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Appendix E Employee Benefit Law
ERISA Procedure 76-1
August 27, 1976
41 FR 36281
It is the practice of the Department of Labor (the Department) to answer inquiries of individuals or organizations affected, directly or indirectly, by the Employee Retirement Income Security Act of 1974 (Pub. L. 93-406, hereinafter "the Act") as to their status under the Act and as to the effect of certain acts and transactions. The answers to such inquiries are categorized as "information letters" and "advisory opinions." This "ERISA Procedure" (ERISA Proc. 76-1) describes the general procedures of the Department in issuing Information letters and advisory opinions under the Act, and is designed to promote efficient handling of inquiries and to facilitate prompt responses.
Section 7 of this Procedure (instructions to individuals and organizations requesting advisory opinions relating to prohibited transactions and common definitions) is reserved. This section will set forth the procedures to be followed to obtain an advisory opinion relating to prohibited transactions and common definitions, such as whether a person is a party in interest and a disqualified person. In general, this section will incorporate a revenue Procedure to be published by the Internal Revenue Service.
This advisory opinion procedure consists of rules of agency procedure and practice, and is therefore excepted under 5 USC 552(b)(3)(A) of the Administrative Procedure Act from the ordinary notice and comment provisions for agency rulemaking. Accordingly, the Procedure is effective August 27, 1976.
Sec. 1. Purpose. The purpose of this ERISA Procedure is to describe the general Procedures of the Department of Labor (the Department) in issuing information letters and advisory opinions to individuals and organizations under the Employee Retirement Income Security Act of 1974 (Pub. L. 93-406), hereinafter referred to as "the Act." This ERISA Procedure also informs individuals and organizations, and their authorized representatives, where they may direct requests for information letters and advisory opinions, and outline procedures to be followed in order to promote efficient handling of their inquiries.
Sec. 2. General practice. It is the practice of the Department to answer inquiries of individuals and organizations, whenever appropriate, and in the interest of sound administration of the Act, as to their status under the Act and as to the effects of their acts or transactions. One of the functions of the Department is to issue information letters and advisory opinions in such matters.
Sec. 3. Definitions.
.01 An "information letter" is a written statement issued either by the Pension and Welfare Benefit Programs (Office of Employee Benefits Security), U.S. Department of Labor, Washington, D.C. or a Regional Office or an Area Office of the Labor-Management Services Administration, U.S. Department of Labor, that does no more than call attention to a well established interpretation or principle of the Act without applying it to a specific factual situation. An information letter may be issued to any individual or organization when the nature of the request from the individual or the organization suggests that it is seeking general information or where the request does not meet all the requirements of section 6 or 7 of this procedure, and it is believed that such general information will aid the individual or organization.
.02 An "advisory opinion" is a written statement issued to an individual or organization, or to the authorized representative of such individual or organization, by the Administrator of Pension and Welfare Benefit Programs or his delegate, that interprets and applies the Act to a specific factual situation. Advisory opinions are issued only by the Administrator of Pension and Welfare Benefit programs or his delegate.
.03 Individuals and organizations are those persons described in section 4 of this procedure.
Sec. 4. Individuals and organizations who may request advisory opinions or information letters.
.01 Any individual or organization affected directly or indirectly by the Act may request an information or an advisory opinion from the Department.
.02 A request by or for an individual or organization must be signed by the individual or organization, or by the authorized representative of such individual or organization. See section 7.03 of this procedure.
Sec. 5. Discretionary Authority to Render Advisory Opinions.
.01 The Department will issue advisory opinions involving the interpretation of the application of one or more sections of the Act, regulations promulgated under the Act, interpretive bulletins or exemptions issued by the Department to a specific factual situation. Generally, advisory opinions will be issued by the Department only with respect to prospective transactions (i.e., a transaction which will be entered into). Moreover, there are certain areas where, because of the inherently factual nature of the problem involved, or because the subject of the request for opinion is under investigation for a violation of the Act, the Department will ordinarily not issue advisory opinions. Generally, an advisory opinion will not be issued on alternative courses of proposed transactions, or on hypothetical situations or where all parties involved are not sufficiently identified and described, or where material facts or details of the transaction are omitted.
.02 The Department ordinarily will not issue advisory opinions relating to the following sections of the Act:
.02(a) Section 3(18), relating to whether certain consideration constitutes adequate consideration;
.02(b) Section 3(26), relating to whether the valuation of any asset is at current value;
.02(c) Section 3(27), relating to whether the valuation of any asset is at present value;
.02(d) Section 102(a)(1), relating to whether a summary plan description is written in a manner calculated to be understood by the average participant;
.02(e) Section 103(a)(3)(A), relating to whether the financial statements and schedules required to be included in the Annual Report are presented fairly in conformity with generally accepted accounting principles applied on a consistent basis;
.02(f) Section 103(b)(1), relating to whether a matter must be included in a financial statement in order to fully and fairly present the financial statement of the plan;
.02(g) Section 202 (other than section 202(a)(3) and (b)(1)), relating to minimum participation standards;
.02(h) Section 203 (other than sections 202(a)(3)(B), (b)(1) (flush language), (b)(2), (b)(3)(A);
.02(i) Section 204 of the Act (other than sections 204(b)(1)(B), (b)(1)(A), (C), (D), (E)), relating to benefit accrual requirements;
.02(j) Section 205(e), relating to the period during which a participant may elect in writing not to receive a joint and survivor annuity;
.02(k) Section 208, relating to mergers and consolidation of plans or transfer of plan assets;
.02(l) Section 209(a)(1), relating to whether the report required by section 209(a)(1) is sufficient to inform the employee of his accrued benefits under the plan, etc.;
.02(m) Sections 302 through 305, relating to minimum funding standards;
.02(n) Section 403(c)(1), relating to the purposes for which plan assets must be held;
.02(o) Section 404(a), relating to fiduciary duties as applied to particular conduct; and
.02(p) Section 407(a)(2) and (3) and (c)(1), relating to fair market value, as applied to whether the value of any particular security or real property constitutes fair market value.
This list is not all inclusive and the department may decline to issue advisory opinions relating to other sections of the Act whenever warranted by the facts and circumstances of a particular case. The Department may, when it is deemed appropriate and in the best interest of sound administration of the Act, issue information letters calling attention to established principles under the Act, even though the request that was submitted was for an advisory opinion.
.03 Pending the adoption of regulations (either temporary or final) involving the interpretation of the application of a provision of the Act, consideration will be given to the issuance of advisory opinions relating to such provisions of the Act only under the following conditions:
.03(a) If an inquiry presents an issue on which the answer seems to be clear from the application of the provisions of the Act to the facts described, the advisory opinion will be issued in accordance with the procedures contained herein.
