[Federal Register Volume 83, Number 136 (Monday, July 16, 2018)]
[Proposed Rules]
[Pages 32815-32825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15076]
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 4041A, 4245, and 4281
RIN 1212-AB38
Terminated and Insolvent Multiemployer Plans and Duties of Plan
Sponsors
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Proposed rule.
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SUMMARY: The Pension Benefit Guaranty Corporation proposes to amend its
multiemployer reporting, disclosure, and valuation regulations to
reduce the number of actuarial valuations required for smaller plans
terminated by mass withdrawal, add a valuation filing requirement and a
withdrawal liability reporting requirement for certain terminated plans
and insolvent plans, remove certain insolvency notice and update
requirements, and reflect the repeal of the multiemployer plan
reorganization rules.
DATES: Comments must be submitted on or before September 14, 2018 to be
assured of consideration.
ADDRESSES: Comments may be submitted by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
(Follow the online instructions for submitting comments.)
Email: [email protected]. Refer to RIN 1212-AB38 in
the subject line.
Mail or Hand Delivery: Regulatory Affairs Division, Office
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K
Street NW, Washington, DC 20005-4026.
All submissions must include the agency's name (Pension Benefit
Guaranty Corporation, or PBGC) and the RIN for this rulemaking (RIN
1212-AB38). All comments received will be posted without change to
PBGC's website, www.pbgc.gov, including any personal information
provided. Copies of comments may also be obtained by writing to
Disclosure Division, Office of the General Counsel, Pension Benefit
Guaranty Corporation, 1200 K Street NW, Washington, DC 20005-4026, or
calling 202-326-4040 during normal business hours. (TTY users may call
the Federal relay service toll-free at 800-877-8339 and ask to be
connected to 202-326-4040.)
FOR FURTHER INFORMATION CONTACT: Hilary Duke ([email protected]),
Assistant General Counsel for Regulatory Affairs, Office of the General
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW,
Washington, DC 20005-4026; 202-326-4400, extension 3839. (TTY users may
call the Federal relay service toll-free at 800-877-8339 and ask to be
connected to 202-326-4400, extension 3839.)
SUPPLEMENTARY INFORMATION:
Executive Summary--Purpose of the Regulatory Action
This proposed rule would make certain reporting and disclosure of
multiemployer information to PBGC and interested parties more efficient
and reflect the repeal of the multiemployer plan reorganization rules.
The proposal would reduce costs by allowing smaller plans terminated by
mass withdrawal to perform actuarial valuations less frequently and by
removing certain notice requirements for insolvent plans. This would
reduce plan administrative costs and, in turn, may reduce financial
assistance provided by PBGC.
PBGC's legal authority for this action is based on section
4002(b)(3) of the Employee Retirement Income Security Act of 1974
(ERISA), which authorizes PBGC to issue regulations to carry out the
purposes of title IV of ERISA; section 4041A(f)(2) of ERISA, which
gives PBGC authority to prescribe reporting requirements for terminated
plans; section 4245(e) of ERISA, which directs PBGC to prescribe
requirements for notices regarding multiemployer plan insolvency;
section 4261 of ERISA, which authorizes PBGC to provide financial
assistance to insolvent plans, and section 4281(d)(3) of ERISA, which
directs PBGC to prescribe requirements for notices to plan participants
and beneficiaries in the event of a benefit suspension by an insolvent
plan.
Executive Summary--Major Provisions of the Regulatory Action
Plan Sponsor Duties--Annual Valuation and Withdrawal Liability
The plan sponsor of a multiemployer plan terminated by mass
withdrawal is responsible for specific duties, including an annual
actuarial valuation of the plan's assets and benefits. This proposed
rule would reduce administrative burden by allowing the plan sponsor to
perform an actuarial valuation only every 5 years if the present value
of the plan's nonforfeitable benefits is $50 million or less. The
proposed rule would add a new requirement for plan sponsors of certain
terminated or insolvent plans to file actuarial valuations with PBGC.
Where the present value of the plan's nonforfeitable benefits is $50
million or less, a plan receiving financial assistance from PBGC would
be able to file alternative valuation information.
The plan sponsor of a multiemployer plan also is responsible for
determining, giving notice of, and collecting withdrawal liability. The
proposal would require plan sponsors of certain terminated or insolvent
plans to file with PBGC information about withdrawal liability payments
and whether any employers have withdrawn but have not yet been assessed
withdrawal liability.
Insolvency Notices and Updates
A multiemployer plan terminated by mass withdrawal that is
insolvent or is expected to be insolvent for a plan year must provide
certain notices to PBGC and participants and beneficiaries. Similarly,
a multiemployer plan that is certified by the plan's actuary to be in
critical status and that is expected to become insolvent under section
4245 of ERISA must provide certain notices to PBGC and interested
parties. Notices include a notice of insolvency and a notice of
insolvency benefit level. The proposed rule would eliminate outdated
information included in the notices. The proposal would require a plan
to provide notices of insolvency if the plan sponsor determines the
plan is insolvent in the current plan year or is expected to be
insolvent in the next plan year. The proposal also would eliminate the
requirement to provide most annual updates to the notices of insolvency
benefit level.
Background
The Pension Benefit Guaranty Corporation (PBGC) administers two
insurance programs for private-sector defined benefit pension plans
under title IV of the Employee Retirement Income Security Act of 1974
(ERISA): A single-employer plan termination insurance program and a
multiemployer plan insolvency insurance program. In general, a
multiemployer pension plan is a collectively bargained plan involving
two or more unrelated employers. This proposed rule deals with
multiemployer plans.
Under section 4041A of ERISA, a mass withdrawal termination of a
plan occurs when all employers withdraw or cease to be obligated to
contribute to the plan. A plan terminated by mass
[[Page 32816]]
withdrawal continues to pay all vested benefits from existing plan
assets and withdrawal liability payments from withdrawn employers.
PBGC's financial assistance to the terminated plan starts only if and
when the plan sponsor determines that the plan is insolvent under
section 4281(d) of ERISA. PBGC also provides financial assistance to
certain plans in critical status that are not terminated or are
terminated by plan amendment \1\ if the plan sponsor determines that
the plan is insolvent under section 4245 of ERISA.
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\1\ Termination of a multiemployer plan by plan amendment is
determined under section 4041A(a)(1) of ERISA.
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Before 2015, financially troubled multiemployer plans entered a
``reorganization'' status if their funding was below a certain level.
Plans in reorganization status were subject to certain rules affecting
plan funding, benefits, and reporting and disclosure. The plan sponsor
of a plan in reorganization that determined the plan was insolvent or
was expected to be insolvent for a plan year was required to provide
PBGC and interested parties notices regarding the plan's insolvency.
The Pension Protection Act of 2006 established critical and endangered
statuses for underfunded plans and provided new tools to help
multiemployer plans in those statuses improve plan funding but did not
repeal the reorganization rules. Section 108 of the Multiemployer
Pension Reform Act of 2014 (MPRA) repealed the rules on reorganization
under section 4241 of ERISA effective for plan years beginning after
December 31, 2014. MPRA also amended the notice requirements under
section 4245(e) of ERISA and 418E(e) of the Internal Revenue Code
(Code) to replace the references to a plan in reorganization with
references to a plan in critical status. These amendments did not
substantively change the notice requirements.
