 4010 funding shortfall; in general. A plan's 4010 funding 
shortfall for a plan year equals the funding shortfall for the plan 
year as provided under section 303(c)(4) of ERISA and section 430(c)(4) 
of the Code, with the following exceptions:
    (i) The funding target used to calculate the 4010 funding shortfall 
is determined without regard to the interest rate stabilization 
provisions of section 303(h)(2)(C)(iv) of ERISA and section 
430(h)(2)(C)(iv) of the Code and without regard to the at-risk plan 
provisions in section 303(i) of ERISA and section 430(i) of the Code.
    (ii) The value of plan assets used to calculate the 4010 funding 
shortfall is determined without regard to the reduction under section 
303(f)(4)(B) of ERISA and section 430(f)(4)(B) of the Code (dealing 
with reduction of assets by the amount of prefunding and funding 
standard carryover balances).
* * * * *

PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS

0
13. The authority citation for part 4041 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1341, 1344, 1350.


0
14. Revise Sec.  4041.29 to read as follows:


Sec.  4041.29   Post-distribution certification.

    (a) Filing requirement. The plan administrator must either--

[[Page 6061]]

    (1) Within 30 days after the last distribution date for any 
affected party, file with PBGC a post-distribution certification (PBGC 
Form 501), completed in accordance with the instructions thereto; or
    (2)(i) Within 30 days after the last distribution date for any 
affected party, certify to PBGC, in the manner prescribed in the 
instructions to PBGC Form 501, that the plan assets have been 
distributed as required, and
    (ii) Within 60 days after the last distribution date for any 
affected party, file a post-distribution certification (PBGC Form 501), 
completed in accordance with the instructions thereto.
    (b) Assessment of penalties. PBGC will assess a penalty for a late 
filing under paragraph (a) of this section only if the required 
information is filed more than 90 days after the distribution deadline 
(including extensions) under Sec.  4041.28(a).

0
 15. Amend Sec.  4041.30 by revising paragraph (d)(2) to read as 
follows:


Sec.  4041.30   Requests for deadline extensions.

* * * * *
    (d) * * *
    (2) Post-distribution deadlines. Extend a filing deadline under 
Sec.  4041.29(a).

PART 4043--REPORTABLE EVENTS AND CERTAIN OTHER NOTIFICATION 
REQUIREMENTS

0
 16. The authority citation for part 4043 continues to read as follows:

    Authority:  29 U.S.C. 1083(k), 1302(b)(3), 1343.


Sec.  4043.2  [Amended]


0
 17. Amend Sec.  4043.2 by removing ``and'' and adding in its place ``, 
ultimate parent, and U.S. entity'' in the introductory text, and 
removing the definition ``U.S. entity''.


Sec.  4043.3  [Amended]

0
 18. Amend Sec.  4043.3 in paragraph (c) by removing ``Web site'' and 
adding in its place ``website''.


Sec.  4043.9  [Amended]

0
 19. Amend Sec.  4043.9 in paragraph (e)(2)(i) by adding ``third-
party'' after ``available''.

0
 20. Revise Sec.  4043.23 to read as follows:


Sec.  4043.23   Active participant reduction.