.03(b) If an inquiry presents an issue on which the answer seems reasonably certain but not entirely free from doubt, an advisory opinion will be issued only it is established to the satisfaction of the Department that a business emergency requires an advisory opinion or that unusual hardship to the plan or its participants and beneficiaries will result from failure to obtain an advisory opinion. In any case in which the individual or organization believes that a business emergency exists or that an unusual hardship to the plan or its participants and beneficiaries will result from the failure to obtain an advisory opinion, the individual or organization should submit with the request a separate letter setting forth the facts necessary for the Department to make a determination in this regard. In this connection, the Department will not deem a "business emergency" to result from circumstances within the control of the individual or organization such as, for example, scheduling within an inordinately short time the closing date of a transaction or a meeting of the Board of Directors or the shareholders of a corporation.
.03(c) If an inquiry presents an issue that cannot be reasonably resolved prior to the issuance of a regulation, an advisory opinion will not be issued.
.04 The Department ordinarily will not issue advisory opinions on the form or effect in operation of a Plan, fund, or program (or a particular provision or provisions thereof) subject to Title I of the Act. For example, the Department will not issue an advisory opinion on whether a plan satisfies the requirements of Parts 2 and 3 of Title I of the Act.
Sec. 6. Instructions to individuals and organizations requesting advisory opinions from the Department.
.01 If an advisory opinion is desired, a request should be submitted to: Advisory Opinion, Office of Regulatory Standards and Exceptions, Pension and Welfare Benefit Programs, U.S. Department of Labor, Washington, D.C. 20216.
.02 A request for an advisory opinion must contain the following information:
.02(a) The name and type of plan or plans (e.g., pension, profit-sharing, or welfare plan); the Employer Identification Number (EIN); the Plan Number (PN) used by the plan in reporting to the Department of Labor on Form EBS-1; or a copy of the first two pages of the most recent Form EBS-1 filed with the Department.
.02(b) A detailed description of the act or acts or transaction or transactions with respect to which an advisory opinion is requested. Where the request pertains to only one step of a larger integrated act or transaction, the facts, circumstances, etc. must be submitted with respect to the entire transaction. In addition, a copy of all documents submitted must be included in the individual's or organization's statement and not merely incorporated by reference, and must be accompanied by an analysis of their bearing on the issue or issues, specifying the pertinent Provisions.
.02(c) A discussion of the issue or issues presented by the act or acts or transaction or transactions which should be addressed in the advisory opinion.
.02(d) If the individual or organization is requesting a particular advisory opinion, the requesting party must furnish an explanation of the grounds for the request, together with a statement of relevant supporting authority. Even though the individual or organization is urging no particular determination with regard to a proposed or prospective act or acts or transaction or transactions, the party requesting the ruling must state such party's views as to the results of the proposed act or acts or transaction or transactions and furnish a statement of relevant authority to support such views.
.03 A request for an advisory opinion by or for an individual or organization must be signed by the individual or organization or by the individual's or organization's authorized representative. If the request is signed by a representative of an individual or organization, or the representative may appear before the Department in connection with the request, the request must include a statement that the representative is authorized to represent the individual or organization.
.04 A request for an advisory opinion that does not comply with all the provisions of this procedure will be acknowledged, and the requirements that have not been met will be noted. Alternatively, at the discretion of the Department, the Department will issue an information letter to the individual or organization.
.05 If the individual or organization, or the authorized representative, desires a conference in the event the Department contemplates issuing an adverse advisory opinion, such desire should be stated in writing when filing the request or soon thereafter in order that the Department may evaluate whether in the sole discretion of the Department, a conference should be arranged and at what stage of the consideration a conference would be most helpful.
.06 It is the practice of the Department to process requests for information letters and advisory opinions in regular order and as expeditiously as possible. Compliance with a request for consideration of a matter ahead of its regular order, or by a specified time, tends to delay the disposition of other matters. Requests for processing ahead of the regular order, made in writing (submitted with the request or subsequent thereto) and showing clear need for such treatment will be given consideration as the particular circumstances warrant. However, no assurance can be that any letter will be processed by the time requested. The Department will not consider a need for expedited handling to arise if the request shows such need has resulted from circumstances within the control of the person making the request.
.07 An individual or organization, or the authorized representative desiring to obtain information relating to the status of his or her request for an advisory opinion may do so by contacting the Office of Regulatory Standards and Exemptions, Pension and Welfare Benefit Programs, U.S. Department of Labor, Washington, D.C.
Sec. 7. Instructions to individuals and organizations requesting advisory opinions relating to prohibited transactions and common definitions. .01 [Reserved] .02 [Reserved] .03 [Reserved]
Sec. 8. Conferences at the Department of Labor. If a conference has been requested, and the Department determines that a conference is necessary or appropriate, the individual or organization or the authorized representative will be notified of the time and place of the conference. A conference will normally be scheduled only when the Department in its sole discretion deems it will be necessary or appropriate in deciding the case. If conferences are being arranged with respect to more than one request for an opinion letter involving the same individual or organization, they will be so scheduled as to cause the least inconvenience to the individual or organization.
Sec. 9. Withdrawal of requests. The individual or organization's request for an advisory opinion may be withdrawn at any time prior to receipt of notice that the Department intends to issue an adverse opinion. Even though a request is withdrawn, all correspondence and exhibits will be retained by the Department and will not be returned to the individual or organization.
Sec. 10. Effect of Advisory Opinion. An advisory opinion is an opinion of the Department as to the application of one or more sections of the Act, regulations promulgated under the Act, interpretive bulletins, or exemptions. The opinion assumes that all material facts and representations set forth in the request are accurate, and applies only to the situation described therein. Only the parties described in the request for opinion may rely on the opinion, and they may rely on the opinion only to the extent that the request fully and accurately contains all the material facts and representations necessary to issuance of the opinion and the situation conforms to the situation described in the request for opinion.
Sec. 11. Effect of Information Letters. An information letter issued by the Department is informational only and is not binding on the Department with respect to any particular factual situation.
Sec. 12. Public inspection.
.01 Advisory opinions shall be open to public inspection at the Public Disclosure Room, U.S. Department of labor, 200 Constitution Avenue, N.W., Washington, D.C. 20216.
.02 Background files (including the request for an advisory opinion, correspondence between the Department and the individual or organization requesting the advisory opinion) shall be available upon written request. Background files may be destroyed after three years from the date of issuance.
.03 Advisory opinions will be modified to delete references to proprietary information prior to disclosure. Any information considered to be proprietary should be so specified in a separate letter at the time of request. Other than proprietary information, all materials contained in the public files shall be available for inspection pursuant to section 12.02.
.04 The cost of search, copying and deletion of any references to proprietary information will be borne by the person requesting the advisory opinion or the background file.
