Aon Hewitt urged the Pension Benefit Guarantee Corporation (PBGC) to rethink its proposed regulations that toughen reporting requirements for U.S. pension plan sponsors.
On Tuesday, June 18, Eric Keener, chief actuary at Aon Hewitt, testified at the PBGC’s first public hearing and suggested that rather than further complicating the process, the PBGC should work with companies to make it simpler for them to comply with reporting rules. Under the current proposed rule, pension plan sponsors would lose many of the waivers and extensions for reporting changes that impact their plans, which would place a greater burden on them.
In its testimony, Aon Hewitt made the following recommendations regarding the proposed regulations:
– Modify and clarify requirements for financially sound plan sponsors or controlled group members.
- Redefine the financial soundness determination date to be either the event date or the date as of the end of the prior fiscal year, as chosen by the plan sponsor.
- Provide specific criteria under which the PBGC would change the reporting threshold for a company’s Commercial Credit Reporting Company Score.
- Consider certain accounting items that create a negative net income for companies but do not necessarily reflect their financial strength.
- Allow companies to meet just three of five proposed criteria to prove financial soundness.
– Lower the criteria for plan financial soundness. Lower the threshold for a plan to be considered financially sound to 95 to 100 percent funded on a premium basis or 80 to 90 percent funded under ERISA section 4044.
– Provide exemptions for active participant reduction reportable event requirements. Modify the requirements for Active Participant Reduction reporting, including exempting frozen plans and plans with fewer than 100 active participants.
– Simplify waivers for controlled groups. Provide more simplified approaches to reporting waivers for controlled groups.
“Pension plan sponsors face myriad challenges and need to comply with complex regulations when reporting changes that affect their pension plans. Eliminating many of the waivers and extensions that companies were previously allowed creates an extra burden on an already complicated pension system and further encourages employers to move away from offering defined benefit plans,” said Eric Keener, chief actuary at Aon Hewitt. “Easing the proposed regulations would allow plan sponsors to focus on effectively managing their plans. Our recommended changes would enable the PBGC to meet its objectives of increasing reporting in certain situations, while still giving plan sponsors flexibility to comply in a less restrictive manner.”
