Client Alert: Deadline Coming Up for Defined Benefit Plans Annual Funding Notice Must be Distributed Soon

March 20, 2009

The U.S. Department of Labor (“DOL”) recently issued Field Assistance Bulletin 2009-1, which provides guidance for complying with the annual pension funding notice requirements in ERISA Section 101(f).  The Pension Protection Act of 2006 amended ERISA to provide that the annual funding notice requirement must be given by single-employer defined benefit plans, as well as multi-employer plans. 

What is the Deadline?

The new annual funding notice requirements are effective for plan years beginning on or after January 1, 2008.   The notice must be provided within 120 days following the end of the plan year.  Calendar year plans must therefore provide the notice by April 30, 2009.  Small plans – plans with 100 or fewer participants – have until the date that the plan’s annual report (Form 5500) is filed to issue the notice.

Who Provides the Notice?

Administrators of single-employer and multi-employer defined benefit pension plans covered by the PBGC must provide the annual funding notice.  This notice replaces the requirement to distribute a summary annual report.

Who Gets the Notice?

– Plan Participants and Beneficiaries
– The PBGC
– Any Labor Organization Involved
– Each Employer Contributing to a Multi-Employer Plan

What Must Be in the Notice?

Among other things (including plan name and plan year), the notice must contain the following:

– Funding Target Attainment Percentage  
– Fair Market Value of Assets  
– Participant Information  
– Summary of the Plan’s Funding and Investment Policies  

Is There a Model Notice?

Yes, the DOL has prepared two model notices, one for single employer plans and one for multi-employer plans.  While use of the model notice is not required, an accurately completed model notice will satisfy ERISA’s content requirements.  The model notices can be found in the Field Assistance Bulletin 2009-1, Appendices A and B, which may be viewed here.

Anything Else Plan Administrators Need to be Aware of?

Yes, the model notices specifically require a summary of the plan’s “funding policy” and “investment policy.”  Plan administrators should make sure these policies are up-to-date and in place.  If no such policies exist, plan administrators should begin working with counsel to prepare such policies as soon as possible.