Sec. 13. Effective date. This procedure is effective August 27, 1976, the date of its publication in the Federal Register.
Signed at Washington, D.C. this 24 day of August 1976.
James D. Hutchinson
Administrator of Pension and Welfare Benefit Programs,
U.S. Department of Labor.
The Internal Revenue Service, US Department of Labor, and Pension Benefit Guaranty Corporation have adopted voluntary correction programs which permit employee benefit plan sponsors and other plan officials to correct certain categories of errors and misfilings with either no, or reduced, penalties, while preserving the plan's tax qualification.
The IRS retirement plan correction program (Employee Plans Compliance Resolution System, covered under Revenue Procedure 2003-44), helps employer sponsors protect participant benefits and keep their plans within the requirements of the Internal Revenue Code. This revenue procedure combined and revised a series of previous IRS remedial programs for correcting plan qualification defects. The program covers qualified retirement plans, Section 403(b) arrangements, SEPs, and SIMPLE IRAs, for a variety of plan qualification failures and violations, including: operational failures, for failure to comply with terms of plan documents; plan document failures, in which retirement plan provisions violate IRS qualification requirements; demographic failures, in which IRS nondiscrimination requirements are not met in the plan document; and the diversion or misuse of plan assets.
Self Correction Program
Under the Self Correction Program certain plan errors can be corrected without IRS involvement. No notification of IRS is required, no fees or penalties are assessed, and the plan and its participants retain tax benefits.
Voluntary Correction Program
The Voluntary Correction Program may be used for plan errors which not eligible for self‑correction. Errors are corrected and the tax benefits of the plan are preserved for plan participants with IRS assistance.
IRS Plan Audits
Errors corrected under either the Self Correction or Voluntary Correction programs are not treated as errors when the IRS audits these plans. For other errors found during IRS examinations, the Audit Closing Agreement Program permits their correction and tax benefit preservation at fees which are lower than would be incurred if the plan had not a participated in the Voluntary Correction Programs.
2. U.S. Department of Labor
The Employee Benefits Security Administration has two voluntary self-correction programs for plan administrators who need help in meeting ERISA requirements: the Delinquent Filer Voluntary Compliance Program promotes, through the assessment of reduced civil penalties, plan administrator compliance with annual reporting obligations under Title I of the Employee Retirement Income Security Act of 1974; the Voluntary Fiduciary Compliance Program allows plan participants and beneficiaries and certain other persons engaging prohibited transactions under the Employee Retirement Income Security Act of 1974 to self‑correct the violations, and avoid potential civil actions by the DOL.
§ Delinquent Filer Voluntary Compliance Program
The Delinquent Filer Voluntary Compliance Program assists plan administrators who have filed Form 5500 late, or not filed it at all, to comply with the filing requirements and pay reduced civil penalties. The IRS has agreed to provide penalty relief under the Code for delinquent Form 5500 Annual Returns/Reports filed for Title I plans where the conditions of this program have been satisfied.
§ Voluntary Fiduciary Correction Program
The Voluntary Fiduciary Correction Program (PTE 2002-51) affords plan sponsors and officials the opportunity to self-correct 15 specific transactions, involving delinquent participant contributions and other violations, prohibited under ERISA. The DOL also relieves these individuals from the payment of excise taxes associated with the transactions covered under the class exemption. It has released a VFC Program FAQ bulletin outlining specific issues and qualifications for participating in the program.
3. Pension Benefit Guaranty Corporation
PBGC provides incentives to self-correct late filings, or other errors involving missed premium deadlines and underpaid premiums.
§ Underpaid Premium Correction Program
Voluntarily self-corrected underpayments made before PBGC sends a notice of premium delinquency or a premium audit, reduces the monthly penalty rate by 80 percent (from 5 percent to 1 percent of the unpaid premium). Premium penalties may be waived for reasonable cause or in other appropriate circumstances.
Missed or improperly prepared reports or notices are assessed lower penalties where the failure is quickly corrected or involves a small plan. Information penalties are waived for reasonable cause or in other appropriate circumstances. Self‑correction is considered a mitigating factor for plans participating in this program.
March 28, 2002 (67 FR 15062)
Agency: Pension and Welfare Benefits Administration, Labor Department.
Frequently Asked Questions about the Voluntary Fiduciary Correction Program
What is the Voluntary Fiduciary Correction Program (VFCP)?
The VFCP is a voluntary enforcement program that encourages the correction of possible violations of Title I of ERISA. The program allows plan officials to identify and fully correct certain transactions such as prohibited purchases, sales and exchanges, improper loans, delinquent participant contributions, and improper plan expenses. The program includes 15 specific transactions and their acceptable means of correction, eligibility requirements, and application procedures. If an eligible party documents the acceptable correction of a specified transaction, the U.S. Department of Labor Employee Benefits Security Administration (EBSA) will issue a no-action letter.
Why did the U.S. Department of Labor create the VFCP?
In part, the U.S. Department of Labor developed the VFCP in response to requests from the employee benefits community for a formal program that would reduce the risk of enforcement action and the imposition of the Section 502(l) penalty. Most of EBSA's investigations are resolved by fiduciaries taking corrective action after EBSA identifies violations. The U.S. Department of Labor recognized that as the private benefit system evolves, there is a need for innovation in voluntary compliance. Publication of the VFCP provides an opportunity to inform plan fiduciaries of their obligations so that complete and fully acceptable corrections may be made without discussion or negotiation with the U.S. Department of Labor.
Who is eligible to participate in the program?
The U.S. Department of Labor will consider an application if neither the plan nor the applicant is under investigation and if the application contains no evidence of potential criminal violations as determined by EBSA.
How long will the U.S. Department of Labor operate the program?
What if the U.S. Department of Labor receives an application from a plan sponsor that has not adequately corrected a violation?
The U.S. Department of Labor may need to negotiate with the sponsor for full correction. In that case, the Section 502(l) penalty may apply to amounts restored pursuant to the negotiation. Depending on the facts, EBSA may also need to conduct a civil or criminal investigation or take other action, such as seeking removal of persons from positions of authority with respect to a plan.
Are there any civil penalties involved in the program?
If the applicant complies with the conditions of the program, no Section 502(l) penalty would apply to correction amounts paid to the plan or to participants. However, the U.S. Department of Labor is not precluded from referring information regarding the transaction to the IRS as required by Section 3003(c) of ERISA, or from imposing civil penalties under Section 502(c)(2) of ERISA based on the failure or refusal to file a timely, complete and accurate annual report Form 5500.
Will the new program provide any certainty to the applicant if he or she complies with the conditions?