This proposed rule would reduce reporting and disclosure
requirements for multiemployer plans that are terminated by mass
withdrawal or in critical status and that are, or are expected to be,
insolvent.\2\ PBGC identified these proposed amendments as part of its
ongoing retrospective review under Executive Order 13563 ``Improving
Regulation and Regulatory Review.'' Executive Order 13563 provides for
Federal regulations to use less burdensome means to achieve policy
goals, and for agencies to give careful consideration to the benefits
and costs of those regulations. Comments received from one commenter in
response to PBGC's July 2017 Request for Information\3\ support the
proposed changes to reduce notice requirements for insolvent plans.
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\2\ In 2014, PBGC amended its regulations to reduce the number
of actuarial valuations required for certain smaller terminated
plans and remove certain insolvency notice and update requirements.
See 79 FR 30459 (May 28, 2014). This rulemaking is a continuation of
that effort to reduce plan burden.
\3\ PBGC Regulatory Planning and Review of Existing Regulations,
Request for Information (82 FR 34619, July 26, 2017).
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Proposed Regulatory Changes
Annual Valuation Requirement
PBGC's regulation on Termination of Multiemployer Plans (29 CFR
part 4041A) establishes rules for the administration of multiemployer
plans that have terminated by mass withdrawal, including basic duties
of plan sponsors of plans terminated by mass withdrawal. Among the
requirements, the plan sponsor of a plan terminated by mass withdrawal
must value the plan's nonforfeitable benefits and assets as of the last
day of the plan year in which the plan terminates and the last day of
each plan year thereafter. The details of the annual actuarial
valuation requirement are provided in subpart B of PBGC's regulation on
Duties of Plan Sponsor Following Mass Withdrawal (29 CFR part 4281).
The plan sponsor of a plan terminated by mass withdrawal uses the
annual actuarial valuation to determine whether the value of
nonforfeitable benefits exceeds the value of assets. If benefits exceed
assets, the plan may need to reduce benefits. If no benefits are
subject to reduction, the plan will continue to make periodic
determinations of plan solvency. The proposed rule would revise Sec.
4041A.25 of the multiemployer termination regulation to clarify the
timing of the plan sponsor's determinations of plan solvency by
combining similar provisions to eliminate repetition and by removing
potentially confusing language.
The plan sponsor of a plan in critical status must also make
determinations of plan solvency. If the plan sponsor determines under
section 4245(d) of ERISA that the plan is expected to be insolvent for
a plan year, the plan must file a notice with PBGC, including a copy of
the most recent actuarial valuation for the plan. PBGC uses the annual
actuarial valuation to estimate the liabilities PBGC will incur when
the plan becomes insolvent and for purposes of its financial
statements.
PBGC is proposing to reduce the number of plans terminated by mass
withdrawal that are required to prepare an annual actuarial valuation.
Section 4041A.24 of the multiemployer termination regulation provides
that if the value of nonforfeitable benefits for a plan terminated by
mass withdrawal is $25 million or less as determined for a plan year,
the plan sponsor may use the actuarial valuation for the next two years
and perform a new actuarial valuation for the third plan year. The
proposed rule would increase the threshold requirement for plans and
allow them to use less frequent actuarial valuations. A plan would be
able to use an actuarial valuation for 5 years if the present value of
the plan's nonforfeitable benefits is $50 million or less and be in
compliance with the statutory requirement that there be an annual
written determination of the value of the plan's nonforfeitable
benefits and the plan's assets.
If the present value of a plan's nonforfeitable benefits exceeds
$50 million, the plan would continue to be required to perform
actuarial valuations annually.\4\ Plans could move in and out of the 5-
year or annual valuation cycle, as applicable, as the value of
nonforfeitable benefits changes. Thus, a plan that had been using an
actuarial valuation for 5 years would be required to perform actuarial
valuations annually if the most recent actuarial valuation indicates
that the present value of the plan's nonforfeitable benefits exceeds
$50 million. Similarly, a plan that had been performing the actuarial
valuation annually would be able to use the actuarial valuation for 5
years if the most recent actuarial valuation shows the present value of
the plan's nonforfeitable benefits to be $50 million or less.
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\4\ No valuation is required for a plan year in which the plan
is closed out in accordance with subpart D of part 4041A.
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To estimate PBGC's multiemployer plan liabilities, PBGC also is
proposing to add the annual actuarial valuation requirement for
insolvent plans receiving financial assistance from PBGC (whether
terminated or not terminated) and plans terminated by plan amendment
that are expected to become insolvent.\5\ The provision allowing
smaller plans to use less frequent actuarial valuations would be
available to these plans. In addition, where the present value of the
plan's nonforfeitable benefits is $50 million or less, a plan receiving
financial assistance from PBGC could comply with the actuarial
valuation requirement by filing alternative information as
[[Page 32817]]
specified in valuation instructions on PBGC's website.
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\5\ Section 4041A.24(a)(2) of PBGC's termination regulation
currently excludes plans receiving financial assistance from PBGC
from the annual actuarial valuation requirement.
Summary of Actuarial Valuation Filing Requirements
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Alternative
Frequency of information
actuarial permitted to be
Size of plan according to most valuation: filed: plans
recent actuarial valuation terminated plans receiving
and insolvent financial
plans assistance
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Present Value of Plan's Every 5 Years..... Yes.
Nonforfeitable Benefits is $50
Million or Less.
Present Value of Plan's Each Year......... No.
Nonforfeitable Benefits Exceeds
$50 Million.
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The proposed amendments would enable PBGC to continue to have
reasonably reliable data to measure its liabilities, while reducing
burden on plans that present smaller exposure. PBGC currently obtains
actuarial valuations for plans receiving financial assistance by
contacting plan sponsors. The proposal would require a plan sponsor to
file the plan's actuarial valuation with PBGC within 180 days after the
end of the plan year for which the actuarial valuation is performed.
Having plans file the actuarial valuation or alternative valuation
information within the proposed time period would provide for a more
efficient process for plans and PBGC. The proposed rule would also make
clarifications and other editorial changes to part 4041A.
Withdrawal Liability Payments
The plan sponsor of a multiemployer plan is required to determine
and collect withdrawal liability in accordance with section 4219 of
ERISA. The plan sponsor assesses withdrawal liability by issuing a
notice to an employer, including the amount of the employer's liability
and a schedule of payments. The plan sponsor also must file with PBGC a
certification that notices have been provided to employers.\6\
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\6\ See 29 CFR 4219.17.
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PBGC uses information about withdrawal liability payments and
settlements, and whether employers have withdrawn from the plan but
have not yet been assessed withdrawal liability, to estimate PBGC's
multiemployer liabilities for purposes of its financial statements and
to provide financial assistance to plans.\7\ It is particularly
important for PBGC to identify all sources of available funding given
the declining financial position of the multiemployer program. As of
September 30, 2017, there were 72 insolvent plans that received
financial assistance from PBGC and 68 terminated plans not yet
receiving financial assistance.\8\ The number of plans receiving and
expected to receive financial assistance led PBGC to examine the way it
obtains withdrawal liability information.
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\7\ PBGC may prescribe reporting requirements for terminated
plans under section 4041A(f)(2) of ERISA.
\8\ See PBGC FY 2017 Annual Report, page 94 at https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2017.pdf.
