Instructions for Part III - Alternative Premium Funding Target Election/Revocation

This Part applies only to Single-employer Plans. Multiemployer Plans should skip to Part IV.

A plan may elect to use the Alternative Premium Funding Target to determine unfunded vested benefits instead of the Standard Premium Funding Target (see "How to Determine Unfunded Vested Benefits" section).

Note that once an election is made, it remains in effect for all subsequent plan years unless and until it is subsequently revoked. An election to use the Alternative Premium Funding Target cannot be revoked for five years. For example:

If you first made an election to use the Alternative Premium Funding Target for the 2008 plan-year filing, you can revoke the election this year (2013) or any year after 2013. If you revoke the election to use the Alternative Premium Funding Target in 2013, you cannot make another election to use the Alternative Premium Funding Target until 2018.
If you first made an election to use the Alternative Premium Funding Target for a plan year beginning in 2009 - 2012, the prior election is still in place and cannot yet be revoked. Skip item 6.
If you are making an election with this filing, do not make an election again in a filing for a future year. This year’s election will remain in place unless and until it is subsequently revoked (see below).
Note that to be valid, an election must be made in accordance with these instructions and must be filed with PBGC on or before the deadline. If you intended to make an election in a prior year, but you filed after the due date, the election did not take effect. You must make the election with this filing for it to first be effective for the 2013 plan year. If you are not sure if an election is in effect, you can view your election status in My PAA under the "View Account History" option.

Revoking an election to use the Alternative Premium Funding Target - An election cannot be revoked for any plan year that begins less than five years after the beginning of the plan year for which the election was first applicable. For example, if you make the election for a plan year that begins on April 1, 2013, the Alternative Premium Funding Target must be used to determine unfunded vested benefits for all plan years beginning before April 1, 2018. The plan may revoke the election first effective for any plan year beginning on or after April 1, 2018, but unless the election is revoked, it will remain in place.

Note that if an election to use the Alternative Premium Funding Target is subsequently revoked, another election to use the Alternative Premium Funding Target cannot be made until five additional years have passed.

6. Alternative Premium Funding Target Election / Revocation

Election - Check this box to make an election to use the Alternative Premium Funding Target first effective for this Premium Payment Year.
Revocation - Check this box to revoke a prior election to use the Alternative Premium Funding Target that was in effect for the plan year immediately preceding the Premium Payment Year.

7. Variable-rate Premium

This item relates to Variable-rate Premium information and applies only to Single-employer Plans.

In general, the Variable-rate Premium is $9 per $1,000, or fraction thereof, of unfunded vested benefits as of the UVB Valuation Date, but no more than $400 times the number of participants (i.e., the MAP-21 Cap). For certain plans of small employers, the Variable-rate Premium may be capped at an amount lower than the MAP-21 CAP (see item 7b).

Some Single-employer Plans are exempt from the Variable-rate Premium; others may have a Variable-rate Premium of $0. In either case, this section must be completed in accordance with the following instructions.

Exemptions – A Single-employer Plan may claim an exemption from the Variable-rate Premium only if it meets the requirements for one of the exemptions described below:
- Plans with no vested participants – Your plan qualifies for this exemption if the plan has no participants with vested benefits as of the UVB Valuation Date.
- Section 412(e)(3) plans (formerly called 412(i) plans) – Your plan qualifies for this exemption if the plan is described in section 412(e)(3) of the Code and regulations thereunder on the UVB Valuation Date.
- Plans terminating in standard terminations – Your plan qualifies for this exemption if notices of intent to terminate in a standard termination were issued in accordance with ERISA section 4041(a)(2), setting forth a proposed termination date (i.e., the 60- to 90-day prospective date) that is on or before the UVB Valuation Date. However, this exemption is conditional on the plan’s ultimately making a final distribution of assets in full satisfaction of its obligations under the standard termination. If such a distribution is not made, this exemption does not apply and the premium(s) that would otherwise have been required will be due retroactive to the applicable due date(s).

If an exemption applies, check the applicable box to indicate which exemption applies and skip to item 8.