Yes. The U.S. Department of Labor acknowledged the need for plan sponsors and their service providers to know that the U.S. Department of Labor would take no further action if the applicant satisfied the terms of the program. Under those circumstances, the U.S. Department of Labor will issue a no-action letter to the applicant. The no-action letter states that the U.S. Department of Labor will not initiate a civil investigation under Title I of ERISA regarding the applicant's responsibility for any transaction described in the no-action letter, nor assess a Section 502(l) penalty. However, the issuance of a no-action letter does not affect the ability of any other government agency, or any other person, to enforce their rights.
How do I apply for relief?
The program includes application procedures. Briefly, one must submit a written narrative and supporting documents describing the transaction and its correction, proof of restoration of losses, and an executed penalty of perjury statement.
Where do I apply?
How can I find out more about the program?
Interested parties may contact the appropriate EBSA regional office. Regional coordinator's assigned to the program will assist you with your questions. Information about the VFCP can also be obtained by calling EBSA's Toll-Free number at 1.866.444.EBSA (3272)
How can I comment on the program?
How do I determine when participant contributions to pension plans are late?
The Department's regulation relating to the definition of Plan Assets - Participant Contributions (29 CFR 2510.3-102) describes a general rule and a maximum time period for pension benefit plans. The general rule provides that the assets of a plan include amounts (other than union dues) that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution to the plan as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets.
The maximum time period for pension benefit plans for transmitting participant contributions shall in no event be later than the 15th business day of the month following the month in which the participant contribution amounts are received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the 15th business day of the month following the month in which such amounts would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant's wages).
The date when participant contributions reasonably can be segregated from the employer's general assets usually will be earlier than the maximum time period for pension plans in the regulation. Thus, when contributions reasonably can be segregated from the employer's general assets in a shorter time period, delay in forwarding the contributions, even a delay that does not exceed the maximum time period under the regulation, may cause a breach of fiduciary duty under Title I of ERISA that may be corrected under the Voluntary Fiduciary Correction Program (VFCP). Moreover, where the contributions have been delinquent longer than the maximum time period and the contributions could have been segregated earlier than the maximum time period, the loss date (as defined in the program), for purposes of calculating lost earnings (as defined in the program), is the date on which the contributions reasonably could have been segregated and not the maximum time period.
How do I show the earliest date contributions can be segregated for purposes of preparing a VFCP application?
Program applicants are reminded that the program requires that the applicant document, under its particular circumstances, the earliest date on which the contributions reasonably could have been segregated from the employer's general assets. This documentation may consist of the plan sponsor's past withholding and remittance history, the sponsor's withholding and remittance process, and the minimum period between withholding and remittance.
Participant contributions to the plan were delinquent, but the dollar amount to correct is very small. Do I have to participate in the VFCP?
If participant contributions are delinquent, plan officials must take appropriate action to correct the violation. Although plan officials are not required to file an application with the Department under the VFCP to correct a violation, the VFCP is available to correct a loss of any amount resulting from a transaction covered by the program. Participation in the VFCP is voluntary. However, if you do not file an application with the Department, you cannot obtain the relief available under the program. Moreover, if the Department discovers the violation on audit, and the correction was not complete for purposes of the program, a civil penalty may be assessed on any additional amount required by the Department to fully correct the violation following the Department's audit of the plan.
Can I use the VFCP to correct a failure to forward participant loan repayments to a plan in a timely fashion?
Yes. In Advisory Opinion 2002-02A, the Department concluded that, while not subject to the participant contribution regulation (29 C.F.R. § 2510.3-102), participant loan repayments paid to or withheld by an employer for purposes of transmittal to an employee benefit plan are sufficiently similar to participant contributions to justify, in the absence of regulations providing otherwise, the application of principles similar to those underlying the final participant contribution regulation for purposes of determining when such repayments become assets of the plan. Specifically, the Advisory Opinion concluded that participant loan repayments paid to or withheld by an employer for purposes of transmittal to the plan become plan assets as of the earliest date on which such repayments can reasonably be segregated from the employer's general assets. Given the similar treatment of participant contributions and loan repayments, the Department has determined that it is appropriate to permit delinquent participant loan repayments to be corrected under the VFCP in the same manner as delinquent participant contributions.
I have determined that participant contributions to the pension plan were delinquent and I want to correct under the program. How do I determine what rate of return to use for calculating earnings on the delinquent contributions?
In order to correct under the program, you will need to calculate the lost earnings on the delinquent contributions. For purposes of correction under the program, the rate of return to use is the highest of:
The plan investments are selected by the plan fiduciaries. How do I calculate the overall rate of return for the plan?
Where there are no distributions or expense disbursements during the period of delinquency, the overall rate of return for the plan is calculated by subtracting the amount of plan assets on the date contributions were due under the Department's regulation from the amount of plan assets on the date the delinquent contributions are repaid to the plan, but not including the addition of the delinquent contributions, divided by the amount of assets on the date the contributions were due.
Where there have been distributions or expense disbursements during the period of delinquency, applicants may demonstrate the actual average rate of return of all the investments of the plan where they have evidence to show such rate of return. In the alternative, applicants may, for administrative convenience, calculate the overall rate of return by using a fraction where the numerator is the amount of plan assets on the date the contributions are repaid minus the amount of plan assets on the date contributions were due, but not including the addition of the delinquent contributions, plus any distributions and expense disbursements made between the date the contributions were repaid and the date the contributions were due, and the denominator is the amount of assets on the date the contributions were due.
The plan investments are participant directed. How do I calculate the rate of return for purposes of determining lost earnings on delinquent contributions?
When calculating the rate of return for participant-directed plans, it is necessary to calculate the rate of return for each individual participant account. The same method used for calculating the overall plan rate of return for a plan where the investments are selected by the plan fiduciaries is used for each participant account. For administrative convenience, the applicant may use the highest rate of return of any plan investment option as the rate of return for each individual participant account.
If the plan investments are participant directed and certain participants have not designated any investment options, what rate of return do I use for those participants for purposes of determining earnings on delinquent contributions?
For those participants in a participant-directed plan who have not designated any investment options, the applicant may use the plan's overall rate of return for those participants during the period of the delinquency.
How do I determine what is the restoration of profits amount for purposes of determining earnings on delinquent contributions?
The restoration of profits amount is the amount earned by the fiduciary or party in interest on the use of the monies that should have been forwarded to the plan for the duration of the delinquency. If the purpose for which the monies were used and the earnings thereon are ascertainable, then those actual earnings are the amount of the restoration of profits.
What is the IRC §6621 rate and how do I find out what the rate was for the applicable time period?
Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and underpayments. The VFCP uses the underpayment rate as the rate of return that must be examined for determining lost earnings where it is not possible to ascertain the restoration of profits amount. The Internal Revenue Service publishes the §6621(a)(2) rate quarterly. The rate announcements can be found on the internet.