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PBGC is proposing that plan sponsors of plans subject to the
actuarial valuation requirement (plans terminated by mass withdrawal,
plans terminated by plan amendment that are expected to become
insolvent, and insolvent plans receiving financial assistance from PBGC
(whether terminated or not terminated)), file with PBGC information
about withdrawal liability, in the aggregate and by employer, that the
plan has or has not yet assessed withdrawn employers. The information
would be specified in the withdrawal liability instructions on PBGC's
website. For each employer not yet assessed withdrawal liability,
information would include the name of the employer and the reasons the
employer has not yet been assessed withdrawal liability. For each
employer assessed withdrawal liability, information would include the
name of the employer and whether there are scheduled periodic payments
or there has been a lump-sum settlement. For periodic payments,
information would include the start date, end date, frequency of
payment (monthly, quarterly, annually), amount of payment, and whether
the employer is current on making its payments. For lump sum
settlements, information would include the amount and date of payment.
To satisfy the filing requirement for employers assessed withdrawal
liability, a plan sponsor could choose to file documents already
prepared containing the withdrawal liability information for each
employer, such as withdrawal liability notices setting forth scheduled
payments or withdrawal liability settlement agreements.
The proposal would require a plan sponsor to file the withdrawal
liability information with PBGC within 180 days after the earlier of
the end of the plan year in which the plan terminates or becomes
insolvent and each plan year thereafter, unless there is no updated
information to file. Having plans file the withdrawal liability
information electronically and within the proposed time period would
provide for an efficient process for plans and PBGC.
Terminated and Insolvent Plan Notices
The plan sponsor of a multiemployer plan terminated by mass
withdrawal must make determinations of insolvency annually in
accordance with section 4281 of ERISA and the plan sponsor of a
multiemployer plan in critical status must make determinations of
insolvency in accordance with section 4245(d) of ERISA. When the plan
sponsor of a multiemployer plan determines that the plan's resources
are not sufficient to pay the promised level of benefits stated in the
plan when due during the plan year, the plan sponsor must suspend
benefits above the amount that assets will cover. However, benefits may
not be reduced to an amount less than the PBGC guarantee level. Plans
that are not able to pay benefits at the promised level of benefits
stated in the plan are required to notify PBGC and plan participants
and beneficiaries.
The notice requirements for plans that have terminated by mass
withdrawal are provided under subpart D of PBGC's regulation on Duties
of Plan Sponsor Following Mass Withdrawal (29 CFR part 4281). Similar
notice requirements are provided for plans that are in critical status
under PBGC's regulation on Notice of Insolvency (29 CFR part 4245).
Under the latter, in addition to notifying PBGC and participants and
beneficiaries, plans must notify other interested parties, including
employers required to contribute to the plan and employee organizations
that, for collective bargaining purposes, represent participants
employed by such employers.
There are two types of notice that plans must provide: A ``notice
of insolvency,'' stating the plan year that the plan is insolvent or is
expected to be insolvent, and a ``notice of insolvency benefit level,''
stating the level of benefits that will be paid during
[[Page 32818]]
a plan year in which a plan is insolvent. The proposed rule would
require the plan sponsor of a critical status plan or of a plan
terminated by mass withdrawal to provide notices of insolvency if it
determines that the plan is insolvent in the current plan year or is
expected to be insolvent in the next plan year. The proposal also would
make the timing of the delivery of the notice of insolvency and the
notice of insolvency benefit level the same--by the later of 90 days
before the beginning of the insolvency year or 30 days after the date
the insolvency determination is made. In addition, the proposal would
allow the plan sponsor to provide one combined notice for the same
insolvency year.
PBGC's regulations currently require plan sponsors to provide the
notice of insolvency benefit level annually. PBGC's experience has been
that virtually all multiemployer plans that become insolvent will
remain so. Thus, once a plan sponsor has provided the initial notice of
insolvency benefit level, there is little need to require the plan
sponsor to provide similar subsequent notices. Consequently, PBGC is
proposing to eliminate most of the annual updates to the notices of
insolvency benefit level. The plan sponsor would provide updated
notices to PBGC and to all participants and beneficiaries only if there
is a change in the amount of benefits paid that affects participants
and beneficiaries generally. If a participant or beneficiary enters pay
status or is reasonably expected to enter pay status during the
insolvency year, or there is a change in benefit level that affects
only one participant or beneficiary or a participant class, a notice
would only be required to be provided to PBGC and to each affected
person. For example, in the latter case, if a participant enters pay
status or a participant's death results in the payment of benefits to
the participant's beneficiary, only PBGC and those affected
participants and beneficiaries would be provided notices.
Plan sponsors are required to electronically file notices of
termination, notices of insolvency, and notices of insolvency benefit
level.\9\ The proposed rule would move the content requirements for
these notices filed with PBGC from the regulations to instructions
available on PBGC's website. PBGC generally considers it preferable to
describe information to be filed only in the filing instructions, and
not in the regulation prescribing the filing, to avoid having two
authoritative descriptions of the same requirements and to make it
easier for filers to find the information they need in one place. The
proposed rule also would make changes to the contents of the notice of
insolvency and notice of insolvency benefit level by eliminating
outdated information and, consistent with MPRA, by removing references
to reorganization in the notice of insolvency regulation. The proposed
rule would also make clarifications and other editorial changes to
parts 4245 and 4281.
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\9\ Section 4000.3(b)(4) of PBGC's regulation on Filing,
Issuance, Computation of Time, and Record Retention requires, with
exceptions, filings to PBGC under parts 4041A, 4245, and 4281 to be
made electronically in accordance with the instructions on PBGC's
website, except as otherwise provided by PBGC.
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Application for Financial Assistance
The plan sponsor of a multiemployer plan must apply to PBGC for
financial assistance if the plan sponsor determines that the plan's
resource benefit level will be below the level of benefits guaranteed
by PBGC or that the plan will be unable to pay guaranteed benefits when
due for any month during the year. Section 4281.47 of PBGC's duties of
plan sponsor regulation requires a plan sponsor to file an initial
application with PBGC at the same time that it files a notice of
insolvency benefit level. When the plan sponsor determines an inability
to pay guaranteed benefits for any month, the plan sponsor must file a
recurring application within 15 days after the plan sponsor makes the
determination. To provide PBGC adequate time to review applications for
financial assistance, the proposed rule would require an initial
application to be filed no later than 90 days before the first day of
the month for which the plan sponsor has determined that the resource
benefit level will be below the level of guaranteed benefits. The
proposed rule would require a recurring application to be filed as soon
as practicable after the plan sponsor determines the plan will be
unable to pay guaranteed benefits when due for a month and make other
editorial changes. The contents of the applications for financial
assistance would be moved from the regulations to instructions on
PBGC's website.
Applicability
The amendments to Sec. Sec. 4041A.2, 4041A.12 and 4041A.25 of the
multiemployer termination regulation that make changes to the
definitions, the content of the notice of termination, and the
determination of plan solvency would be applicable as of the effective
date of the final rule.
The amendments to Sec. 4041A.23 of the multiemployer termination
regulation and to part 4245 that require plan sponsors to file with
PBGC withdrawal liability information would be applicable for plan
years ending after the effective date of the final rule.
The amendments to Sec. 4041A.24 of the multiemployer termination
regulation and to part 4245 that change the annual actuarial valuation
requirement would be applicable to actuarial valuations prepared for
plan years ending after the effective date of the final rule.
