Employers that derisk their pension funds now have to disclose risk transfer information to the Pension Benefit Guaranty Corp. as part of paying their annual pension insurance premiums to the federal agency.
The risk-transfer disclosure requirement, which the PBGC said Monday has been approved by the Office of Management and Budget, will affect 2015 premium filings, which for most employers are due Oct. 15.
In cases when employers offer to convert plan participants' monthly annuity to a cash lump sum, employers will have to answer four questions: How many plan participants not in pay status, such as retirees, were offered the option? How many of those participants took it? How many plan participants in pay status were offered the option? How many of those employees took it?
In cases when employers buy a group annuity from an insurer and the insurer then provides the pension benefits to participants, the employer will have to report how many participants were in pay status and how many were not when the annuity was purchased.
However, employers can disregard annuity purchases and lump-sum offers made less than 60 days before the PBGC premium filing was made.
The answers to the PBGC questions relate to lump-sum offers and annuity purchases that occurred in 2014, and those in 2015 that occurred 60 days prior to when plan sponsors made their PBGC premium payments.
Benefit experts say the new requirement will add to the administrative burden associated with sponsoring a pension fund.
“We are concerned about additional administrative requirements on a system that is already heavily regulated with complex reporting requirements,” said Alan Glickstein, a senior retirement consultant with Towers Watson.
“It is additional and, in some cases, near real-time reporting that can be a significant burden” on plan sponsors, Mr. Glickstein added.
The new requirement to file the risk transfer information comes amid a surge of employers over the last few years who have engaged in such transactions, most recently including Kimberly-Clark Corp., Bristol-Myers Squibb Co., Motorola Solutions Inc. and NCR Corp.
The potential effect of such transactions on the PBGC's premium base was the driving force behind the move to obtain risk transfer information.
Risk transfers “deserve PBGC's attention because, among other things, they lower the participant count and reduce premium income,” the agency said earlier in a filing with the OMB. “Premium losses have the potential to degrade PBGC's ability to carry out its mandate” to guarantee benefits.