May 3, 2004 (FR 04-10406)
Voluntary Correction Program
Agency: Pension Benefit Guaranty Corporation
Effective Date: May 3, 20024
Summary: The Pension Benefit Guaranty Corporation (''PBGC'') is announcing a Participant Notice Voluntary Correction Program (''VCP''). This program, which generally covers Participant Notices for the 2002 or 2003 plan year that were not issued as required, is designed to encourage plan administrators to correct recent compliance failures without penalty and to facilitate plan administrators' future compliance. The PBGC will not pursue any failure to provide a pre-2002 Participant Notice unless there is a 2002 or 2003 participant Notice failure that is covered by the VCP but that does not meet the requirements for penalty relief under the VCP. Elsewhere in today's Federal Register, the PBGC is proposing a new Participant Notice penalty policy.
Dates: To meet the requirements for penalty relief under the Participant Notice Voluntary Correction Program with respect to a Participant Notice failure for the 2002 or 2003 plan year, the plan administrator must: (1) Issue a VCP corrective notice by the 2004 Participant Notice due date (for calendar year plans, generally October 4, 2004, November 15, 2004, or December 15, 2004); and (2) notify the PBGC within 30 days after the 2004 Participant Notice due date.
For further information contact: Harold J. Ashner, Assistant General Counsel, or Catherine B. Klion, Attorney, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026; 202-326-4024 (TTY/TDD users may call the Federal relay service toll-free at 1-800-877-8339 and ask to be connected to 202-326-4024.)
Supplementary information: Overview of Participant Notice Requirements Section 4011 of the Employee Retirement Income Security Act of 1974 (''ERISA'') requires certain underfunded plans to issue a notice to participants of the plan's funding status and the limits on the PBGC's guarantee (''Participant Notice''). The Participant Notice helps to ensure that participants better understand the financial status of their plans and the consequences that plan underfunding may have on their promised benefits. The PBGC's implementing regulations are at 29 CFR part 4011. In general, a plan administrator must issue a Participant Notice for a plan year if a variable rate premium (which is tied to plan underfunding) is payable for that plan year, unless the plan meets the ''DRC Exception Test'' for that plan year or for the prior plan year. However, the Job Creation and Worker Assistance Act of 2002 (JCWAA) made a temporary change to the premium interest rate that did not apply for purposes of determining whether a Participant Notice was required. Therefore, a plan administrator may be required to provide a Participant Notice for the 2002 or 2003 plan year even if a variable rate premium is not payable for that plan year. The Pension Funding Equity Act of 2004 (PFEA), which was signed into law by the President on April 10, 2004, changes the rules for determining the required interest rate for premium payment years beginning in 2004 or 2005. Under PFEA, plan administrators may use the premium interest rate for purposes of determining whether a Participant Notice is required. Thus, a plan administrator may be required to issue a Participant Notice for the 2004 or 2005 plan year only if a variable rate premium is payable for that plan year. A Participant Notice for a plan year is due in that plan year-''two months after the due date (with extensions) for the plan's Form 5500 for the prior plan year. (The due date for a plan's Participant Notice for a plan year is keyed to the due date for the plan's Summary Annual Report for the prior plan year so that the two documents may be issued together.) For calendar year plans, common due dates for the 2004 Participant Notice are therefore October 4, 2004, November 15, 2004, and December 15, 2004. There are a variety of rules governing who is entitled to receive the Participant Notice and the form, content, and manner of issuance of the Participant Notice. Plan administrators are required to certify on the annual PBGC premium filing (Form 1 or Form 1-EZ) that, for the prior plan year: (1) A Participant Notice was not required to be issued; (2) a Participant Notice was issued as required; or (3) an explanation is attached (e.g., because a required Participant Notice was issued late). See appendix A for a detailed explanation of the requirements governing Participant Notices.
Compliance and Enforcement Background The Participant Notice requirement went into effect in the 1995 plan year for large plans (generally plans with more than 100 participants) and in the 1996 plan year for small plans (generally plans with 100 or fewer participants). In the first few years after the requirement went into effect, plan administrators of only a relatively small number of defined benefit plans had to provide a Participant Notice, reflecting the fact that plans were better funded at that time. The PBGC conducted compliance surveys and found that both large plan and small plan compliance was high for those plan years. In the last several years, however, because of low interest rates and poor investment returns, more plans have become underfunded and, therefore, many plan administrators have been required to issue a Participant Notice for the first time. Recent PBGC audits have found higher rates of noncompliance with the Participant Notice requirement than in prior years. Much of the noncompliance appears to have resulted from a lack of awareness or understanding of the applicable requirements rather than from an attempt to avoid disclosure. Nonetheless, plan participants deserve to know if their plans are underfunded. As a result, the PBGC is expanding its Participant Notice enforcement program with a view toward more actively auditing compliance and assessing penalties for noncompliance.
Overview of Voluntary Correction Program As a transition to this expanded enforcement program, the PBGC is launching a Participant Notice Voluntary Correction Program (''VCP'') designed to encourage plan administrators to correct past compliance failures and to facilitate their future compliance with Participant Notice requirements. The VCP generally covers Participant Notice failures for the 2002 and 2003 plan years. Under this program, the PBGC will not assess penalties for failure to provide a 2002 or 2003 Participant Notice as required if the failure is corrected in accordance with the guidelines in this notice. (The VCP focuses on the 2002 and 2003 plan years in part because the PBGC is concerned that some plan administrators may have misunderstood the effect of JCWAA on their Participant Notice obligations for those plan years.) The PBGC will not pursue failures to provide a pre-2002 Participant Notice unless there is a 2002 or 2003 by the VCP but that does not meet the requirements for penalty relief under the VCP. Focusing the PBGC's enforcement resources primarily on 2002 and later Participant Notice failures will concentrate those resources effectively and limit disclosures to plan years that are most relevant to participants. The PBGC anticipates that many plan administrators will want to participate in the VCP as a precaution, even in the absence of a known Participant Notice failure. Participation in the VCP will not affect the likelihood that a plan will be selected for audit of compliance with the requirement to issue a post-VCP Participant Notice (see ''Participant Notices Covered by VCP''), with the PBGC premium requirement, or with any other PBGC requirement.
Participant Notices Covered by VCP The VCP covers any Participant Notice for a plan's 2002 or 2003 plan year: (1) That is due before May 7, 2004; and (2) that is not, as of May 7, 2004, the subject of a PBGC audit proceeding. For purposes of determining whether the VCP covers a plan's Participant Notice, the date the Participant Notice is due is determined without regard to any deadline extension resulting from a disaster relief notice. For example, if a calendar year plan's 2003 Participant Notice was originally due on December 15, 2003, but as a result of a disaster relief notice the due date was extended to May 14, 2004, the VCP would cover the plan's 2003 Participant Notice because the extension to May 14, 2004, would be disregarded.