The amendments to part 4245 and part 4281 that make changes to the
content and timing of the notices of insolvency and notices of
insolvency benefit level and that make changes to the timing of an
application for financial assistance would be applicable as of the
effective date of the final rule.
Executive Orders 12866, 13563, and 13771
PBGC has determined that this rulemaking is not a ``significant
regulatory action'' under Executive Order 12866 and Executive Order
13771. Accordingly, this proposed rule is exempt from Executive Order
13771 and OMB has not reviewed the rule under Executive Order 12866.
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This proposed rule is associated with retrospective review
and analysis in PBGC's Plan for Regulatory Review issued in accordance
with Executive Order 13563.
Although this is not a significant regulatory action under
Executive Order 12866, PBGC has examined the economic implications of
this proposed rule and has concluded that the amendments to the annual
actuarial valuation requirements and notice of insolvency and notice of
insolvency benefit level would reduce costs for multiemployer plans by
approximately $438,000. The analysis is as follows.
Annual Actuarial Valuation Requirement
PBGC has estimated the value of this proposed rule for the annual
actuarial valuation requirements for plans terminated by mass
withdrawal that are not insolvent (assuming an annual
[[Page 32819]]
actuarial valuation cost of $12,000 per plan for plans whose
nonforfeitable benefits have a present value of $25 million or less and
cost of $30,000 per plan for plans whose nonforfeitable benefits have a
present value in the range of $25 to $50 million.\10\). As of the end
of the 2017 fiscal year, there were 68 terminated plans that were not
insolvent. Of that total, there were 47 plans whose nonforfeitable
benefits have a present value of $25 million or less that will be able
to use an actuarial valuation for 5 years instead of 3 years for annual
savings of approximately $75,200 (47 x $12,000 x .1333 (1/3-1/5)) and 8
plans whose nonforfeitable benefits have a present value in the range
of $25 to $50 million that will be able to use an actuarial valuation
for 5 years instead of 1 year for annual savings of approximately
$192,000 (8 x $30,000 x .8 (1-1/5)). PBGC estimates annual aggregate
savings of approximately $267,200 to these plans.
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\10\ The cost of an actuarial valuation varies greatly by plan
size. Based on plan actuary experience, an actuarial valuation for a
smaller plan where the present value of the plan's nonforfeitable
benefits is $50 million or less may cost approximately $10,000 to
$35,000.
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As of the end of the 2017 fiscal year, there were 72 insolvent
plans. Of that total, there were 15 insolvent plans whose
nonforfeitable benefits have a present value exceeding $50 million. As
PBGC currently obtains actuarial valuations from these insolvent plans
and provides financial assistance for the cost of performing the
actuarial valuations, PBGC believes there is no additional cost under
this proposed rule for performing insolvent plan actuarial valuations.
The savings under the proposed rule are offset by the annual cost
of the actuarial valuation and alternative valuation filing
requirements. PBGC estimates that each year, approximately 40 plans
will file actuarial valuations and approximately 10 plans will file
alternative valuation information. As discussed below under the
Paperwork Reduction Act analysis, PBGC estimates an annual aggregate
hour burden of 20 hours at an estimated dollar equivalent of $1,500 and
an annual aggregate cost burden of $8,000.
Withdrawal Liability Filing
Under the proposed rule, PBGC expects to receive withdrawal
liability information from approximately 140 plans. As discussed below
under the Paperwork Reduction Act analysis, PBGC estimates an annual
hour burden of 140 hours at an estimated dollar equivalent of $10,500
and an annual cost burden of $56,000.
Annual Notice Updates
As discussed below under the Paperwork Reduction Act analysis, PBGC
estimates that the annual aggregate cost of preparing the notice of
insolvency and notice of insolvency benefit level without the proposed
rule, and based on recent plan experience, is approximately $627,400
($12,000 + $615,400). This estimate is based on an estimated 11 plans
required to issue the notice of insolvency and 55 plans required to
issue an annual update to the notice of insolvency benefit level.
Allowing plans to issue a combined notice and eliminating most of the
annual updates to the notice of insolvency benefit level will reduce
the cost to $380,400, saving plans approximately $247,000 ($627,400 -
$380,400).
Regulatory Flexibility Act
The Regulatory Flexibility Act imposes certain requirements with
respect to rules that are subject to the notice and comment
requirements of section 553(b) of the Administrative Procedure Act and
that are likely to have a significant economic impact on a substantial
number of small entities. Unless an agency determines that a rule is
not likely to have a significant economic impact on a substantial
number of small entities, section 603 of the Regulatory Flexibility Act
requires that the agency present an initial regulatory flexibility
analysis at the time of the publication of the proposed rule describing
the impact of the rule on small entities and seeking public comment on
such impact. Small entities include small businesses, organizations and
governmental jurisdictions.
Small Entities
For purposes of the Regulatory Flexibility Act requirements with
respect to this proposed rule, PBGC considers a small entity to be a
plan with fewer than 100 participants. This is substantially the same
criterion PBGC uses in other regulations \11\ and is consistent with
certain requirements in title I of ERISA \12\ and the Code,\13\ as well
as the definition of a small entity that the Department of Labor has
used for purposes of the Regulatory Flexibility Act.\14\
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\11\ See, e.g., special rules for small plans under part 4007
(Payment of Premiums).
\12\ See, e.g., ERISA section 104(a)(2), which permits the
Secretary of Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100 participants.
\13\ See, e.g., Code section 430(g)(2)(B), which permits plans
with 100 or fewer participants to use valuation dates other than the
first day of the plan year.
\14\ See, e.g., Department of Labor's final rule on Prohibited
Transaction Exemption Procedures, 76 FR 66637, 66644 (Oct. 27,
2011).
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Thus, PBGC believes that assessing the impact of the proposed rule
on small plans is an appropriate substitute for evaluating the effect
on small entities. The definition of small entity considered
appropriate for this purpose differs, however, from a definition of
small business based on size standards promulgated by the Small
Business Administration (13 CFR 121.201) pursuant to the Small Business
Act. PBGC therefore requests comments on the appropriateness of the
size standard used in evaluating the impact on small entities of the
proposed amendments.
Certification
On the basis of its definition of small entity, PBGC certifies
under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) that the amendments in this rule will not have a significant
economic impact on a substantial number of small entities. Based on
data for the 2017 fiscal year, PBGC estimates that only 16 small plans
of the approximately 1,400 plans covered by PBGC's multiemployer
program will be required to file withdrawal liability information and
an actuarial valuation or alternative valuation information under the
proposed rule. An estimated three small plans will be relieved of the
burden to prepare and distribute an annual notice of insolvency benefit
level update to participants and beneficiaries. This is not a
substantial number of small plans. Accordingly, as provided in section
605 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), sections
603 and 604 do not apply.
Paperwork Reduction Act
PBGC is submitting the information requirements under this proposed
rule to the Office of Management and Budget (OMB) under the Paperwork
Reduction Act. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid OMB control number.
The collection of information in part 4041A is approved under
control number 1212-0020 (expires November 30, 2018). Based on recent
plan experience, PBGC estimates that the current notice of termination
and other requirements in part 4041A have an annual burden of 69 hours
and a cost of $50,000, increased from an estimated 17 hours and $3,850.
