Publications

The Retirement Protection Act of 1994 (RPA '94) adds a new annual notice requirement to participants of underfunded defined benefit plans, disclosing the extent of the plan's underfunding and the limits on benefits guaranteed by the Pension Benefit Guaranty Corporation (PBGC) if the plan terminates while underfunded (PBGC Reg. Sec. 2627, issued June 30, 1995).

The notice contains specific language and must be distributed to all participants of underfunded defined benefit (DB) plans that are subject to the PBGC variable rate premium. The notice must be distributed within two months after the due date of Form 5500 for the previous plan year (including extension).

The notice requirement is first effective for plan years beginning in 1995. Plans with fewer than 100 participants, however, are first subject to this notice requirement for the plan years beginning in 1996. Therefore, it is likely that many plans will be required to distribute this notice for the first time in 1996. (For example, an underfunded plan with less than 100 participants must first distribute this notice by September 30, 1996, if the 1995 Form 5500 is filed on July 31, 1996.)

The notice must also disclose any missed quarterly contributions (if paid more than 60 days late). The notice must inform participants whether the missed quarterly payment has been made, and if it has, the date of late payment.

Failure to issue timely notices may bring penalties of up to $1,000 per day assessed by the PBGC.