The US Department of Labor (DOL) has issued new guidance in the form of Field Assistance Bulletin No. 2025-02 (FAB 2025-02) and updated model annual funding notices (AFNs) for single-employer and multiemployer pension plans. FAB 2025-02 addresses some conflicts between Section 101(f) of ERISA (as amended by SECURE 2.0)—which requires the plan administrator of a retirement plan to disclose certain information to participants, beneficiaries, and other entities—and previous DOL regulations at 29 CFR § 2520.101-5.
The major changes in FAB 2025-02 relate to the format of the notice itself, the methodology for measuring the value of assets, value of liabilities, and funding level. While the changes mostly affect single-employer defined benefit pension plans, there are important changes for multiemployer pension plans to take notice of as well. Further, for a multiemployer plan that has received special financial assistance from the Pension Benefit Guaranty Corporation (PBGC), modifications to the AFN disclosures previously provided in DOL’s Field Assistance Bulletin No. 2023-01 (FAB 2023-01) also apply.
The new requirements apply to plan years beginning after December 31, 2023. The 2024 AFN for a plan using a calendar year is due by April 30, 2025. Many plan administrators have already prepared 2024 AFNs for their plans or even distributed them. Nevertheless, even if the AFN has been distributed, DOL still requires a plan administrator to consider FAB 2025-02 to determine whether the AFN constitutes a “reasonable, good faith interpretation” of the law, as amended.
If the plan administrator concludes that the AFN did not meet this new standard, FAB 2025-02 makes clear that DOL expects appropriate corrective action to be taken. Presumably, this would require the plan administrator to issue a revised, good-faith compliant AFN and redistribute it, which could be a costly correction given the potential for duplicate mailing and postage costs.
What Has Changed for the Annual Funding Notice?
First, a plan administrator can no longer rely on the previous model, so the AFN should look a bit different. The new model AFN uses a different format and layout, beginning with basic information for a participant about the plan, the plan administrator, and the PBGC guarantee and continuing with previously required information regarding the funded percentage of the plan, the fair market value of assets of the plan, the funding status of the plan, and the PBGC guarantee, among other requirements.
Second, the AFN is now required to include information about participants and beneficiaries based on their status (retired, deferred vested, or active) for the notice year and the preceding two plan years. This demographic information must be as of the last day of the plan year (previously, this information was presented as of the first day of the plan year).
That can present a challenge with the due date of the AFN relatively early in the year. If the plan is a large plan, the plan administrator is permitted to make reasonable, good-faith estimates with respect to the most recently concluded year. If the plan is small, it has up to 9 ½ months after the end of the notice year to distribute the AFN, and presumably might not need to make good-faith estimates. In any event, for the two preceding plan years, the plan administrator must enter the actual number of participants and beneficiaries as of the last day of those plan years no matter the size of the plan.
Third, the AFN must include the “average return on assets” for the notice year. This phrase was not defined in the statute, but DOL has provided two methods to calculate the pension plan’s “average return on assets,” both of which are variations on formulas used in the schedules to the Form 5500. DOL also acknowledged that other methods may fulfill the requirement.
Whether you have prepared the 2024 AFN, put it off, or pushed it out the door, you should consider reviewing the new guidance with legal counsel and the plan actuary to confirm that your plan’s 2024 AFN reflects a reasonable, good-faith interpretation of the new disclosure requirements in ERISA Section 101(f), as clarified by FAB 2025-02.