Glossary term
Annual Funding Notice (AFN)
An Annual Funding Notice is a required disclosure that gives participants in defined benefit pension plans information about the plan's funding status.
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What Is an Annual Funding Notice?
An Annual Funding Notice, or AFN, is a required disclosure for defined benefit pension plans. It gives participants, beneficiaries, and certain other parties information about the plan's funded status, assets, liabilities, and related pension-insurance context.
The notice is not a personal benefit statement. It does not tell a participant exactly what monthly benefit they will receive. Instead, it gives plan-level information that helps readers understand the financial condition of the pension plan backing promised benefits.
Key Takeaways
- Annual Funding Notices apply to defined benefit pension plans, not ordinary 401(k) account statements.
- The notice reports information about plan funding, assets, liabilities, and funded percentage.
- Participants, beneficiaries, labor organizations, employers, and PBGC may be among the required recipients depending on the plan.
- Large underfunded single-employer plans may have PBGC submission requirements.
- The notice is a warning-and-context document, not a guarantee that benefits will change or stay the same.
What the Notice Tells You
An AFN generally helps readers see whether a pension plan has enough assets set aside relative to its benefit obligations. It may include the plan's funding percentage, asset and liability values, participant counts, investment policy information, and explanations of benefit restrictions or PBGC guarantees when relevant.
For multiemployer plans, the notice can be especially important because funding problems may involve many employers and unions. For single-employer plans, it can help employees and retirees understand whether the sponsor's pension promise is strongly funded, weakly funded, or somewhere in between.
Timing and Recipients
ERISA section 101(f) provides the annual funding notice framework. PBGC guidance notes that multiemployer defined benefit plans generally must provide funding notices no later than 120 days after the close of the plan year, while small plans may have a later deadline tied to the Form 5500 filing schedule.
For single-employer plans, PBGC has separate submission rules for certain plans, including plans whose liabilities exceed plan assets by more than $50 million. Participants do not need to manage those filing rules, but the rules explain why the notice is part of a broader pension oversight system.
How to Read It
The funded percentage is important, but it is not the whole story. A plan's investment risk, employer financial strength, contribution policy, participant demographics, interest-rate assumptions, and legal protections can all affect pension security.
A low funded percentage does not automatically mean benefits will stop, and a high funded percentage does not eliminate all risk. The notice should prompt a careful reading of the plan's condition and, when needed, a follow-up with the plan administrator.
The Bottom Line
An Annual Funding Notice is a pension transparency document. It helps participants see the financial condition of a defined benefit plan, but it should be read as plan-level context rather than a personalized benefit guarantee.