Compliance March 27, 2015

PBGC Revising Reportable Events Forms

The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) extend approval of two collections of information under PBGC’s regulation for reportable events.
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In a public notice of its request, the agency explains that provisions of section 4043 of the Employee Retirement Income Security Act (ERISA) and of sections 303(k) of ERISA and 430(k) of the Internal Revenue Code have been implemented in PBGC’s regulation on Reportable Events and Certain Other Notification Requirements (see “A Review of PBGC Reportable Events”). Subparts B and C of the regulation deal with reportable events, and subpart D deals with failures to make required contributions.

Approval of the forms for collection of information under subparts B, C and D expires March 31, 2015. PBGC is requesting that OMB extend its approval for three years, with modifications. According to the agency, it is developing a final rule for reportable events, and OMB approval of the current information collection will expire before the final rule is published.

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On January 23, PBGC notified the public that it intended to submit revised forms and instructions to OMB for review, and the agency received no comments about the notice. PBGC intends to revise the current forms and instructions to:

  • Require that additional supporting and identifying information be provided (e.g., separating filer’s name from title, filer’s email address, event date, notice due date, filing date, and why a filing is late, if applicable).
  • Require more description of the pertinent facts relating to an event (e.g., reason for a late contribution) and about information being included or missing with filing.
  • Add an information requirement included in the regulation to Forms 10 and 10-A (for change in contributing sponsor or controlled group event).
  • Provide enhanced instructions about the type of actuarial information required to be submitted.
  • Include a note in the Form 10-A instructions stating that PBGC typically asks for additional information (which will be specified) to be submitted within seven days (or sooner, in some cases).
  • Remove information requirements that PBGC no longer needs or can gather from public sources.
  • Require additional information for certain events (e.g., cumulative amounts missed for missed contribution events, actuarial information for liquidation events, additional loan documentation such as waivers and cross-defaults for loan default events).
  • Require a signature and certification on Form 10 and Form 10-A as to the completeness and accuracy of the contents of the filing.

The text of the PBGC’s request notice is here.

The Markets March 27, 2015

An Opportunity for Liquid Alternatives in DC Plans

As plan advisers are increasingly focused on new strategies to improve plan participant outcomes, liquid alternatives may present an opportunity to diversify retirement portfolios.
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In a paper, “Liquid Alternatives and the Opportunity in Defined Contribution Plans,” from Pershing Prime Services’ Executive Insights series, Mark Aldoroty, head of sales and relationship management for Pershing Prime Services, and Rob Cirrotti, head of retirement solutions at Pershing, say the increased returns and hedges that reduce risk in liquid alternatives can have a significant impact to participant outcomes over time.

The paper suggests that the best fit for liquid alternatives in a defined contribution (DC) plan is within a target-date strategy or advisory model. “You can’t throw these investments into a DC plan lineup and expect plan participants to figure out what to do with them,” the paper says.

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To make a liquid alternative offering attractive to a DC plan, advisers need to examine what reasonably converts from the hedge fund space to the DC plan space. The strategy needs to feel like a daily liquid product. The paper notes that DC platforms are evolving to accommodate these strategies.

Advisers need to educate DC plan fiduciaries about the benefits of liquid alternatives to plan participants. Some fiduciaries may be completely unfamiliar with these strategies. Because these strategies are relatively new and do not come with a decades-long benchmarking history, there needs to be fact-based education for all DC plan decisionmakers, the authors contend—plan fiduciaries, as well as advisers. They need education about hedging and non-correlated risk. While there is not yet definitive proof that liquid alternatives improve retirement plan outcomes, advisers can look to how these vehicles have helped in other areas of investing and correlate that to retirement plans.

The paper contends DC plan fiduciaries need to change their focus from investment selection risk to retirement adequacy risk. They are increasingly going to be judged on results participants achieve, so they should shift their thinking toward offering investment options that can produce better outcomes.

“While the role of a DC plan fiduciary remains the same, in providing prudent investment decisions, the investments to consider are ever changing. With the growth of alternative investments, DC plan fiduciaries need to educate themselves on new products and how they will, or will not, fit into their DC plan investment menu,” the authors conclude.

The paper may be requested from here. A free registration is required.

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