Small Employer Cap qualification – If the plan qualifies as a small employer plan, the Variable-rate Premium may be capped at an amount lower than the MAP‑21 Cap.
Determining whether a plan qualifies for the Small Employer Cap – For this purpose:
- a plan is a small-employer plan if the aggregate number of employees of all contributing sponsors of the plan and all members of the contributing sponsors’ controlled groups, as of the first day of the Premium Payment Year, is 25 or fewer,
- the aggregate number of employees is determined in the same manner as under section 410(b)(1) of the Code, taking into account the provisions of section 414(m) and (n) of the Code, but without regard to section 410(b)(3), (4), and (5) of the Code, and
- employees are counted as of the first day of the Premium Payment Year, not as of the Participant Count Date or the UVB Valuation Date.
  Note that a plan with 25 or fewer participants does not necessarily qualify for the Small Employer Cap because the eligibility criterion is based on employees, not the Participant Count. For example, if a plan has 15 participants, but there are more than 25 employees (taking into account all employees of all contributing sponsors of the plan and all members of their controlled groups), the plan does not qualify for the cap.
  
  Also note that a plan with more than 25 participants might qualify for the cap. For example, consider a contributing sponsor with 20 employees, all of whom are participants in a plan. If the plan also covers 15 former employees who are either terminated vested or retired, there are 35 participants in total. This plan would qualify for the cap (assuming there are no other contributing sponsors and no controlled group members).
Reporting requirements – If your plan qualifies for this cap, check the box to report that fact.

If your plan qualifies for this cap, instead of reporting both the uncapped Variable-rate Premium ($9 per $1,000 of unfunded vested benefits) and the maximum Variable-rate Premium and then paying the lesser of the two amounts, you may report and pay the maximum Variable-rate Premium.

If you choose not to report the uncapped Variable-rate Premium, omit all items 7c through 7g and go directly to item 7h. Note that if you choose to pay the maximum Variable-rate Premium without determining whether it is less than the uncapped Variable-rate Premium, you may pay a larger Variable-rate Premium than required.

c. Assumptions and methods used to determine Premium Funding Target

The assumptions used to determine the Premium Funding Target (see item 7d below) differ depending on which calculation method is used.

With the standard method, the Premium Funding Target is calculated using the same assumptions used to determine the minimum required contribution for the Premium Payment Year with one exception. In lieu of the discount rates used for funding purposes, the discount rates are the segment rates for the month preceding the month in which the Premium Payment Year begins that are determined in accordance with ERISA section 4006(a)(3)(E)(iv).
With the alternative method, the Premium Funding Target is calculated using the assumptions used to determine the minimum required contribution for the Premium Payment Year except that the discount rates do not reflect the MAP-21 Stabilization Rules. You may use the alternative method only if there is an election to do so in effect from a prior year or if you elect to do so for the first time this year. For information on how to make the election, see instructions for item 6.

Premium Funding Target method – Report whether you are using the Standard Premium Funding Target or the Alternative Premium Funding Target to determine unfunded vested benefits by checking the applicable box (i.e., "Standard" or "Alternative").

Note that the standard method must be used unless an election to use the alternative method is in effect.

Also, note that if an election to use the alternative method is in effect, you must use the alternative method. An election is in effect only if an election to use the alternative method was made by checking the election box in item 6 of Part III of this filing, or if an election is in effect from a prior year’s filing. Checking the alternative box in item 7(c)(1) does not constitute an election. For more information on how to make the election, see instructions for item 6.

Filers are encouraged to review prior filings or to review the Account History on My PAA to confirm whether an election to use the alternative method is in effect.

Report the discount rate(s) used to determine the Premium Funding Target. If you are using the:
- Standard Premium Funding Target, these rates must be the segment rates for the month preceding the month in which the Premium Payment Year begins that are determined in accordance with ERISA section 4006(a)(3)(E)(iv) (i.e., the rates that would be determined under ERISA section 303(h)(2)(C) if ERISA section 303(h)(2)(D) were applied by using the monthly yields for the month preceding the month in which the Premium Payment Year begins on investment grade corporate bonds with varying maturities, and in the top 3 quality levels, rather than the average of such yields for a 24-month period). These rates are available through the Practitioners Page at www.pbgc.gov.
- Alternative Premium Funding Target, these rates must be identical to the rates that would have been used to determine the minimum required contribution for the Premium Payment Year required to be reported in item 21a of the 2013 Schedule SB, Form 5500 if not for the MAP-21 Stabilization Rules. This includes any elections with respect to the optional phase-in from the prior current liability discount rate, the applicable month, and the option to use the full yield curve in lieu of segment rates. If the full yield curve is used for this purpose, rather than reporting the full yield curve, check the box to report that fact.

