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Employee Benefits Security Administration

Fact Sheet

Annual Funding Notice for Defined Benefit Plans

EBSA plans to enhance retirement security and increase pension plan transparency by ensuring that workers receive periodic notification of the funded status of their defined benefit pension plans, ultimately supporting the Secretary's good jobs for everyone policy.

Key Action: Proposed Regulation

The Department's EBSA plans to publish a proposed regulation in August 2010 that would require defined benefit pension plan administrators to provide workers with detailed information of their plan's funded status in an annual notice, written in manner that can be understood by the average worker.

Key Concern and Issues to be Addressed

Many workers who rely on their defined benefit pension plan for retirement security do not know if their plan is fully funded and capable of paying all benefits when they are due. This initiative will ensure that workers and others receive good information about the funded status of their plans as a way to ensure sufficient assets are available to pay future benefits.

Background

  • Section 101(f) of the Employee Retirement Income Security Act (ERISA) sets forth requirements applicable to furnishing annual funding notices.
  • Before the Pension Protection Act of 2006 (PPA), section 101(f) applied only to multiemployer defined benefit plans.
  • Section 501(a) of the PPA amended section 101(f) of ERISA, making significant changes to the annual funding notice requirements. These amendments require administrators of all defined benefit plans that are subject to title IV of ERISA, not only multiemployer plans, to provide an annual funding notice to the Pension Benefit Guaranty Corporation (PBGC), to each plan participant and beneficiary, to each labor organization representing such participants or beneficiaries, and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan.
  • An annual funding notice must include, among other things, the plan's funding percentage, a statement of the value of the plan's assets and liabilities and a description of how the plan's assets are invested as of specific dates, and a description of the benefits under the plan that are eligible to be guaranteed by the PBGC.
  • Notices for large plans must be furnished no later than 120 days after the close of the plan year. Notices for small plans (100 or fewer participants) must be furnished no later than the filing of the plan's annual report, including filing extensions.
  • The PPA amendments to section 101(f) apply to plan years beginning after December 31, 2007.