[[Page 32820]]
PBGC estimates that the proposed changes to file withdrawal
liability information electronically would have a minimal hour and cost
burden as it is expected that the information would be easily
accessible and that most plans would use documents already prepared
containing withdrawal liability information. PBGC estimates that
approximately 140 plans would file withdrawal liability information and
that it would take each plan approximately 2 hours to electronically
file the information. PBGC further estimates that the filings would be
completed by pension fund office staff (50%) and outside attorneys
(50%). The total hour burden would be approximately 140 hours of
pension fund office time at an estimated dollar equivalent of $10,500
(based on an assumed hourly rate of $75 for administrative, clerical,
and supervisory time). The total cost burden would be approximately
$56,000 (based on 140 contracted hours assuming an average hourly rate
of $400).
PBGC expects that an estimated 40 plans (28 plans with
nonforfeitable benefits that exceed $50 million plus 12 plans with
nonforfeitable benefits of $50 million or less) would file actuarial
valuations and that it would take each plan 30 minutes to file the
information electronically. PBGC expects that an estimated 10 plans
receiving financial assistance from PBGC would file alternative
valuation information and that it would take each plan 2 hours to file
the information electronically. PBGC further estimates that the filings
would be completed by pension fund office staff (50%) and outside
attorneys (50%). The total estimated hour burden to file the actuarial
valuations and to complete and file the alternative valuation
information would be approximately 20 hours of pension fund office time
at an estimated dollar equivalent of $1,500 (based on an assumed hourly
rate of $75 for administrative, clerical, and supervisory time). The
total cost burden would be approximately $8,000 (based on 20 contracted
hours assuming an average hourly rate of $400).
PBGC estimates that without the proposed rule there would be 2,111
notices and responses and that the total annual burden of the
collection of information in part 4041A would be about 69 hours and
$50,000. PBGC estimates that with the proposed rule there would be
2,301 notices and responses each year and that the total annual burden
of the collection of information would be an hour burden of about 229
hours for pension fund office time (69+140+20) at an estimated dollar
equivalent of $17,175 and a cost burden for work by outside consultants
of $114,000 ($50,000+$56,000+$8,000).
The collection of information in part 4245 is approved under
control number 1212-0033 (expires November 30, 2018). PBGC estimates
that only 1 plan would issue new notices of insolvency under part 4245
and that each year there would be 1,038 notices or combined notices
issued to participants and beneficiaries, PBGC, and other interested
parties. PBGC previously estimated that the notices were prepared and
distributed by outside consultants and that the annual hour burden was
1 hour and the annual cost burden was $723. Based on recent plan
experience, the time to prepare and distribute the notices can vary
significantly by plan size. PBGC estimates that without the proposed
rule, the annual hour burden would be 20 hours and the annual cost
burden would be $12,000. The proposed regulation would reduce the
burden by allowing plans to combine the notice of insolvency and the
notice of insolvency benefit level and by eliminating most of the
annual updates to participants and beneficiaries. PBGC estimates the
proposed rule would reduce the annual hour burden to 16 hours of
pension fund office time and the annual cost burden for work by outside
consultants to $10,000.
The collection of information in part 4281 is approved under
control number 1212-0032 (expires November 30, 2018). PBGC expects to
receive the following notices under part 4281: 1 notice of benefit
reduction; 10 notices of insolvency; 55 notices of insolvency benefit
level; 10 initial applications for financial assistance; and 300 non-
initial applications for financial assistance. PBGC's estimates
previously assumed that the notices were prepared and distributed by
outside consultants. PBGC estimated an annual hour burden of 60 hours
and an annual cost burden of $309,020. Based on recent plan experience
and information that the notices are distributed by pension fund
offices, PBGC estimates an annual hour burden of 1,300 hours and an
annual cost burden of $615,400. Under the proposed rule, most of the
annual updates to the notice of insolvency benefit level would be
eliminated unless there is a change in benefit level. PBGC estimates
the proposed change would reduce the number of plans issuing notices of
insolvency benefit level from 55 plans to approximately 5 plans. PBGC
estimates that 13,826 notices and applications would be issued annually
under part 4281. PBGC estimates that the proposed rule would reduce the
annual hour burden to 240 hours of pension fund office time and the
annual cost burden for work by outside consultants to $370,400.
List of Subjects
29 CFR Part 4041A
Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.
29 CFR Part 4245
Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.
29 CFR Part 4281
Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.
For the reasons given above, PBGC proposes to amend 29 CFR chapter
XL and 29 CFR parts 4041A, 4245, and 4281 as follows:
PART 4041A--TERMINATION OF MULTIEMPLOYER PLANS
0
1. The authority citation for part 4041A is revised to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341a, 1431, 1441.
0
2. In Sec. 4041A.2:
0
a. Add in alphabetical order a definition for ``Actuarial valuation'';
0
b. Amend the definition of ``Available resources'' by removing ``means,
for a plan year, available'' and adding in its place ``means
available'';
0
c. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
d. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
e. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
f. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that a plan is unable'' and adding in its place ``unable''
and by removing the second sentence;
0
g. Amend the definition of ``Nonguaranteed benefits'' by removing ``the
PBGC's'' and adding in its place ``PBGC's''.
The addition reads as follows:
Sec. 4041A.2 Definitions.
* * * * *
Actuarial valuation means a report submitted to a plan of a
valuation of plan assets and liabilities that is performed in
accordance with subpart B of part 4281 of this chapter.
* * * * *
[[Page 32821]]
Sec. 4041A.11 [Amended]
0
3. In Sec. 4041A.11:
0
a. Amend paragraph (a) by removing ``A Notice of Termination shall be
filed with the PBGC'' and adding in its place ``A notice of termination
must be filed with PBGC'';
0
b. Amend the paragraph heading in paragraph (b) by removing ``shall''
and adding in its place ``must'' and the text is amended by removing
``shall sign and file the Notice.'' and adding in its place ``must sign
and file the notice.'';
0
c. Amend paragraph (c)(1) by removing ``the Notice shall be filed with
the PBGC'' and adding in its place ``the notice must be filed with
PBGC'';
0
d. Amend paragraph (c)(2) by removing ``the Notice shall be filed with
the PBGC'' and adding in its place ``the notice must be filed with
PBGC'';
0
e. Amend paragraph (d) by removing ``Filings to PBGC'' and adding in
its place ``Filings with PBGC''.
0
4. Revise section 4041A.12 to read as follows:
Sec. 4041A.12 Contents of notice.
(a) Information to be contained in notice. A notice of termination
under Sec. 4041A.11 required to be filed with PBGC must contain the
information and certification specified in the instructions for the
notice of termination on PBGC's website (www.pbgc.gov).
(b) Additional information. In addition to the information required
under paragraph (a) of this section, PBGC may require the submission of
any other information that PBGC determines is necessary for review of a
notice of termination.
Sec. 4041A.21 [Amended]
0
5. In Sec. 4041A.21:
0
a. Amend the first sentence by removing ``shall'' and adding in its
place ``must'';
0
b. Amend the second sentence by removing ``shall be'' and adding in its
place ``is'' and by removing ``this subpart.'' and adding in its place
``this subpart C.'';
0
6. In Sec. 4041A.23:
0
a. Amend the section heading by removing ``Imposition and collection of
withdrawal liability.'' and adding in its place ``Withdrawal
liability.'';
0
b. Redesignate the text of Sec. 4041A.23 as paragraph (a) with the
paragraph heading ``Collection of withdrawal liability.'';
0
c. Amend paragraph (a) by removing ``shall be responsible for
determining, imposing and collecting'' and adding in its place ``must
determine, give notice of, and collect'' and by removing ``part 4219,
subpart C,'' and adding in its place ``subpart C of part 4219'';
0
d. Add paragraph (b) to read as follows:
Sec. 4041A.23 Withdrawal liability.
