PBGC says active annuity purchase is not a reportable event 

Unless a waiver applies, defined benefit plan sponsors must file with the PBGC when certain events or attrition cause a drop in the number of actively employed plan participants exceeding 20% or more. Single-cause events are measured by the reduction in active participants as a percentage of the active count at the beginning of the plan year. Attrition events are measured by the reduction in active participants from the beginning to the end of the plan year. For both purposes, participants are considered active if they are working anywhere in the controlled group, regardless of whether they are currently accruing benefits in the plan.

As part of a pension-risk transfer transaction, defined benefit plan sponsors often purchase annuities for inactive participants (retirees and vested terminated employees), but may also include active participants with frozen benefits. Although these individuals remain actively employed within the controlled group, after the annuity purchase, they are no longer plan participants.

The plan sponsor requesting the ruling intends to purchase annuities for roughly 69% of the plan’s active participants, who will remain employed in the controlled group. Although this reduction is far greater than the 20% that would ordinarily trigger event reporting, PBGC confirmed that reporting is not required in this circumstance. PBGC explains that the event-reporting rules are designed to capture events such as workforce reductions that might signal financial issues with a plan or present a risk to the employer’s ability to maintain the plan, not risk-transfer transactions after which the benefits are no longer under PBGC protection.

PBGC provides the following guidelines for reflecting an active-participant annuity purchase when determining whether reporting is required for a subsequent event in the year of the purchase:

• For determining whether a single-cause event has occurred, the affected participants may be disregarded in the numerator of the reduction fraction (that is, they are not considered to have been part of the reduction in active participants).
• For determining whether an attrition event has occurred, the affected participants may be added back to the active-participant count at the end of the year.
• For both single-cause and attrition events, the affected participants are included in the denominator because they were active participants at the beginning of the plan year.