UVB Valuation Date – Report the UVB Valuation Date for the Premium Payment Year.

d Premium Funding Target as of UVB Valuation Date

Report the Premium Funding Target. This is the liability measure used to determine the Variable-rate Premium. It is similar to the funding target that is used to determine the minimum funding requirement for the Premium Payment Year, except that only vested benefits are taken into account. See "How to Determine Unfunded Vested Benefits" section for more information, including information on when certain types of benefits are considered vested.

Note for Mid-size and Large Plans – If the Premium Funding Target (and thus, the Variable-rate Premium) being reported in this filing is an estimate, check the box to report that fact. Note that if you file on an estimated basis, you must ultimately make a reconciliation filing using the actual Premium Funding Target (by amending this filing). In the reconciliation filing, in addition to reporting the actual Premium Funding Target data, be sure to indicate that the reported amount is no longer an estimate by making sure the "estimate" box is no longer checked. See "Correcting Filings, Reconciling Estimates, Refunding Overpayments" section.

Note also that to qualify for the automatic penalty relief, the estimated Premium Funding Target must be certified by an enrolled actuary to be a reasonable estimate that:

takes into account the most recent data available to the enrolled actuary, and
has been determined in accordance with generally accepted actuarial principles and practices.

See "Late Payment Charges" section for more information on the penalty relief available to Large and Mid-size Plans paying estimated Variable-rate Premiums on the due date.

Report the Premium Funding Target (dollars only) for (1) active participants, (2) terminated vested participants, (3) retirees and beneficiaries receiving payment, and (4) the total premium funding target ((1)+(2)+(3)).

Note that if you are using the Alternative Premium Funding Target, the amount reported is generally equal to the total funding target required to be reported in the 2013 Schedule SB (item 3d) reduced by the non-vested portion of the total funding target (item 3c(1)) reported in that same Schedule.

e Market value of assets – Report the fair market value of plan assets (dollars only) as of the UVB Valuation Date for the Premium Payment Year adjusted to reflect contribution receipts as follows:

Adjustments for prior year contributions

If contributions for the prior plan year were made after the UVB Valuation Date and before the date the premium filing is made, increase the market value to include the discounted value of such contributions. Prior year contributions are discounted from the date made to the UVB Valuation Date, using the effective interest rate for the plan year for which the contributions were made.

Adjustments for current year contributions

If contributions for the current plan year were made before the UVB Valuation Date, decrease the market value by the adjusted value of these current year contributions. (Note – this can happen only if the UVB Valuation Date is after the beginning of the plan year.) For this adjustment, such contributions are increased to the UVB Valuation Date.

Interest adjustments

For both interest adjustments noted above, use the effective interest rate determined under ERISA section 303(h)(2)(A) and reported in item 5 of Schedule SB for the plan year for which the contributions were made.

Comparison to asset value reported on Schedule SB

In general, the asset value reported here must be the same as the market value of assets required to be reported in the 2013 Schedule SB (item 2a). The amounts would differ only if a premium filing is made before the premium filing due date and prior year contributions are made after the premium filing is made (and thus not included in assets).

f Unfunded vested benefits – Report the excess (rounded up to the next $1,000), if any, of the Premium Funding Target over the fair market value of assets.

g Uncapped Variable-rate Premium –Report the product of 0.009 and the amount of unfunded vested benefits.

h Maximum Variable-rate Premium

(1) MAP-21 Cap – report the product of the Participant Count multiplied by $400.

(2) Small Employer Cap – Report the product of the Participant Count multiplied by the Participant Count multiplied by $5. If the plan does not qualify for the Small Employer Cap, this item must be left blank.

(3) Maximum Variable-rate Premium – If the plan qualifies for the Small Employer Cap, report the lesser of the Small Employer Cap and the MAP-21 Cap. Otherwise, report the MAP-21 Cap.

i Variable-rate Premium – Report the lesser of the maximum Variable-rate Premium and the uncapped Variable-rate Premium. If the plan qualifies for the Small Employer Cap and chooses not to report uncapped Variable-rate premium data, report the maximum Variable-rate Premium.

If this is a short plan year of coverage, the required Variable-rate Premium may be a prorated portion of this amount; however, the full year’s premium amount must be reported in this item.