Dealing with PBGC Reportable Events: A Practical Guide for Employers and Their Advisors

Description

The PBGC made major modifications, effective in 2016, to its reportable events rules. Complying with these complex rules can be challenging for employers, particularly since reporting is triggered by events that arise on a sporadic basis and that may involve only some distant member of the contributing sponsor’s “controlled group.” Corporate finance and HR staff, as well as their advisors, need to have a solid understanding of these rules so that they can properly identify and plan for events that are reportable and timely report them to PBGC.

Occurrence of a reportable event can have serious consequences under corporate loan and other agreements, and may lead to PBGC threatening to initiate an involuntary termination of a pension plan and thus potentially triggering an enormous liability. In addition, failure to comply with the rules in a timely manner not only can have serious consequences under corporate loan and other agreements but can also result in a penalty of up to $2,063 per day for so long as the delinquency continues, with the full penalty assessed separately against each contributing sponsor and each plan administrator required to report the event.

The new regulations significantly change the definitions of many of the reportable events, in some cases dramatically expanding the scope of the reportable event. For example, while the “loan default” reportable event rules were previously structured to ensure that “technical” defaults would not have to be reported, the new rules not only clearly capture “technical” defaults, but also for the first time require reporting even of non-defaults where the lender waives or agrees to an amendment of a covenant the effect of which is to cure or avoid a breach that would trigger a default.

The new regulations also eliminate most of the reporting extensions, and significantly revise the reporting waiver rules. For example, there is now a more stringent test for waivers based on the level of pension plan funding and a new focus, for waiver purposes, on the financial risk profile of the employer responsible for funding the pension plan.

Listen as our experienced panel provides practical guidance to meet the challenges of dealing with the PBGC’s Early Warning Program and its reportable events rules, one year after implementation of those rules. The Participant and Plan Sponsor Advocate at the PBGC will be sharing her perspective on the concerns of the plan sponsor community on these and related issues.