    (a) Reportable event. A reportable event occurs for a plan:
    (1) Single-cause event. (i) On each date in a plan year when, as a 
result of a new single cause, the ratio of the aggregate number of 
individuals who ceased to be active participants because of that 
single-cause, to the number of active participants at the beginning of 
such plan year, exceeds 20 percent.
    (ii) Examples of single-cause events include a reorganization or 
restructuring, the discontinuance of an operation or business, a 
natural disaster, a mass layoff, or an early retirement incentive 
program.
    (2) Attrition event. At the end of a plan year if the sum of the 
number of active participants covered by the plan at the end of such 
plan year, plus the number of individuals who ceased to be active 
participants during the same plan year that are reported to PBGC under 
paragraph (a)(1) of this section, is less than 80 percent of the number 
of active participants at the beginning of such 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, and the number of active participants at the end of a plan 
year may be determined by using the number of active participants at 
the beginning of the next plan year.
    (2) Active participant. ``Active participant'' for purposes of this 
section means a participant who--
    (i) Is receiving compensation from any member of the plan's 
controlled group for work performed for any member of the plan's 
controlled group;
    (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. For purposes of determining whether a 
participant is an active participant, a participant does not cease to 
be active if the participant leaves employment with one member of a 
plan's controlled group to become employed by another controlled group 
member.
    (c) Reductions due to cessations and withdrawals. For purposes of 
paragraph (a) 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 sections 4062(e) or 
4063(a) of ERISA, and
    (2) Is timely reported to PBGC under section 4062(e) and/or section 
4063(a) of ERISA before the due date of the notice required by 
paragraph (a) of this section.
    (d) Waivers--(1) Small plan. Notice under this section is waived if 
the plan had 100 or fewer participants for whom flat-rate premiums were 
payable for the plan year preceding the event year.
    (2) Low-default-risk. Notice under this section is waived if each 
contributing sponsor of the plan and the highest level U.S. parent of 
each contributing sponsor are low-default-risk on the date of the 
event.
    (3) Well-funded plan. Notice under this section is waived if the 
plan is in the well-funded plan safe harbor for the event year.
    (4) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction, or the parent 
company within a parent-subsidiary controlled group of any such 
contributing sponsor, is a public company and timely files a SEC Form 
8-K disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).
    (5) Statutory events. Notice is waived for an active participant 
reduction event described in section 4043(c)(3) of ERISA except to the 
extent required under this section.
    (e) Extension--attrition event. For an event described in paragraph 
(a)(2) of this section, the notice date is extended until the premium 
due date for the plan year following the event year.
    (f) Examples--(1) Determining whether a single-cause event occurred 
(Example 1). A calendar-year plan had 1,000 active participants at the 
beginning of the current plan year. As the result of a business unit 
being shut down, 160 participants are permanently laid off on July 30. 
Before July 30, and as part of the course of regular business 
operations, some active participants terminated employment, some 
retired and some new hires became covered by the plan. Because 
reductions due to attrition are disregarded for purposes of determining 
whether a single-cause event has occurred, it is not necessary for the 
sponsor to tabulate an exact active participant count as of July 30. 
Rather, the relevant percentage for determining whether a single-cause 
event occurred is determined by dividing the number of active 
participants laid-off as a result of the business unit shut down to the 
beginning of year active participant count. Because that ratio is less 
than 20 percent (i.e., 160/1,000 = .16, or 16 percent), a single-cause 
event under paragraph (a)(1) of this section did not occur on July 30. 
However, if, as a result of the business unit shutdown, additional 
layoffs occur later in the same year, a single-cause event may

[[Page 6062]]

subsequently be triggered (See Example 3 in paragraph (f)(3) of this 
section).
    (2) Determining whether an attrition event occurred in year when a 
single-cause event occurred (Example 2).--(i) Assume the same facts as 
in Example 1 in paragraph (f)(1) of this section except that the number 
of active participants laid off on July 30 was 230 and thus, a single-
cause event occurred. Further, assume that the event was timely 
reported to PBGC (i.e., on or before August 30). Lastly, assume the 
active participant count as of year-end is 600.
    (ii) To prevent duplicative reporting (i.e., to ensure that the 
participants who triggered a single-cause reporting requirement do not 
also trigger an attrition event), the 230 participants who triggered 
that single-cause reporting requirement are not taken into account for 
purposes of determining whether an attrition event occurred. This is 
accomplished by increasing the year-end count by 230. Therefore, the 
applicable percentage for the attrition determination is 83 percent 
(i.e., (600 + 230)/1,000 = .83). Because 83 percent is greater than 80 
percent, an attrition event has not occurred.
    (3) Single-cause event spread out over multiple dates (Example 3). 
(i) Assume the same facts as in Example 1 in paragraph (f)(1) of this 
section except that the layoffs resulting from the business unit shut 
down are spread out over several months. Table 1 to paragraph (f)(3) 
summarizes the applicable calculations:

                                                               Table 1 to Paragraph (f)(3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Single-cause event spread out over multiple dates
---------------------------------------------------------------------------------------------------------------------------------------------------------
                      Date                            Number laid-off        Aggregate reduction                    Applicable percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
February 1......................................                       50                       50  50/1,000 = 5 percent.
May 15..........................................                       50                      100  100/1,000 = 10 percent.
September 1.....................................                      110                      210  210/1,000 = 21 percent.
November 1......................................                       40                      250  250/1,000 = 25 percent.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) A single-cause event occurs on September 1 because that is the 
first time the applicable percentage exceeds 20 percent. This event 
must be reported by October 1. The November 1 layoff does not trigger a 
subsequent single-cause event because the layoff is part of the same 
single-cause event already timely reported to PBGC. However, they will 
be considered in the determination of whether an attrition event occurs 
at year-end as explained in paragraph (f)(3)(iii) of this section.
    (iii) As illustrated in Example 2 in paragraph (f)(2) of this 
section, for purposes of determining whether an attrition event has 
occurred, the year-end count is increased by the number of participants 
that triggered a single-cause event. In this case, that number is 210. 
The fact that an additional 40 active participants were laid off as a 
result of the business unit shut down after the single-cause event 
occurred does not affect the calculation because it was not already 
reported to PBGC. For example, if the year-end active participant count 
is 560, the number that gets compared to the beginning-of-year active 
participant count is 770 (i.e., 560 + 210 = 770). Because 770 is less 
than 80 percent of 1,000, an attrition event has occurred and must be 
reported.
    (4) Multiple single-cause events in same plan year (Example 4). 
Assume the same facts as in Example 1 in paragraph (f)(1) of this 
section except that the July 30 shutdown of the business unit resulted 
in 205 layoffs on that date. A single-cause event occurred and is 
timely reported. Later in the same plan year, the company announces an 
early retirement incentive program and 210 employees participate in the 
program with the last employees participating in the program retiring 
on November 15 of the plan year. A new single-cause event has occurred 
as of November 15 resulting in a reporting obligation of the active 
participant reduction due to the retirement incentive program (210/1000 
= 21 percent).