Requirements for VCP Penalty Relief For any Participant Notice that is covered by the VCP, the PBGC will not assess a penalty if the plan administrator, in accordance with the guidelines in this notice: (1) Issues a VCP corrective notice; and (2) notifies the PBGC that it is participating in the VCP. (If the only failure was a late issuance corrected before May 7, 2004, see ''Special rule for late 2002/2003 notices already corrected.'') VCPCorrective Notice The PBGC believes that many of the plans that will participate in the VCP to correct a Participant Notice failure for 2002 or 2003 will also be required to issue a Participant Notice for 2004. Accordingly, the PBGC has structured the VCP corrective notice requirements to enable such plans to issue a single notice that meets the requirements for a VCP corrective notice and for the 2004 Participant Notice. This approach will minimize the confusion for participants that could result from the issuance of multiple notices at or about the same time. The VCP corrective notice must meet all of the requirements that apply to the 2004 Participant Notice (or, if the plan is not required to issue a 2004 Participant Notice, all of the requirements that would apply if it were required), except as otherwise provided in the guidelines in this notice. Normally the 2004 Participant Notice would have to include the ''funded current liability percentage'' for the 2003 plan year or for the 2004 plan year. Under the VCP, whether the plan administrator is correcting only a 2002 failure, only a 2003 failure, or both a 2002 and a 2003 failure, the VCP corrective notice: (1) Must include the funded current liability percentage for the 2002 plan year and for the 2003 plan year, and (2) may include as well the funded current liability percentage for the 2004 plan year. In all other respects, the VCP corrective notice must contain the information required in a 2004 Participant Notice (e.g., current information on funding waivers, missedcontributions, and limitations on the PBGC's guarantee). Although the plan administrator is not required to inform participants that it had a Participant Notice failure for the 2002 or 2003 plan year (or for both), or that it is participating in a ''voluntary correction program,'' a plan administrator may choose to include that information in the VCP corrective notice. Appendix B contains a model VCP corrective notice that plan administrators may use to meet VCP requirements. The PBGC will treat a VCP corrective notice that is issued in accordance with the guidelines in this notice as meeting the requirements for the 2004 Participant Notice. Plan administrators should take special note that because the VCP corrective notice is tied to the requirements for the 2004 Participant Notice rather than to the requirements for the 2002 or 2003 Participant Notice that was not issued as required, the VCP corrective notice is required to be issued only to those persons entitled to receive the plan's 2004 Participant Notice (or that would be entitled to receive the plan's 2004 Participant Notice if it were required). Thus, there is no need to issue the VCP corrective notice to those persons who were entitled to receive the 2002 or 2003 Participant Notice that was not issued as required but who are not entitled to receive the 2004 Participant Notice (e.g., a participant whose entire benefit has been annuitized or paid out in a lump sum). Notice to PBGC The plan administrator must notify the PBGC that it is participating in the VCP no later than the 30th day after the due date for issuing the VCP corrective notice. The notification must include a copy of the VCP corrective notice and the name and telephone number of a person for the PBGC to contact with any questions. Plan administrators may notify the PBGC electronically through the PBGC's Web site at http:// www.pbgc.gov/participantnotice, by fax at 202-336-4197, or by mail, commercial delivery service, or hand at Contracts and Control Review Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Suite 580, Washington, DC 20005-4026. The PBGC will promptly issue a written acknowledgment of the notification. Plan administrators should keep the acknowledgment as proof of meeting the VCP requirement of notifying the PBGC.
Special Rule for Late 2002/2003 Notices Already Corrected If a plan administrator's only failure with respect to a 2002 or 2003 Participant Notice was late issuance and the failure has been corrected before May 7, 2004, the PBGC will treat the plan administrator as having participated in the VCP and will assess no penalty for that 2002 or 2003 failure (and will not pursue any pre-2002 Participant Notice failure) without requiring that the plan administrator issue a VCP corrective notice or notify the PBGC of the plan's participation in the VCP.
Effect of VCP on Certification Requirements Ordinarily, a plan administrator that filed an erroneous certification on the annual PBGC premium filing as to whether a Participant Notice was required for the prior plan year and, if so, whether it was issued as required would have to file an amended certification. However, if the plan administrator notifies the PBGC of the plan's participation in the VCP, the PBGC will treat the notification as effectively amending any erroneous certification filed on or before May 7, 2004, with respect to a 2002 or 2003 Participant Notice. The PBGC will take no enforcement action based on the erroneous prior certification if the plan administrator of a plan that meets the requirements for penalty relief under the VCP amends (or effectively amends) the erroneous prior certification. meet the requirements for VCP penalty relief will be required to check a box on the 2005 PBGC premium filing notifying the PBGC of the plan's participation in the VCP. This requirement is in addition to the Notice to PBGC requirement described above that must be met to qualify for VCP penalty relief, except under ''Special rule for late 2002/2003 notices already corrected.''
Compliance Assistance The PBGC has developed written guidance on the requirements of the VCP, including a Fact Sheet and Frequently Asked Questions. All information related to the VCP and to Participant Notice requirements generally is available on the PBGC's Web site at http://www.pbgc.gov/ participantnotice. In addition, plan administrators seeking guidance on Participant Notice compliance questions, including questions about the VCP, may submit questions electronically through that Web site or call the toll-free telephone number at the PBGC's Practitioner Customer Service Center (1-800-736-2444). Plan administrators may also contact the PBGC to request appropriate modifications to the VCP requirements on a case-by-case basis. For example, in the case of a 2002 or 2003 ''partial'' failure such as a failure to provide the notice to some of the participants or a failure to include in the notice some required information, the PBGC will work with the plan administrator to determine what type of correction, if any, would be needed to address the partial failure in order to qualify for penalty relief under the VCP.
Future Participant Notice Penalties Elsewhere in today's Federal Register, the PBGC is proposing a new Participant Notice penalty policy. The PBGC intends to publish its final Participant Notice penalty policy as soon as practicable after considering public comments.
Compliance With Rulemaking Guidelines The PBGC has determined, in consultation with the Office of Management and Budget, that this Notice is a ''significant regulatory action'' under Executive Order. The Office of Management and Budget has therefore reviewed this notice under Executive Order 12866. The collection of information requirements under the VCP have been approved by the Office of Management and Budget under control numbers 1212-0009 (expires December 31, 2006) and 1212-0050 (expires November 30, 2004). 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. Because this action deals only with a general statement of PBGC enforcement policy, it is not subject to the notice and comment rulemaking requirements or delayed effective date requirements under section 553 of the Administrative Procedure Act. Because no general notice of proposed rulemaking is required, the Regulatory Flexibility Act does not apply. See 5 U.S.C. 601(2), 603, 604. Issued in Washington, DC, this 3rd day of May, 2004.
