Model Participant Notice
The Retirement Protection Act of 1994 requires certain underfunded
plans to notify participants and beneficiaries annually of the plan's
funding status and the limits of PBGC's guarantee. (See Section 4011 of
ERISA and 29 CFR Part 4011.) The regulation includes a model notice that
plans can use to meet this requirement.
For the convenience of plan administrators, this Technical Update
republishes the Model Participant Notice, updated to reflect the 2001
maximum guaranteed benefits.
Participant Notice Worksheet
This Technical Update also includes a worksheet to help plan
administrators determine whether they must issue a 2001 Participant
Notice. Generally, the requirement to issue a 2001 Participant Notice
applies to the plan administrator of any single-employer plan that pays
a variable rate premium for the 2001 plan year. However, no notice is
required if the plan meets certain funding requirements for the 2000 or
2001 plan year, as explained in the worksheet.
Due Dates
The 2001 Participant Notice is due two months after the due date
(including extensions) for the 2000 Form 5500. The following table shows
the common filing due dates for calendar year plans:
2000 Form 5500
|
2001 Participant Notice |
Tuesday, July 31, 2001
|
Monday, October 1, 2001 |
Monday, September 17, 2001
|
Monday, November 19, 2001 |
Monday, October 15, 2001
|
Monday, December 17, 2001 |
(Due dates that fall on a weekend or Federal holiday are extended to
the next business day.)
Model Participant Notice
The following is an example of a Participant Notice
that satisfies the requirements of section 4011.10 when the required
information is filled in.
Notice to Participants of [Plan
Name]
The law requires that you receive information on the
funding level of your defined benefit pension plan and the benefits
guaranteed by the Pension Benefit Guaranty Corporation (PBGC), a federal
insurance agency.
YOUR PLAN'S FUNDING
As of [DATE], your plan had [INSERT NOTICE FUNDING
PERCENTAGE DETERMINED IN ACCORDANCE WITH SECTION 4011.10(c)] percent of
the money needed to pay benefits promised to employees and retirees.
To pay pension benefits, your employer is required to
contribute money to the pension plan over a period of years. A plan's
funding percentage does not take into consideration the financial
strength of the employer. Your employer, by law, must pay for all
pension benefits, but your benefits may be at risk if your employer
faces a severe financial crisis or is in bankruptcy.
[INCLUDE THE FOLLOWING PARAGRAPH ONLY IF, FOR ANY OF
THE PREVIOUS FIVE PLAN YEARS, THE PLAN HAS BEEN GRANTED AND HAS NOT
FULLY REPAID A FUNDING WAIVER.]
Your plan received a funding waiver for [LIST ANY OF
THE FIVE PREVIOUS PLAN YEARS FOR WHICH A FUNDING WAIVER WAS GRANTED AND
HAS NOT BEEN FULLY REPAID]. If a company is experiencing temporary
financial hardship, the Internal Revenue Service may grant a funding
waiver that permits the company to delay contributions that fund the
pension plan.
[INCLUDE THE FOLLOWING WITH RESPECT TO ANY UNPAID OR
LATE PAYMENT THAT MUST BE DISCLOSED UNDER SECTION 4011.10(b)(6):]
Your plan was required to receive a payment from the
employer on [LIST APPLICABLE DUE DATE(S)]. That payment [has not been
made] [was made on [LIST APPLICABLE PAYMENT DATE(S)]].
PBGC GUARANTEES
When a pension plan ends without enough money to pay
all benefits, the PBGC steps in to pay pension benefits. The PBGC pays
most people all pension benefits, but some people may lose certain
benefits that are not guaranteed.
The PBGC pays pension benefits up to certain maximum
limits.
- The maximum guaranteed benefit is $3,392.05 per
month or $40,704.60 per year for a 65-year-old person in a plan that
terminates in 2001.
- The maximum benefit may be reduced for an
individual who is younger than age 65. For example, it is $1,526.42
per month or $18,317.04 per year for an individual who starts
receiving benefits at age 55. [IN LIEU OF AGE 55, YOU MAY ADD OR SUBSTITUTE ANY
AGE(S) RELEVANT UNDER THE PLAN. FOR EXAMPLE, YOU MAY ADD OR
SUBSTITUTE THE MAXIMUM BENEFIT FOR AGES 62 OR 60. THE MAXIMUM
BENEFIT IS $2,679.72 PER MONTH OR $32,156.64 PER YEAR AT AGE 62; IT
IS $2,204.83 PER MONTH OR $26,457.96 PER YEAR AT AGE 60. IF THE PLAN
PROVIDES FOR NORMAL RETIREMENT BEFORE AGE 65, YOU MUST INCLUDE THE
NORMAL RETIREMENT AGE. IF THE PLAN DOES NOT PROVIDE FOR COMMENCEMENT OF
BENEFITS BEFORE AGE 65, YOU MAY OMIT THIS PARAGRAPH.]