0
 21. Amend Sec.  4043.26 by revising paragraph (a)(1) to read as 
follows:


Sec.  4043.26   Inability to pay benefits when due.

    (a) * * *
    (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),
    (ii) The need to verify a person's eligibility for benefits,
    (iii) The inability to locate a person, or
    (iv) Any other administrative delay, to the extent that the delay 
is for less than the shorter of two months or two full benefit payment 
periods.
* * * * *

0
 22. Amend Sec.  4043.27 by revising paragraph (d)(3) to read as 
follows:


Sec.  4043.27  Distribution to a substantial owner.

* * * * *
    (d) * * *
    (3) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction, or the parent 
company within a parent-subsidiary controlled group of any such 
contributing sponsor, is a public company and timely files a SEC Form 
8-K disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).

0
 23. Amend Sec.  4043.29 by revising the section heading and paragraphs 
(a), (b)(6), and (c) to read as follows:


Sec.  4043.29  Change in controlled group.

    (a) Reportable event. (1) A reportable event occurs for a plan when 
there is a transaction that results, or will result, in one or more 
persons' (including any person who is or was a contributing sponsor) 
ceasing to be a member of the plan's controlled group (other than by 
merger involving members of the same controlled group).
    (2) 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

[[Page 6063]]

reportable if it will result solely in a reorganization involving a 
mere change in identity, form, or place of organization, however 
effected.
    (b) * * *
    (6) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction, or the parent 
company within a parent-subsidiary controlled group of any such 
contributing sponsor, is a public company and timely files a SEC Form 
8-K disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).
    (c) Examples. The following examples assume that no waiver applies.
    (1) Controlled group breakup. Company A (the contributing sponsor 
of Plan A), and Company B (the contributing sponsor of Plan B) are in 
the same controlled group with Parent Company AB. On March 31, Parent 
Company AB and Company C enter into an agreement to sell the stock of 
Company B to Company C, a company outside of the controlled group. The 
transaction will close on August 31 and Company B will continue to 
maintain Plan B. Both Company A (Plan A's contributing sponsor) and the 
plan administrator of Plan A are required to report that Company B 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 and Parent Company AB are no longer part of Plan B's 
controlled group. Both reports are due on April 30, 30 days after they 
entered into the agreement to sell Company B.
    (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 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 date the binding contract was 
executed), 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 notice due date 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 notice due date, Company R has the reporting 
obligation.
    (3) Dissolution of controlled group member. Company A (which 
maintains Plan A) and Company B are in the same controlled group with 
Parent Company AB. Pursuant to an asset sale agreement, Company B sells 
its assets to a company outside of the controlled group. After the 
sale, Company B will be dissolved and no longer operating. Since 
Company B will no longer be a member of Plan A's controlled group, a 
reportable event occurs on the date Company B enters into the asset 
sale agreement. Note that this event may also be required to be 
reported as a liquidation event under 29 CFR 4043.30.
    (4) Merger of controlled group members. Company A (which maintains 
Plan A) and Company B are in the same controlled group with Parent 
Company AB. Parent Company AB decides to merge the operations of 
Company B into Company A. Although Company B will no longer be a member 
of Plan A's controlled group, no report is due given Company B is 
merging with Company A.

0
 24. Revise Sec.  4043.30 to read as follows:


Sec.  4043.30  Liquidation.