Bradley D. Belt,
Executive Director, Pension Benefit Guaranty Corporation.
Summary of Participant Notice Requirements Statutory and Regulatory Framework Section 4011 of ERISA and 29 CFR part 4011 require certain underfunded plans to issue an annual notice to participants (a ''Participant Notice'') that discloses the plan's funding status and the limits of the PBGC's guarantee.
When Requirement Applies In general, a plan administrator is required to provide a Participant Notice for a plan year if a variable rate premium (which is tied to plan underfunding) is payable for that plan year, unless the plan meets a funding-related test tied to the ''deficit reduction contribution'' rules-the ''Deficit Reduction Contribution (''DRC'') Exception Test''-for that plan year or for the prior plan year. See § 4011.3. However, as discussed below under Effect of JCWAA on Requirements, a plan administrator may be required to provide a Participant Notice for the 2002 or 2003 plan year even if a variable rate premium is not payable for that plan year. In general, the DRC Exception Test requires a plan to be at least 90 percent funded, although a plan that is at least 80 percent funded meets the test if it was at least 90 percent funded for two consecutive plan years out of the last three. There are special rules under the DRC Exception Test that allow small plans to avoid doing additional calculations by using numbers they already reported on the Schedule B to their Form 5500. See § 4011.4. Most new and newly covered plans are exempt from the Participant Noticerequirement. See § 4011.5. Due Dates A participant notice for a plan year is due in that plan year. The due date for issuing a Participant Notice for a plan year is two months after the plan's due date, with extensions, if any, for filing the Form 5500 for the prior plan year. (The due date for a plan's Participant Notice for a plan year is keyed to the due date for the plan's Summary Annual Report for the prior plan year so that the two documents may be issued together.) The plan administrator may change the date of issuance from one plan year to the next, provided that the effect of any change is not to avoid disclosing a minimum funding waiver or a missed contribution. See § 4011.8.
Persons Entitled To Receive Notice A plan administrator must provide a Participant Notice to participants, beneficiaries of deceased participants, alternate payees, and unions. To determine who is a person entitled to receive a Participant Notice, the plan administrator may select any date during the period beginning with the last day of the prior plan year and ending with the date on which the Participant Notice is due, provided that a change in the date from one plan year to another does not exclude a substantial number of participants and beneficiaries. See § 4011.7.
Manner of Issuance The plan administrator must issue a Participant Notice using measures reasonably calculated to ensure actual receipt by the persons entitled to receive it. A Participant Notice may be issued together with another document, such as the Summary Annual Report (which is due at the same time as the Participant Notice), as long as it is in a separate document. See § 4011.9, as amended by the PBGC's final rule published October 28, 2003 (68 FR 61344, 61353).
Form of Notice A Participant Notice must contain the plan's ''Notice Funding Percentage''-the plan's ''funded current liability percentage'' as defined in section 302(d)(9)(C) of ERISA- for the current plan year or the prior plan year, along with the date as of which that percentage is determined. The Participant Notice also must contain information on minimum funding waivers and missed contributions, a summary of plan benefits guaranteed by the PBGC with an explanation of the limitations on the guarantee, and other information specified in the regulation. See § 4011.10(b) and (c). Additional information must be in a separate document. See § 4011.10(d). A Participant Notice must be readable and written in a manner calculated to be understood by the average plan participant and not to mislead recipients. See § 4011.10(a). Plan administrators of plans with specified numbers or percentages of participants literate only in the same non-English language must provide either an English-language Participant Notice with aprominent legend in the common non-English language offering assistance in that language or a Participant Notice in the common non-English language. See § 4011.10(e). The Participant Notice regulation contains a Model Participant Notice as an example of a Participant Notice that meets the requirements of § 4011.10. Each year the PBGC issues a Technical Update that provides specific information relating to that year's Participant Notice and updates the Model Notice. Effect of JCWAA on Requirements Section 405 of the Job Creation and Worker Assistance Act of 2002 (''JCWAA'') increased the required interest rate for calculating vested benefits for the PBGC variable rate premium under section 4006(a)(3)(E)(iii) of ERISA from 85 percent to 100 percent of the yield on 30-year Treasury securities. The statutory change applies only to plan years beginning in 2002 or 2003. However, JCWAA does not allow use of 100 percent of the Treasury yield to determine whether a PBGC variable rate premium is payable for purposes of determining whether a Participant Notice is required. Thus, plan administrators must continue to use 85 percent of the Treasury yield for this purpose. Section 405 of JCWAA also increased, for plan years beginning in 2002 or 2003, the maximum interest rate (from 105 percent to 120 percent of the four-year weighted average of the yield on 30-year Treasury securities) that may be used to calculate current liability for purposes of the DRC funding requirement. The change in the maximum interest rate used to calculate current liability for DRC funding purposes can affect, for the 2002, 2003, and certain future plan years: (1) Whether a plan administrator is required to issue a Participant Notice; and (2) the plan funding information required to be disclosed in a Participant Notice. The effect of JWCAA on Participant Notice requirements is fully discussed in PBGC Technical Updates 02-2 and 03-17, both available on the PBGC's Web site, http:// www.pbgc.gov/participantnotice.
CertificationThe plan administrator is required to certify on the annual PBGC premium filing (Form 1 or Form 1-EZ) that, for the prior plan year: (1) A Participant Notice was not required to be issued; (2) a Participant Notice was issued as required; or (3) an explanation is attached (e.g., because a required Participant Notice was issued late).
Penalties If a Participant Notice is not issued as required, the PBGC may assess penalties under section 4071 of ERISA and 29 CFR part 4071. For more information on Participant Notice penalties, see the PBGC's proposal on such penalties published elsewhere in today's Federal Register
Appendix B Model VCP Corrective Notice The following is an example of a corrective notice that satisfies the requirements of the Participant Notice Voluntary Correction Program when the required information is filled in (subject to § 4011.10(d)-(e), as applicable). It also satisfies the requirements of § 4011.10 for the 2004 Participant Notice.
