The Pension Protection Act of 2006 requires both single and multiemployer defined benefit pension plans to provide annual plan funding notices. These funding notices inform pension plan participants about the financial status of their pension plans.
Under prior law, all private retirement plans were required to provide overviews of their financial status to employees in “Summary Annual Reports.” In addition, multiemployer defined benefit pension plans and underfunded single employer defined benefit plans were required to tell employees if their plans were underfunded, and the extent that their benefits were guaranteed by the federal pension insurance program if the plan terminated.
The Pension Protection Act eliminates the Summary Annual Report and requires all defined benefit pension plans, funded and underfunded, single and multiemployer plans to distribute annual plan funding notices to all plan participants and beneficiaries, labor organizations representing participants, employers having an obligation to contribute under the plan, and the PBGC.
The notices must contain the following information:
Additionally, multiemployer plans must provide information on whether the plan was in endangered or critical status during the current year. Under the Pension Protection Act, multiemployer plans that are underfunded by a specific percentage are categorized as either in critical or endangered funding status. Depending on the degree of underfunding these plans must adopt rehabilitative plans designed to increase the funding level of the plans. Read about benefit cutbacks the Pension Protection Act permits in certain underfunded multiemployer plans.
For most plans, the plan funding notice must be provided within 120 days after the end of the plan year. For plans covering less than 100 employees, the notice is not due until seven months after the end of the plan year or longer if the plan is granted extensions. The new provision tooks effect in 2008.
Read Section 501 of the Pension Protection Act of 2006 Public Law 109-280< Back