    (a) Reportable event. A reportable event occurs for a plan when a 
member of the plan's controlled group--
    (1) Resolves to cease all revenue-generating business operations, 
sell substantially all its assets, or otherwise effect or implement its 
complete liquidation (including liquidation into another controlled 
group member) by decision of the member's board of directors (or 
equivalent body such as the managing partners or owners) or other actor 
with the power to authorize such cessation of operations, sale, or a 
liquidation, unless the event would be reported under paragraph (a)(2) 
or (3) of this section;
    (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 under 
paragraph (a) of this section 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 under paragraph (a) of this section is a foreign 
entity other than a foreign parent.
    (3) Reporting under insolvency event. Notice under this section is 
waived if reporting is also required under Sec.  4043.35(a)(3) or (4) 
and notice has been provided timely to PBGC for the same event under 
that section.
    (c) Public company extension. If any contributing sponsor of the 
plan, or the parent company within a parent-subsidiary controlled group 
of such contributing sponsor, is a public company, the due date for 
notice under this section is extended until the earlier of--
    (1) The date the contributing sponsor or parent company timely 
files a SEC Form 8-K disclosing the event under an item of the Form 8-K 
other than under Item 2.02 (Results of Operations and Financial 
Condition) or in financial statements under Item 9.01 (Financial 
Statements and Exhibits); or
    (2) The date when a press release with respect to the liquidation 
described under paragraph (a) of this section is issued in the U.S. in 
the English language.
    (d) Examples--(1) Liquidation within a controlled group. Plan A's 
controlled group consists of Company A (its contributing sponsor), 
Company B, Company Q (the parent of Company A and Company B). Company B 
represents the most significant portion of cash flow for the controlled 
group. Company B experiences an unforeseen event that negatively 
impacts operations and results in an increase in debt. The controlled 
group liquidates Company B by ceasing all operations, settling its 
debts, and merging any remaining assets into Company Q. (For purposes 
of this example, it does not matter under which of paragraphs (a)(1) 
through (3) of this section reporting is triggered). The transaction is 
to be treated as a tax-free liquidation for tax purposes. Both Company 
A (Plan A's contributing sponsor) and the plan administrator of Plan A 
are required to report that Company B will liquidate within the 
controlled group.
    (2) Cessation of operations. Plan A is sponsored by Company A. The 
owners of Company A decide to cease all revenue-generating operations. 
Certain administrative employees will wind down the business and 
continue to be employed until the wind down is complete, which could 
take several months. Company A is required to report a liquidation 
reportable event 30 days after the decision is made to cease all 
revenue-generating operations.
    (3) Sale of assets. Plan A is sponsored by Company A. In a meeting 
of the

[[Page 6064]]

Board of Directors of Company A, the Board resolves to sell all the 
assets of Company A to Company B. Under the asset sale agreement with 
Company B, Company B will not assume Plan A; Company A expects to 
undertake a standard termination of Plan A. Company A is required to 
report a liquidation event 30 days after the Board resolved to sell the 
assets of Company A.

0
 25. Amend Sec.  4043.31 by revising paragraph (c)(6) to read as 
follows:


Sec.  4043.31   Extraordinary dividend or stock redemption.

* * * * *
    (c) * * *
    (6) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction, or the parent 
company within a parent-subsidiary controlled group of any such 
contributing sponsor, is a public company and timely files a SEC Form 
8-K disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).

0
 26. Amend Sec.  4043.32 by revising paragraph (c)(4) to read as 
follows:


Sec.  4043.32   Transfer of benefit liabilities.

* * * * *
    (c) * * *
    (4) Public company. Notice under this section is waived if any 
contributing sponsor of the plan before the transaction, or the parent 
company within a parent-subsidiary controlled group of any such 
contributing sponsor, is a public company and timely files a SEC Form 
8-K disclosing the event under an item of the Form 8-K other than under 
Item 2.02 (Results of Operations and Financial Condition) or in 
financial statements under Item 9.01 (Financial Statements and 
Exhibits).

0
 27. Amend Sec.  4043.35 by adding paragraph (b)(3) to read as follows:


Sec.  4043.35   Insolvency or similar settlement.

* * * * *
    (b) * * *
    (3) Liquidation event. Notice under paragraph (a)(3) or (4) of this 
section is waived if reporting is also required under Sec.  4043.30 and 
notice has been provided timely to PBGC for the same event under that 
section.


Sec.  4043.81   [Amended]

0
 28. Amend Sec.  4043.81 by removing paragraph (c).

PART 4233--PARTITIONS OF ELIGIBLE MULTIEMPLOYER PLANS

0
29. The authority citation for part 4233 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1413.

Appendix A to Part 4233--[Amended]

0
 30. Amend the two model notices in appendix A by removing the phone 
number ``(202) 326-4000 x6535'' under PBGC Contact Information after 
``Phone:'' and adding in its place ``(202) 229-6047'', and by removing 
the phone number ``(202) 326-4488'' under PBGC Participant and Plan 
Sponsor Advocate Contact Information after ``Phone:'' and adding in its 
place ``(202) 229-4448''.

    Issued in Washington, DC.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2020-01628 Filed 2-3-20; 8:45 am]
 BILLING CODE 7709-02-P