* * * * *
(b) Filing of withdrawal liability information. For each employer
that has withdrawn from the plan, the plan sponsor must file with PBGC,
not later than 180 days after the end of the plan year in which the
plan terminates and each plan year thereafter, the information
specified in the withdrawal liability instructions on PBGC's website
(www.pbgc.gov).
0
7. Revise Sec. 4041A.24 to read as follows:
Sec. 4041A.24 Plan valuations and monitoring.
(a) Annual valuation requirement. The plan sponsor of a plan must
have actuarial valuations performed in accordance with this section and
with subpart B of part 4281.
(1) Termination year valuation. The plan sponsor of a plan must
have an actuarial valuation performed for the plan for the plan year in
which the plan terminates.
(2) High-obligation valuations. If the present value of a plan's
nonforfeitable benefits exceeds $50 million according to the most
recent actuarial valuation under this paragraph (a), the plan sponsor
must have an actuarial valuation performed for the plan for each plan
year.
(3) Low-obligation valuations. If the present value of a plan's
nonforfeitable benefits does not exceed $50 million according to the
most recent actuarial valuation under this paragraph (a), the plan
sponsor may treat that actuarial valuation as the actuarial valuation
for each of the four plan years following the plan year for which the
actuarial valuation was performed.
(4) Timing and filing. Each actuarial valuation under this
paragraph (a) must be performed within 150 days after the end of the
plan year for which it is performed and must be filed with PBGC within
180 days after the end of that plan year in accordance with the
valuation instructions on PBGC's website (www.pbgc.gov).
(5) Exception for plans closing out. Notwithstanding paragraphs
(a)(1) through (a)(4) of this section, no actuarial valuation is
required for the plan year in which a plan closes out under subpart D
of this part.
(b) Plan monitoring; benefit reductions--(1) Applicability. This
paragraph (b) applies to a plan that is not receiving financial
assistance from PBGC for the plan year following the plan year for
which an actuarial valuation is performed under paragraph (a) of this
section.
(2) Funding level determination. Upon receipt of each actuarial
valuation under paragraph (a) of this section, the plan sponsor must
determine whether the value of nonforfeitable benefits exceeds the
value of plan assets (including withdrawal liability claims). If it
does, then the plan sponsor must--
(i) Amend the plan to reduce benefits subject to reduction (if any)
in accordance with the procedures in subpart C of part 4281 of this
chapter to the extent necessary to ensure that the plan's assets are
sufficient to discharge when due all of the plan's obligations with
respect to nonforfeitable benefits or, if that result cannot be
achieved, to the maximum extent possible; and
(ii) If, after implementing the provisions of paragraph (b)(2)(i)
of this section, the plan's assets are insufficient to discharge when
due all of the plan's obligations with respect to nonforfeitable
benefits, make determinations of plan solvency in accordance with Sec.
4041A.25.
(3) Notices of benefit reduction. The plan sponsor of a plan that
is amended to reduce benefits under paragraph (b)(2)(i) of this section
must provide participants and beneficiaries and PBGC notice of the
benefit reduction in accordance with Sec. 4281.32 of this chapter.
(c) Alternative method of compliance--(1) Applicability. Paragraph
(c) of this section applies to a plan that meets both of the following
requirements--
(i) The plan is receiving financial assistance from PBGC for the
plan year following the plan year for which an actuarial valuation is
required under paragraph (a) of this section.
(ii) The present value of the plan's nonforfeitable benefits does
not exceed $50 million according to the most recent actuarial valuation
under paragraph (a) of this section.
(2) Alternative compliance requirements. A plan sponsor is
considered to comply with the actuarial valuation and filing
requirements of paragraph (a) of this section if both--
(i) The plan sponsor files with PBGC the information in paragraph
(c)(3) of this section within the time required for filing the
actuarial valuation under paragraph (a)(4) of this section, and
(ii) If, within 90 days after the plan sponsor makes the filing
described in paragraph (c)(2)(i) of this section, PBGC requests other
information reasonably required to determine the plan's assets and
liabilities, the plan sponsor files such other information within 60
days after PBGC's request.
[[Page 32822]]
(3) Information to be provided. The information the plan sponsor
must file with PBGC under paragraph (c)(2)(i) of this section is all of
the following:
(i) The most recent summary plan description of the plan or the
date the document was previously filed with PBGC.
(ii) The most recent actuarial valuation of the plan or the date
the document was previously filed with PBGC.
(iii) Information reasonably necessary for PBGC to prepare an
actuarial valuation as specified in the valuation instructions on
PBGC's website (www.pbgc.gov).
0
8. In Sec. 4041A.25:
0
a. Revise paragraphs (a) and (b);
0
b. Amend paragraph (c) by removing ``shall'' and adding in its place
``must'';
0
c. Amend paragraph (d) by removing ``If the plan sponsor determines
that the plan is, or is expected to be, insolvent for a plan year, it
shall'' and adding in its place ``If the plan sponsor determines that
the plan is insolvent in the current plan year or is expected to be
insolvent in the next plan year it must'' and by removing ``the PBGC''
and adding in its place ``PBGC''.
The revisions read as follows:
Sec. 4041A.25 Periodic determinations of plan solvency.
(a) Annual insolvency determination. A plan that has no benefits
subject to reduction and has assets insufficient to discharge when due
all of the plan's obligations with respect to nonforfeitable benefits
must make periodic determinations of plan solvency in accordance with
this paragraph (a). No later than six months before the beginning of
the applicable plan year described in this paragraph (a), or as soon as
practicable after the plan sponsor determines the applicable plan year,
and no later than six months before each plan year thereafter, the plan
sponsor must determine in writing whether the plan is expected to be
insolvent for such plan year. The applicable plan year is--
(1) For a plan that had no benefits subject to reduction when it
terminated, the plan year the plan terminated; or
(2) For a plan that eliminated benefits subject to reduction by
amendment after termination, the plan year in which the amendment that
eliminated all (or all remaining) benefits subject to reduction is
effective.
(b) Other determination of insolvency. Whether or not a prior
determination of plan insolvency has been made under paragraph (a) of
this section (or under section 4245 of ERISA), a plan sponsor that has
reason to believe, taking into account the plan's recent and
anticipated financial experience, that the plan is insolvent in the
current plan year or is expected to be insolvent in the next plan year
must determine in writing whether the plan is or is expected to be
insolvent for that plan year.
* * * * *
SUBCHAPTER J--INSOLVENCY, REORGANIZATION, TERMINATION, AND OTHER RULES
APPLICABLE TO MULTIEMPLOYER PLANS
0
9. Amend the heading for Subchapter J by removing ``reorganization,''.
PART 4245--NOTICE OF INSOLVENCY
0
10. The authority citation for part 4245 is revised to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341a, 1431, 1426(e).