- The maximum benefit will also be reduced when a
benefit is provided for a survivor.
The PBGC does not guarantee certain types of benefits.
[INCLUDE THE FOLLOWING GUARANTEE LIMITS THAT APPLY TO THE BENEFITS
AVAILABLE UNDER YOUR PLAN.]
- The PBGC does not guarantee benefits for which you
do not have a vested right when a plan ends, usually because you
have not worked enough years for the company.
- The PBGC does not guarantee benefits for which you
have not met all age, service, or other requirements at the time the
plan ends.
- Benefit increases and new benefits that have been
in place for less than a year are not guaranteed. Those that have
been in place for less than 5 years are only partly guaranteed.
- Early retirement payments that are greater than
payments at normal retirement age may not be guaranteed. For
example, a supplemental benefit that stops when you become eligible
for Social Security may not be guaranteed.
- Benefits other than pension benefits, such as
health insurance, life insurance, death benefits, vacation pay, or
severance pay, are not guaranteed.
- The PBGC generally does not pay lump sums exceeding
$5,000.
WHERE TO GET MORE INFORMATION
Your plan, [EIN-PN], is sponsored by [CONTRIBUTING
SPONSOR(S)]. If you would like more information about the funding of
your plan, contact [INSERT NAME, TITLE, BUSINESS ADDRESS AND PHONE
NUMBER OF INDIVIDUAL OR ENTITY].
For more information about the PBGC and the benefits
it guarantees, you may request a free copy of Your Guaranteed Pension@
by writing to Consumer Information Center, Dept. YGP, Pueblo, Colorado
81009. [THE FOLLOWING SENTENCE MAY BE INCLUDED:] Your Guaranteed
Pension@ is also available from the PBGC Web site at http://www.pbgc.gov/pubs.htm.
Issued: [INSERT AT LEAST MONTH AND YEAR]
![Graphic of Plan Year 2001 Participant Notice Worksheet](/peth04/20041016071731im_/http://pbgc.gov/images/tech01-2.gif)
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Participant Notice Worksheet
Plan Year 2001
Definitions and Special Small Plan Rules
I. Funded Current Liability Percentage
(See Special Small Plan Rules below)
The percentage obtained by dividing:
a. The actuarial value of the plan's assets (not reduced by any
credit balance in the funding standard account), determined as of
the plan's valuation date, by
b. The plan's current liability (determined using the highest
interest rate allowable for the plan year), determined as of the
plan's valuation date.
II. Special Small Plan Rules
In calculating its Funded Current Liability Percentage for a plan
year, a plan that is a "small plan" (see definition in III.
below) for that plan year may use one or both of the following rules:
a. The plan's Funded Current Liability Percentage may be
calculated by substituting for items I.a. and I.b. above the
following numbers that are required to be reported on the Form 5500,
Schedule B, for the plan year for which the percentage is
calculated. Under this special rule, the plan must substitute both
of the following numbers: (1) the market value of the plan's assets
as of the beginning of the plan year (for I.a. above); and (2) the
plan's total current liability for all participants as of the
beginning of the plan year (for I.b. above).
b. When calculating current liability under I.a. above (whether
or not the plan uses the special rule in II.a. above), if the plan's
current liability is calculated and reported on Schedule B using an
interest rate lower than the highest allowable interest rate, the
current liability at the highest rate may be determined by reducing
the reported current liability by one percent for each tenth of a
percent by which the highest allowable interest rate exceeds the
interest rate used.
Example: Assume that a small plan's current liability as
of January 1, 2001, is $250,000, based on an interest rate of
6.4%. Assume further that the highest allowable interest rate
for the 2001 plan year is 7%. Because the highest allowable
interest rate exceeds the interest rate used by six-tenths of a
percent, current liability may be reduced by 6% to $235,000, as
follows:
100% - 6(1%) = 94% x $250,000 = $235,000.
III. Definition of "Small Plan"
A plan is considered to be a "small plan"
for a plan year if it had 100 or fewer participants on each day during
the preceding plan year. When determining whether a plan is a
"small plan," its participants must be aggregated with the
participants of all other defined benefit plans maintained by the same
employer or any other member of the employer's controlled group in
accordance with ERISA section 302(d)(6)(C).