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. [You may include a statement to the effect that the plan had a prarticipant notice failure for the 2002 plan year or for the 2003 plan year (or for both). You may also include a statement to the effect that the plan is participating the PBGC'S Participants Notice Voluntary Correction Program.] Your Plan's Funding As of [Applicable date], your plan had [Insert plan's funded current liability percentage (as defined in section 302(d)(9)(C) of ERISA) for the 2002 plan year] percent of the money needed to pay benefits promised to employees and retirees. As of [Applicable date], your plan had [Insert plan's funded current liability percentage (as defined in section 302(d)(9)(C) of ERISA) for the 2003 plan year] percent of the money needed to pay benefits promised to employees and retirees. [You may also include the following statement: As of [Applicable date], your plan had [Insert plan's funded current liability percentage (as defined in section 302(d)(9)(C) of ERISA) for the 2004 plan year] percent of the money needed to pay benefits promised to employees and retirees.] [SEE § 4011.10(c)(2) For special rules small plans may use to determine the plan's funded current liability percentage.] 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 paln 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 terminates 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 $3,698.86 per month or $44,386.32 per year for a 65-year-old person in a plan that terminates in 2004. [If you issue this notice after the maximum guaranteed benefit information for plans that terminate in 2005 is announced, you may add or substitute that information in order to provide participants with more current information. The PBGC expects to make that information available on its website at www.PBGC.gov in early November 2004.] The maximum benefit may be reduced for an individual who is younger than age 65. For example, it is $1,664.49 per month or $19,973.88 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 $2,922.10 per month or $35,065.20 per year at age 62; It is $2,404.26 per month or $28,851.12 per year at age 60. If the plan provides for normal retirement before AGE 65, you must include the normal retirement age.] [If you issue this notice after the maximum guaranteed benefit information for plans that terminate in 2005 is announced, you may add or substitute that information in order to provide participants with more current inforamtion. The PBGC expects to make that information available on its web site at www.PBGC.gov in early November 2004.] [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 terminates, 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 terminates. 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 on the PBGC's Web site at www.pbgc.gov. Issued: [Insert at least month and year] [FR Doc. 04-10406 Filed 5-6-04; 8:45 am] Billing Code 7708-01-P
Class Exemption to Permit Certain Transactions Identified in the Voluntary Fiduciary Correction Program
March 28, 2002 (67 FR 15083)
Agency: Department of Labor, Employee Benefits Security Administration
Action: Grant of Class Exemption
Effective Date: November 25, 2002
Section I: Eligible Transactions
The sanctions resulting from the application of section 4975(a) and (b) of the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall not apply to the following eligible transactions described in section 7 of the Voluntary Fiduciary Correction (VFC) Program (67 FR 15061, March 28, 2002), provided that the applicable conditions set forth in Sections II, III and IV are met:
A. Failure to transmit participant contributions to a pension plan within the time frames described in the Department's regulation at 29 CFR section 2510.3-102, (see VFC Program, section 7.A.1.), and/or the failure to transmit participant loan repayments to a pension plan within a reasonable time after withholding or receipt by the employer.
B. Loan at a fair market interest rate to a party in interest with respect to a plan. (See VFC Program, section 7.B.1.).
C. Purchase or sale of an asset (including real property) between a plan and a party in interest at fair market value. (See VFC Program, sections 7.C.1. and 7.C.2.).
D. Sale of real property to a plan by the employer and the leaseback of the property to the employer, at fair market value and fair market rental value, respectively. (See VFC Program, section 7.C.3.).
Section II: Conditions
A. With respect to a transaction involving participant contributions or loan repayments to pension plans described in Section I.A., the contributions or repayments were transmitted to the pension plan not more than 180 calendar days from the date the amounts were received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the date the amounts otherwise would have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant's wages).
B. With respect to the transactions described in Sections I.B., I.C., or I.D., the plan assets involved in the transaction, or series of related transactions, did not, in the aggregate, exceed 10 percent of the fair market value of all the assets of the plan at the time of the transaction.
C. The fair market value of any plan asset involved in a transaction described in Sections I.C. or I.D. was determined in accordance with section 5 of the VFC Program.
D. The terms of a transaction described in Sections I.B., I.C., or I.D. were at least as favorable to the plan as the terms generally available in arm's-length transactions between unrelated parties.
E. With respect to any transaction described in Section I, the transaction was not part of an agreement, arrangement or understanding designed to benefit a party in interest.
F. (1) With respect to any transaction described in Section I, the applicant has not taken advantage of the relief provided by the VFC Program and this exemption for a similar type of transaction(s) identified in the current application during the period which is three years prior to submission of the current application. (2) Notwithstanding the foregoing, Section II.F.(1) shall not apply to an applicant provided that: (a) The applicant was a broker-dealer registered under the Securities Exchange Act of 1934, a bank supervised by the United States or a State thereof, a broker-dealer or bank subject to foreign government regulation, an insurance company qualified to do business in a State, or an affiliate thereof; (b) The applicant was a party in interest (including a fiduciary) solely by reason of providing services to the plan or solely by reason of a relationship to such service provider described in section 3(14)(F), (G), (H) or (I) (and/or the corresponding provisions of section 4975 of the Code); (c) Neither the applicant nor any affiliate (i) was a fiduciary (within the meaning of section 3(21)(A) of ERISA) with respect to the assets of the plan involved in the transaction and (ii) used its discretion to cause the plan to engage in the transaction; (d) Individuals acting on behalf of the applicant had no actual knowledge or reason to know that the transaction was not exempt pursuant to a statutory or administrative exemption under ERISA and/or the Code; and (e) Prior to the transaction, the applicant established written policies and procedures that were reasonably designed to ensure compliance with the prohibited transaction rules and the applicant engaged in periodic monitoring for compliance.
Section III: Compliance with VFC Program
A. The applicant has met all of the applicable requirements of the VFC Program.
B. PWBA has issued a no action letter to the applicant pursuant to the VFC Program with respect to a transaction described in Section I.
Section IV: Notice
A. Written notice of the transaction(s) for which the applicant is seeking relief pursuant to the VFC Program and this exemption, and the method of correcting the transaction, was provided to interested persons within 60 calendar days following the date of the submission of an application under the VFC Program. A copy of the notice was provided to the appropriate Regional Office of the United States Department of Labor, Pension and Welfare Benefits Administration within the same 60-day period, and the applicant indicated the date upon which notice was distributed to interested persons. Plan assets were not used to pay for the notice. The notice included an objective description of the transaction and the steps taken to correct it, written in a manner reasonably calculated to be understood by the average plan participant or beneficiary. The notice provided for a period of 30 calendar days, beginning on the date the notice was distributed, for interested persons to provide comments to the appropriate Regional Office. The notice included the address and telephone number of such Regional Office.
B. Notice was given in a manner that was reasonably calculated, taking into consideration the particular circumstances of the plan, to result in the receipt of such notice by interested persons, including but not limited to posting, regular mail, or electronic mail, or any combination thereof. The notice informed interested persons of the applicant's participation in the VFC Program and intention of availing itself of relief under the exemption.
Signed at Washington, DC, this 11th day of November, 2002.
Ivan L. Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 02-29799 Filed 11-22-02; 8:45 am]