On April 3, 2025, the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) released Field Assistance Bulletin (FAB) 2025-02 and updated model annual funding notices (AFNs) for single-employer (Appendix 1) and multiemployer (Appendix 2) defined benefit (DB) pension plans. The changes reflect amendments under section 343 of the SECURE 2.0 Act of 2022 (SECURE 2.0) to the AFN requirements found in ERISA section 101(f).

FAB 2025-02 does not address every potential SECURE 2.0-related issue concerning the annual funding notice. Plan administrators acting in “reasonable, good faith” compliance with the Bulletin’s guidance will be treated by the DOL as meeting the AFN requirements.

We previously outlined the AFN requirements for single-employer plans and multiemployer plans, highlighting the changes required by SECURE 2.0. Below is an overview of EBSA’s new guidance—excluding considerations for Cooperative and Small Employer Charity (CSEC) plans.

Effective date for SECURE 2.0 AFN changes

Plan administrators must comply with SECURE 2.0’s modified AFN requirements for plan years beginning after December 31, 2023.

AFNs must be distributed within 120 days after the end of the plan year, referred to as the “notice year” for the AFN. For example, the 2024 notice for a calendar plan year must be distributed by April 30, 2025. Small plans (those with 100 or fewer participants on each day of the plan year preceding the notice year) must distribute their AFNs by their Form 5500 due date, including extensions.

New model notices supersede the prior model notices

Prior model notices included in the DOL’s 2015 final rule do not meet the new SECURE 2.0 requirements and should therefore not be used going forward. However, in light of the impending 2024 AFN distribution deadline for calendar plan years, some plans have attempted to include SECURE 2.0 updates in the older model notice published before FAB 2025-02. According to FAB 2025-02, those plans should review the Bulletin’s guidance to confirm that their disclosures align with a “reasonable, good faith interpretation.” Corrective action may be necessary if the disclosures fall short.

Three years of participant counts must be disclosed

SECURE 2.0 requires single-employer and multiemployer plans to show participant counts as of the end of the notice year plus the two prior plan years in tabular format. Plans should generally not use estimates for the notice year’s participant counts.

However, FAB 2025-02 acknowledges that large plans may face difficulties in determining final counts by the AFN distribution deadline. Accordingly, if a large plan provides reasonable, good faith participant count estimates for the current notice year—and clearly labels them as estimates—the plan will not be considered out of compliance with ERISA section 101(f). Actual counts must be used for the two prior plan years.

Small plans may not estimate counts because their AFN distribution deadline coincides with Form 5500 filing deadlines, allowing sufficient time to obtain final counts.

Average return on assets for the notice year

SECURE 2.0 requires single-employer and multiemployer plans to disclose the average return on assets for the notice year but does not define how this is calculated. FAB 2025-02 provides two acceptable calculation methods but also notes that other methods may be used to satisfy this requirement.

• Method 1 follows the same methodology used by single-employer plans to determine the “actual rate of return” for the Schedule SB to Form 5500 but applied to the notice year instead of the prior plan year. This methodology takes into account the timing of all cash flows throughout the year (i.e., contributions, benefit payments, and expenses).
• Method 2 aligns with the approach multiemployer plans use when calculating the estimated investment return on the market value of assets for the Schedule MB to Form 5500 but again applied to the notice year rather than the one-year period ending on the valuation date. This methodology treats all cash flows as if they were made midyear.

End-of-year funded percentages based on PBGC assumptions (single-employer plans)

Single-employer plans traditionally disclosed funded percentages using the plan’s Funding Target Attainment Percentage (FTAP), which was often measured at the beginning of the plan year and reflected any carryover or prefunding balances. SECURE 2.0 mandates that single-employer plans disclose a market-based funded percentage at the end of each plan year (and the preceding two years), based on interest rates used to calculate the standard premium funding target for Pension Benefit Guaranty Corporation (PBGC) variable rate premium purposes and the market value of assets (unreduced by any carryover or prefunding balances).

The SECURE 2.0 changes to the ERISA section 101(f) AFN requirements mention disclosing two funded percentages: the “plan’s percentage of plan liabilities funded” and the “plan’s funded status,” both of which are ratios of the plan’s assets to liabilities. FAB 2025-02 clarifies that this is duplicative and only needs to be shown once.

Elimination of at-risk disclosures (single-employer plans)

SECURE 2.0 removed the “at-risk” disclosure requirements. For the 2024 notice year forward, plans no longer need to calculate or disclose “at-risk” liabilities or apply at-risk rules when calculating year-end liabilities.

Interest rate stabilization supplement (single-employer plans)

FAB 2025-02 does not address the supplement to the AFN related to interest rate stabilization under the Moving Ahead for Progress in the 21st Century Act (MAP-21), as updated by the Infrastructure Investment and Jobs Act of 2021 (IIJA). Single-employer plans must still include a supplemental page disclosing how interest rate stabilization affects the plan’s funded percentage, funding shortfall, and minimum required contributions if the plan meets the following criteria:

• The funding target using interest rate stabilization is less than 95% of the funding target without it
• The plan’s funding shortfall determined without interest rate stabilization is greater than $500,000, and
• The plan had 50 or more participants on any day in the preceding plan year. When counting participants, all single‐employer DB plans maintained by the same employer (or any member of that employer’s controlled group) are treated as one plan. However, only the participants belonging to that employer or controlled group member are included in the count.

Special financial assistance disclosures (multiemployer plans)

The new model AFN does not include language for multiemployer plans that are eligible for or have received special financial assistance (SFA) under the American Rescue Plan Act of 2021 (ARPA). These multiemployer plans should continue following FAB 2023-01 until further DOL guidance is issued. Adherence to FAB 2023-01 will be deemed a “reasonable, good faith interpretation” of AFN disclosure requirements for SFA-related items.

Waiver from Form 5500 audit remains unchanged (small plans)

Although the prior model AFNs in the DOL’s 2015 final rule should no longer be used, as mentioned above, the information in the final rule regarding disclosure of a plan’s use of the small plan audit waiver still applies. DB plans with fewer than 100 participants that file the Form 5500 or Form 5500-SF as small plans and are subject to the AFN requirements instead of the summary annual report (SAR) must include an additional disclosure on the AFN if they qualify for the audit waiver.

Under ERISA regulation 2520.104-46, a small plan can qualify for this waiver if at least 95% of its assets are “qualifying plan assets,” or if the individuals handling any non-qualifying assets are covered by a fidelity bond in an amount no less than the value of the “non-qualifying plan assets” they handle. The audit waiver exempts the plan from the requirement to engage an independent qualified public accountant to conduct the plan’s annual Form 5500 audit, but the plan administrator must disclose it in the annual funding notice to confirm the assets reported on the Form 5500 or Form 5500-SF were held by the plan.

The disclosure must inform participants and beneficiaries of the waiver, identify the regulated financial institutions holding the qualifying plan assets, and let them know they can request evidence of the fidelity bond or financial statements from those institutions. For small DB plans that are subject to the AFN requirement and qualify for the audit waiver, separate model disclosure language to include in the AFN is provided in the appendix of ERISA regulation 2520.104-46.

Please contact your Milliman consultant for advice on how these provisions may impact your plan(s).