Updated August 7, 2026. Quick answer: the Annual Funding Notice is the letter your pension plan is legally required to send every year, and the number everyone fixates on — the funded percentage — is the one most likely to be misread. 🔴 The law requires three years of it, side by side, because the trend is the signal and a single year is close to meaningless.
What this notice is, and when it must arrive
It is a disclosure required by ERISA, not a warning and not a statement of your personal benefit. The timing rule is fixed:
Any notice under paragraph (1) shall be provided not later than 120 days after the end of the plan year to which the notice relates.
Small plans work differently — for those, the notice comes when the plan files its annual report rather than on the 120-day clock. And Congress set an explicit readability standard: the notice “shall be written in a manner so as to be understood by the average plan participant.” ⚠️ If it is not, that is a drafting failure, not a comprehension failure on your part.
🔴 The three-year table is the whole document
The statute requires a table showing the funding target attainment percentage, the funding shortfall, and the minimum required contribution — and not for one year, but “for the applicable plan year and each of the 2 preceding plan years.”
Read across, not down. A plan at 82% that was at 74% and 78% is a different story from a plan at 82% that was at 96% and 89%, and the single headline number cannot tell them apart. Congress required three years precisely because one is not informative.
⚠️ And a funded percentage is not a statement about your cheque. It is a snapshot of plan assets measured against a valuation of liabilities using prescribed assumptions — assumptions that legislation has repeatedly changed. The notice itself acknowledges this: the statute requires an explanation that under a series of named funding acts “the plan sponsor may contribute less money to the plan when interest rates are at historical lows.” A percentage can move because the rules moved.
What else it must contain, and what each part is for
The funding policy and the asset allocation — the statute requires the allocation of plan investments “expressed as percentages of total assets” and the average return on assets for the plan year. This is the part almost nobody reads and the part that describes how the plan intends to get where it is going.
The participant counts — retirees and beneficiaries receiving benefits, those entitled to future benefits, and active participants. 🔴 The ratio between them is quietly one of the most informative things in the document. A plan with far more people drawing than paying in is a different structure from one still growing.
For a multiemployer plan: the status label. The notice must state whether the plan was in critical or endangered status, and if it was, how to obtain the plan’s funding improvement or rehabilitation plan along with the actuarial and financial data showing what has been done. ⚠️ “Endangered” and “critical” are statutory categories with defined triggers, not adjectives the trustees chose — and they come with required corrective plans you are entitled to read.
The insurance question, honestly
Private defined-benefit pensions are backed by the Pension Benefit Guaranty Corporation, and the notice will refer to it. That guarantee has limits, and it is not the same as your full promised benefit.
⚠️ This page prints no guarantee figures. The maximum guarantee is set annually and varies by the age at which benefits start, and a stale number here would be worse than none. The current figures are published by the PBGC itself — and the multiemployer guarantee is calculated on a completely different basis from the single-employer one, which is a distinction routinely lost in general articles.
What to actually do with it
Keep them. The document is only useful in a run of three or four, and the three-year table means two notices give you five years of history.
Read the trend, the participant ratio, and the status label — in that order. Then stop. For an ongoing plan, there is usually no action to take, and the notice does not ask for any.
If the plan is in critical or endangered status, request the rehabilitation or funding improvement plan. The notice must tell you how, and that document — not the percentage — is where any actual consequence for participants would be described.
⚠️ Scope
This page decodes a disclosure. It does not advise on whether to take a lump sum, when to retire, or what any plan will pay you, and it makes no prediction about any plan’s future.
Sources
Quoted from ERISA § 101(f), codified at 29 U.S.C. § 1021(f) (annual funding notice: content, timing, form and manner), via Cornell’s Legal Information Institute, retrieved 7 August 2026: law.cornell.edu. No PBGC guarantee figures are printed here, for the reason given above.
Related: state tax notices · Medicare notices — the same decoding habit applies to all three: find the identifier and the date before you read the prose.