0
11. Revise the heading for Part 4245 to read as follows:
PART 4245--DUTIES OF PLAN SPONSOR OF AN INSOLVENT PLAN
0
12. Revise Sec. 4245.1 to read as follows:
Sec. 4245.1 Purpose, scope, and filing and issuance rules.
(a) Purpose and scope. This part prescribes insolvency notice
requirements and financial assistance requirements pertaining to
critical status plans. Plans that have terminated by mass withdrawal
under section 4041A(a)(2) of ERISA are required to file and issue
similar insolvency notices under part 4281 of this chapter and
withdrawal liability and actuarial valuation information under part
4041A of this chapter.
(b) Filing and issuance rules.--(1) Method of filing. Filing with
PBGC under this part must be made by a method permitted under the rules
in subpart A of part 4000 of this chapter.
(2) Method of issuance. The issuance of the notice of insolvency
benefit level to interested parties must be made by one of the
following methods--
(i) A method permitted under the rules in subpart B of part 4000 of
this chapter.
(ii) For interested parties other than participants and
beneficiaries who are in pay status or reasonably expected to enter pay
status during the insolvency year for which the notice is given, the
plan sponsor may post the notice at participants' work sites or publish
the notice in a union newsletter or in a newspaper of general
circulation in the area or areas where participants reside. Notice to a
participant is deemed notice to that participant's beneficiary or
beneficiaries.
(3) Filing and issuance dates. The date that a filing is sent and
the date that an issuance is provided are determined under the rules in
subpart C of part 4000 of this chapter.
(4) Where to file. Filings with PBGC under this part must be made
as described in Sec. 4000.4 of this chapter.
(5) Computation of time. The time period for filing or issuance
under this part must be computed under the rules in subpart D of part
4000 of this chapter.
0
13. In Sec. 4245.2:
0
a. Revise the definition of ``Actuarial valuation'';
0
b. Amend the definition of ``Available resources'' by removing ``means,
for a plan year, available'' and adding in its place ``means
available'';
0
c. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
d. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
e. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
f. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that a plan is unable'' and adding in its place ``unable''
and by removing the second sentence;
0
g. Add in alphabetical order a definition for ``Interested parties'';
0
h. Remove the definition of ``Reorganization''.
The revision and addition read as follows:
Sec. 4245.2 Definitions.
* * * * *
Actuarial valuation means a report submitted to a plan of a
valuation of plan assets and liabilities that is performed in
accordance with subpart B of part 4281 of this chapter.
* * * * *
Interested parties means, with respect to a plan,--
(1) Employers required to contribute to the plan;
(2) Employee organizations that, for collective bargaining
purposes, represent plan participants employed by such employers; and
(3) Plan participants and beneficiaries.
* * * * *
0
14. Revise Sec. 4245.3 to read as follows:
Sec. 4245.3 Notice of insolvency.
(a) Requirement of notice. The plan sponsor of a plan that
determines that the plan is insolvent in the current plan year or is
expected to be insolvent in the next plan year must file with PBGC a
[[Page 32823]]
notice of insolvency containing the information described in Sec.
4245.4(a) and must issue to interested parties a notice of insolvency
containing the information described in Sec. 4245.4(b). Once notices
of insolvency with respect to a plan have been provided as required, no
notices of insolvency need be provided with respect to the plan for any
subsequent plan year. A notice of insolvency may be combined with a
notice of insolvency benefit level under Sec. 4245.5 for the same plan
year.
(b) When to provide notice. The plan sponsor must provide the
notices of insolvency under paragraph (a) of this section at the time
described in Sec. 4281.43(b) of this chapter.
0
15. Revise Sec. 4245.4 to read as follows:
Sec. 4245.4 Contents of notice of insolvency.
(a) Notice to PBGC. A notice of insolvency under Sec. 4245.3
required to be filed with PBGC must contain the information and
certification specified in the notice of insolvency instructions on
PBGC's website (www.pbgc.gov).
(b) Notices to interested parties. A notice of insolvency under
Sec. 4245.3 required to be given to interested parties must contain
all of the following information--
(1) The information set forth in Sec. 4281.44(b)(1) through (4) of
this chapter.
(2) The estimated total amount of annual benefit payments under the
plan (determined without regard to the insolvency) for the insolvency
year.
(3) The estimated amount of the plan's available resources for the
insolvency year.
0
16. Revise Sec. 4245.5 to read as follows:
Sec. 4245.5 Notice of insolvency benefit level.
(a) Requirement of notice. The plan sponsor of an insolvent plan
must file with PBGC and issue to interested parties notices of
insolvency benefit level containing the information described in Sec.
4245.6 in each of the following circumstances--
(1) For the initial insolvency year, provide the notices of
insolvency benefit level to PBGC and to interested parties.
(2) For any insolvency year following the initial insolvency year--
(i) If there is a change in the insolvency benefit level that
affects plan payees generally, provide the notices of insolvency
benefit level to PBGC and to plan payees. For purposes of this section,
``plan payee'' means a participant or beneficiary in pay status or
reasonably expected to enter pay status during the insolvency year.
(ii) If there is a change in the insolvency benefit level that
affects only one plan payee or a class of plan payees but not plan
payees generally (treating commencement of a person's benefits for this
purpose as a change in the insolvency benefit level for that person),
provide the notices of insolvency benefit level to PBGC and to each
affected plan payee.
(b) Combined notices. The plan sponsor may combine a notice of
insolvency benefit level and a notice of insolvency under Sec. 4245.3
for the same plan year.
(c) When to provide notice. The plan sponsor must provide the
required notices under this section at the time described in Sec.
4281.45(c) of this chapter.
0
17. Revise Sec. 4245.6 to read as follows:
Sec. 4245.6 Contents of notice of insolvency benefit level.
(a) Notice to PBGC. A notice of insolvency benefit level under
Sec. 4245.5(a) required to be filed with PBGC must contain the
information and certification specified in the notice of insolvency
benefit level instructions on PBGC's website (www.pbgc.gov).
(b) Notices to interested parties other than participants and
beneficiaries in or entering pay status. A notice of insolvency benefit
level under Sec. 4245.5(a) required to be delivered to interested
parties, other than to a participant or beneficiary who is in pay
status or is reasonably expected to enter pay status during the
insolvency year, must include all of the following information--
(1) The name of the plan.
(2) The plan year for which the notice is issued.
(3) The estimated amount of annual benefit payments under the plan
(determined without regard to the insolvency) for the insolvency year.
(4) The estimated amount of the plan's available resources for the
insolvency year.
(5) The amount of financial assistance, if any, requested from
PBGC.
(c) Notices to participants and beneficiaries in or entering pay
status. A notice of insolvency benefit level required by Sec.
4245.5(a) to be delivered to participants and beneficiaries who are in
pay status or are reasonably expected to enter pay status during the
insolvency year for which the notice is given must include the
information set forth in Sec. 4281.46(b)(1) through (7) of this
chapter.
0
18. Revise Sec. 4245.7 to read as follows:
Sec. 4245.7 Successor plan.
The plan sponsor of a successor plan created by a partition order
under Sec. 4233.14 of this chapter must issue to participants and
beneficiaries any notice required under the partition order and is not
required to file or issue notices under Sec. Sec. 4245.3 or 4245.5.
0
19. Revise Sec. 4245.8 to read as follows:
Sec. 4245.8 Financial assistance.
