Notice Of Critical Status For [Insert Name Of Pension

notice of critical status for [insert name of pension plan] this is to inform you that on [enter date] the plan actuary certified to t

Notice of Critical Status For
[Insert name of pension plan]
This is to inform you that on [enter date] the plan actuary certified
to the U.S. Department of the Treasury, and also to the plan sponsor,
that the plan [enter “is” or “will be”] in critical status for the
plan year beginning [enter beginning date of plan year]. Federal law
requires that you receive this notice.
Critical Status
The plan is considered to be in critical status because it has funding
or liquidity problems, or both. More specifically, the plan’s actuary
determined that [complete and insert appropriate explanation(s) from
the options below].
{Option one: “the plan’s funded percentage for [enter plan year] is
less than 65%, and the sum of the fair market value of its current
assets plus the present value of expected employer contributions
through [enter end of the 6th plan year following the current plan
year] is less than the present value of all benefits projected to be
payable (plus administrative expenses) through [enter end the 6th plan
year following the current plan year].”}
{Option two: “the plan has an accumulated funding deficiency for the
current plan year.”}
{Option three: “over the next three plan years, the plan is projected
to have an accumulated funding deficiency for the [enter appropriate
plan year or years].”}
{Option four: “the funded percentage of the plan is 65% or less, and
over the next four plan years, the plan is projected to have an
accumulated funding deficiency for the [enter appropriate plan year or
years].”}
{Option five: “the sum of the plan’s normal cost and interest on the
unfunded benefits for the current plan year exceeds the present value
of all expected contributions for the year; the present value of
vested benefits of inactive participants is greater than the present
value of vested benefits of active participants; and the plan has an
accumulated funding deficiency for the current plan year.”}
{Option six: “the sum of the plan’s normal cost and interest on the
unfunded benefits for the current plan year exceeds the present value
of all expected contributions for the year; the present value of
vested benefits of inactive participants is greater than the present
value of vested benefits of active participants; and over the next
four plan years, the plan is projected to have an accumulated funding
deficiency for the [enter appropriate plan year or years].”}.
{Option seven: “the sum of the fair market value of the plan’s current
assets plus the present value of expected employer contributions
through [enter date that is the end of the plan year that is the 4th
plan year following the current plan year] is less than the present
value of all benefits payable through [enter date that is the end of
the plan year that is the 4th plan year following the current plan
year].”}
{Option eight: “the plan was in critical status last year and over the
next 9 years, the plan is projected to have an accumulated funding
deficiency for the [enter appropriate plan year or years].”}
{Instructions: Insert the following discussion entitled Rehabilitation
Plan and Possibility of Reduction in Benefits only if the plan is in
critical status and adjustable benefits have not yet been reduced
(e.g., the initial critical status year). Where adjustable benefits
have already been reduced, insert the discussion below entitled
Rehabilitation Plan.}
Rehabilitation Plan and Possibility of Reduction in Benefits
Federal law requires pension plans in critical status to adopt a
rehabilitation plan aimed at restoring the financial health of the
plan. The law permits pension plans to reduce, or even eliminate,
benefits called “adjustable benefits” as part of a rehabilitation
plan. If the trustees of the plan determine that benefit reductions
are necessary, you will receive a separate notice in the future
identifying and explaining the effect of those reductions. Any
reduction of adjustable benefits (other than a repeal of a recent
benefit increase, as described below) will not reduce the level of a
participant’s basic benefit payable at normal retirement. In addition,
the reductions may only apply to participants and beneficiaries whose
benefit commencement date is on or after [enter the date notice is or
was provided for the first plan year in which the plan is in critical
status]. But you should know that whether or not the plan reduces
adjustable benefits in the future, effective as of [enter date notice
is or was provided for the first plan year in which the plan is in
critical status or January 1, 2008, whichever is later], the plan is
not permitted to pay lump sum benefits (or any other payment in excess
of the monthly amount paid under a single life annuity) while it is in
critical status.
Rehabilitation Plan
Federal law requires pension plans in critical status to adopt a
rehabilitation plan aimed at restoring the financial health of the
plan. This is the [enter number] year the plan has been in critical
status. The law permits pension plans to reduce, or even eliminate,
benefits called “adjustable benefits” as part of a rehabilitation
plan. On [enter date], you were notified that the plan reduced or
eliminated adjustable benefits. On [enter date of initial critical
status notice], you were notified that as of [enter date] the plan is
not permitted to pay lump sum benefits (or any other payment in excess
of the monthly amount paid under a single life annuity) while it is in
critical status. If the trustees of the plan determine that further
benefit reductions are necessary, you will receive a separate notice
in the future identifying and explaining the effect of those
reductions. Any reduction of adjustable benefits (other than a repeal
of a recent benefit increase, as described below) will not reduce the
level of a participant’s basic benefit payable at normal retirement.
In addition, the reductions may only apply to participants and
beneficiaries whose benefit commencement date is on or after [enter
the date notice is or was provided for the first plan year in which
the plan is in critical status].
Adjustable Benefits
The plan offers the following adjustable benefits which may be reduced
or eliminated as part of any rehabilitation plan the pension plan may
adopt [check appropriate box or boxes]:
□ Post-retirement death benefits;
□ Sixty-month payment guarantees;
□ Disability benefits (if not yet in pay status);
□ Early retirement benefit or retirement-type subsidy;
□ Benefit payment options other than a qualified joint-and survivor
annuity (QJSA);
□ Recent benefit increases (i.e., occurring in past 5 years);
□ Other similar benefits, rights, or features under the plan {provide
identification}
_______________________________________________________________________________
_______________________________________________________________________________
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Employer Surcharge
The law requires that all contributing employers pay to the plan a
surcharge to help correct the plan’s financial situation. The amount
of the surcharge is equal to a percentage of the amount an employer is
otherwise required to contribute to the plan under the applicable
collective bargaining agreement. With some exceptions, a 5% surcharge
is applicable in the initial critical year and a 10% surcharge is
applicable for each succeeding plan year thereafter in which the plan
is in critical status.
Where to Get More Information
For more information about this Notice, you may contact [enter name of
plan administrator] at [enter phone number and address (including
e-mail address if appropriate)]. You have a right to receive a copy of
the rehabilitation plan from the plan.
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