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ARA Makes Recommendations to PBGC on Coverage Determination Form

Advocacy

The American Retirement Association (ARA) on Feb. 4 submitted a comment letter to the Pension Benefit Guaranty Corporation (PBGC) on the agency’s proposed form and instructions that would enable it to obtain information it needs in order to make coverage determinations.

The PBGC had announced Dec. 3 that it was seeking the approval of the Office of Management and Budget on the proposed form.

The ARA made a variety of recommendations to the PBGC concerning the form and instructions, as well as actions the PBGC can take concerning the form and the procedures it follows in gathering and presenting associated information. The ARA suggests that coverage determinations not be automatically applied on a fully retroactive basis, as facts and participant coverage under the plan established earlier may have changed; rather, that a fully retroactive determination could be requested at the option of the plan sponsor filing for the coverage determination.

The ARA suggests that the PBGC:

  • espouse additional flexibility to allow prospective coverage determinations before a plan is fully established, and that can be requested at the option of the plan sponsor filing for the coverage determination;
  • issue a periodic report summarizing their findings on coverage determinations, perhaps on a quarterly or semiannual basis;
  • consider allowing a streamlined form to be submitted for coverage determinations before a plan is established or when a second determination is being requested; and
  • clarify in the instructions that previous coverage determinations it made do not need to be re-submitted by the plan sponsor using the new form.

In general regarding the proposed form and instructions, the ARA recommends the following.

Numbering the questions within each part of the form, which the ARA argues would make referencing the information easier, decrease the chances of incorrect boxes being checked in communications with plan sponsors, and make the forms more accurate during the PBGC’s review.

Leaning toward a simpler, less complex form with adequate, but minimal, information necessary to complete a proper coverage determination. The ARA argues that the simpler the form, the more requests that would be submitted, while the more complex and onerous the form, the less requests that would be submitted.

Differentiating between legal documents that the PBGC needs to see, and information that can be submitted in a spreadsheet or other form of document.

Drilling down, the ARA also makes recommendations regarding specific parts of the proposed form.

In Part I, identifying the filer, the ARA recommends including boxes for “Enrolled actuary for the plan,” “Plan attorney” and “Third party administrator,” and clarifying who can be an authorized contact.

In Part II, 3rd section, the ARA recommends asking directly if there are any knowing material omissions, and that this question be shifted to Part IX.

In Part III, 4th section, 1st box, the ARA recommends that the PBGC reconsider whether this information is necessary, perhaps listing Participant A, B, C, etc., rather than listing by name.

In Part III, 4th section, the ARA recommends that the PBGC clarify what information is required where non-corporate plan sponsors are operating in community property states. It also recommends that the PBGC state in the instructions that spousal ownership be determined in accordance with relevant state law.

In Part III, 4th section, the ARA recommends that because partnership agreements themselves may be burdensome for the filer to provide, a simple listing of the partners be provided instead.

In Part IV, 2nd section, 7th box, the ARA recommends that the PBGC clarify that the information called for regarding dates and amounts paid to participants within the last six years may be provided in a spreadsheet listing.

Brian Graff, ARA Executive Director and CEO, as well as Marty Pippins, Executive Director of the ASPPA College of Pension Actuaries (ACOPA), signed the letter.