Pension Benefit Guaranty Corporation Archives - Page 3 of 5

New PBGC Guidance Provides Premium Penalty Relief for Certain Late Payments and for Faulty Alternative Premium Funding Target Elections

by McDermott Will & Emery | Sep 28, 2011 | Retirement Plans

by Joseph S. Adams, Maureen O’Brien and Patrick D. Ryan

On September 14, 2011, the Pension Benefit Guaranty Corporation (PBGC) issued a notice (Notice) that provides relief to pension plans from penalties associated with certain late payment of premiums and situations involving the failure to properly elect the alternative premium funding target (APFT) to calculate the variable rate premium (VRP). According to PBGC’s press release, the agency was granting premium-related relief as part of a continuing effort to ease regulatory burdens on its customers. Plan sponsors and industry groups continue to request that the PBGC expand premium penalty relief.

Click here for additional information.

Pension Benefit Guaranty Corporation Issues Final Rule on Termination Dates for Pension Plans of Bankrupt Sponsors

by McDermott Will & Emery | Jun 28, 2011 | Retirement Plans

by Alan D. Nesburg, PC and Maureen O’Brien

On June 14, 2011, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations that apply to single-employer pension plans maintained by employers in bankruptcy. These regulations implement a change made by the Pension Protection Act of 2006 (PPA). The change affects the amount of benefits payable by the PBGC to participants.

If an underfunded pension plan terminates during the plan sponsor’s bankruptcy, the termination date is either agreed to by the plan administrator and the PBGC, or the date is set judicially. Before the PPA, the plan termination date was used to determine both the amount of and eligibility for benefits guaranteed by the PBGC to participants.

The PPA amended the Employee Income Retirement Security Act of 1974 (ERISA) to substitute the bankruptcy filing date for the plan termination date for these two important purposes: determining the amount of participants’ guaranteed benefits under Section 4022 of ERISA and determining whether benefits are guaranteed under Section 4044 of ERISA.

The new PBGC regulations include these provisions:

Guaranteed benefits are based on the amount of a participant’s service and compensation as of the bankruptcy filing date.
The maximum guaranteed benefit, the phase-in limit, and the accrued-at-normal limit are all determined as of the bankruptcy filing date.
Only nonforfeitable benefits as of the bankruptcy filing date are guaranteed.
Subsidized early retirement benefits (or disability or other benefits) to which a participant becomes entitled between the bankruptcy filing date and the actual termination date of the plan will continue in pay status (or may go into pay status), but the amount of the benefit is reduced to reflect that the subsidy (or other benefit) is not guaranteed.
Benefits in priority category 3 under Section 4044 of ERISA are benefits in pay status or that could have been in pay status three years before the bankruptcy filing date (priority category 3 benefits are guaranteed by the PBGC).
If a plan has more than one contributing sponsor and all contributing sponsors did not file for bankruptcy on the same date, PBGC will determine the bankruptcy filing date based on the individual facts and circumstances.

Importantly, under PPA the bankruptcy filing date was not substituted for the plan termination date for all purposes. The termination date still controls for purposes of determining both the amount of a plan’s unfunded liabilities and the parties responsible for those liabilities under Section 4062 of ERISA.

The regulations have an effective date of July 14, 2011, but the PPA change applies if bankruptcy proceedings were initiated on or after September 16, 2006. Plan sponsors that have filed for bankruptcy or are considering such a filing should contact their regular McDermott attorney to discuss the effect of the new regulations.

PBGC Publishes Preliminary Plan for Regulatory Review; Will Re-Examine Reportable Event and 4062(e) Guidance

by Jackie Sinn | Jun 7, 2011 | Benefit Controversies

by Maureen O’Brien and Joseph S. Adams

In response to an Executive Order from the White House to identify opportunities to make government regulations less burdensome and more effective, the Pension Benefit Guaranty Corporation (PBGC) recently published its Preliminary Plan for Regulatory Review. Most notably, PBGC noted that it had begun implementing the Executive Order by reconsidering several rules it has recently proposed:

Reportable Events: PBGC announced it was already planning to re-propose regulations regarding reportable events under Section 4043 of the Employment Retirement Income Security Act (ERISA).
ERISA Section 4062(e): PBGC announced it will also reconsider its proposed rule regarding the substantial cessation of operations by employers that maintain defined benefit pension plans in light of public comments. As previously noted by our Firm and several industry groups, the proposed rule had the potential to impose unexpected and extensive liability for employers who undertake routine corporate actions.

In addition, according to the Preliminary Plan, PBGC intends to review the following rules:

Voluntary Correction Programs: PBGC will consider whether to expand its current voluntary correction program for errors related to filings and other requirements.
Premiums: PBGC will review the premium payment requirements for small plans to determine whether changes could be made that would enable small plans to streamline their premium and funding valuation procedures.
ERISA Section 4010: PBGC will review ERISA Section 4010 (Annual Financial and Actuarial Information Reporting) and the filing application to determine whether the burden on employers can be reduced.

PBGC also intends to review various other sections of Title IV of ERISA to delete obsolete regulations or incorrect references, fill-in gaps where additional guidance would be helpful and simplify language.

President Obama’s Executive Order called for an "open exchange" of information among government officials, experts, stakeholders and the public. Accordingly, the PBGC is accepting public comments on its Preliminary Plan. For more information regarding submitting comments, click here.