(a) Application for financial assistance. If the plan sponsor of a
plan determines that the plan's resource benefit level for an
insolvency year is below the level of benefits guaranteed by PBGC or
that the plan will be unable to pay guaranteed benefits when due for
any month during the year, the plan sponsor must apply to PBGC for
financial assistance pursuant to section 4261 of ERISA and in
accordance with Sec. 4281.47 of this chapter.
(b) Actuarial valuations and withdrawal liability. The plan sponsor
of an insolvent plan or a terminated plan that is expected to become
insolvent under section 4245 of ERISA must--
(1) File withdrawal liability information with PBGC in accordance
with Sec. 4041A.23 of this chapter. The filing under paragraph Sec.
4041A.23(b) of this chapter must be not later than 180 days after the
earlier of the end of the plan year in which the plan becomes insolvent
or terminates and each plan year thereafter.
(2) Have performed and file with PBGC actuarial valuations in
accordance with Sec. 4041A.24 of this chapter, except that if a plan
is not terminated, the termination year valuation under Sec.
4041A.24(a)(1) of this chapter must be performed for the plan for the
plan year in which the plan becomes insolvent.
PART 4281--DUTIES OF PLAN SPONSOR FOLLOWING MASS WITHDRAWAL
0
20. The authority citation for part 4281 is revised to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341(a), 1399(c)(1)(D), 1431,
and 1441.
0
21. In Sec. 4281.2:
0
a. Add in alphabetical order a definition for ``Actuarial valuation'';
0
b. Amend the definition of ``Available resources'' by removing ``means,
for a plan year, available'' and adding in its place ``means
available'';
0
c. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
d. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
e. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
f. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that
[[Page 32824]]
a plan is unable'' and adding in its place ``unable'' and by removing
the second sentence;
0
g. Amend the definition of ``Pro rata'' by removing ``shall'' and
adding in its place ``must''.
The addition reads as follows:
Sec. 4281.2 Definitions.
* * * * *
Actuarial valuation means a report submitted to a plan of a
valuation of plan assets and liabilities that is performed in
accordance with subpart B of this part.
* * * * *
0
22. Revise Sec. 4281.3 to read as follows:
Sec. 4281.3 Filing and issuance rules.
(a) Method of filing. Filing with PBGC under this part must be made
by a method permitted under the rules in subpart A of part 4000 of this
chapter.
(b) Method of issuance. The notices must be issued to interested
parties by the methods provided in Sec. 4281.32(c) for notices of
benefit reductions, Sec. 4281.43(c) for notices of insolvency, and
Sec. 4281.45(d) for notices of insolvency benefit level.
(c) Filing and issuance dates. The date that a filing is sent and
the date that an issuance is provided are determined under the rules in
subpart C of part 4000 of this chapter.
(d) Where to file. Filings with PBGC under this part must be made
as described in Sec. 4000.4 of this chapter.
(e) Computation of time. The time period for filing or issuance
under this part must be computed under the rules in subpart D of part
4000 of this chapter.
Sec. 4281.11 [Amended]
0
23. In Sec. 4281.11:
0
a. Amend paragraph (a) by removing ``annual valuation'' and adding in
its place ``annual actuarial valuation'', by removing ``shall be'' and
adding in its place ``are'', and by removing ``year thereafter.'' and
adding in its place ``year thereafter for which an actuarial valuation
is required to be performed under Sec. 4041A.24 of this chapter.''.
0
b. Amend paragraph (b) introductory text by removing ``shall be'' and
adding in its place ``is''.
Sec. 4281.13 [Amended]
0
24. In Sec. 4281.13:
0
a. Amend the introductory text by removing ``shall'' and adding in its
place ``must'';
0
b. Amend paragraph (b) by removing ``described in Sec. 4281.14;'' and
by adding in its place ``under Sec. 4044.53 of this chapter;''.
Sec. 4281.14 [Removed and Reserved]
0
25. Section 4281.14 is removed and reserved.
0
26. Revise Sec. 4281.43 to read as follows:
Sec. 4281.43 Notice of insolvency.
(a) Requirement of notice. The plan sponsor of a plan that
determines that the plan is insolvent in the current plan year or is
expected to be insolvent in the next plan year must file with PBGC a
notice of insolvency containing the information described in Sec.
4281.44(a) and issue to plan participants and beneficiaries a notice of
insolvency containing the information described in Sec. 4281.44(b).
Once notices of insolvency with respect to a plan have been provided as
required, no notice of insolvency need be provided with respect to the
plan for any subsequent year. A notice of insolvency may be combined
with a notice of insolvency benefit level under Sec. 4281.45 for the
same plan year.
(b) When to provide notice--(1) Except as provided in paragraph
(b)(2) of this section, the plan sponsor must file or issue the notices
of insolvency under paragraph (a) of this section by the later of--
(i) 90 days before the beginning of the insolvency year, or
(ii) 30 days after the date the insolvency determination is made.
(2) Participants and beneficiaries in pay status. The plan sponsor
may deliver the notices of insolvency under paragraph (a) of this
section to participants and beneficiaries in pay status concurrently
with the first benefit payment made after the date the insolvency
determination is made.
(c) Method of issuance to participants and beneficiaries. The
issuance of the notice of insolvency to participants and beneficiaries
must be made by one of the following methods--
(1) A method permitted under the rules in subpart B of part 4000 of
this chapter.
(2) For participants and beneficiaries other than those who are in
pay status or reasonably expected to enter pay status during the
insolvency year for which the notice is given, the plan sponsor may
post the notice at participants' work sites or publish the notice in a
union newsletter or in a newspaper of general circulation in the area
or areas where participants reside. Notice to a participant is deemed
notice to that participant's beneficiary or beneficiaries.
0
27. Revise Sec. 4281.44 to read as follows:
Sec. 4281.44 Contents of notice of insolvency.
(a) Notice to PBGC. A notice of insolvency required under Sec.
4281.43(a) to be filed with PBGC must contain the information and
certification specified in the notice of insolvency instructions on
PBGC's website (www.pbgc.gov).
(b) Notice to participants and beneficiaries. A notice of
insolvency required under Sec. 4281.43(a) to be issued to plan
participants and beneficiaries must contain all of the following
information--
(1) The name of the plan.
(2) A statement of the plan year for which the plan sponsor has
determined that the plan is or is expected to be insolvent.
(3) A statement that benefits above the amount that can be paid
from available resources or the level guaranteed by PBGC, whichever is
greater, will be suspended during the insolvency year, with a brief
explanation of which benefits are guaranteed by PBGC under section
4022A of ERISA.
(4) The name, address, and telephone number of the plan
administrator or other person designated by the plan sponsor to answer
inquiries concerning benefits.
0
28. Revise Sec. 4281.45 to read as follows:
Sec. 4281.45 Notice of insolvency benefit level.
(a) Requirement of notice. The plan sponsor of an insolvent plan
must file with PBGC a notice of insolvency benefit level containing the
information described in Sec. 4281.46(a) and issue to plan payees
(which for purposes of this section means participants and
beneficiaries in pay status or reasonably expected to enter pay status
during the insolvency year) a notice of insolvency benefit level
containing the information described in Sec. 4281.46(b) in each of the
following circumstances--
(1) Except as provided in paragraph (a)(2) of this section, for the
initial insolvency year and for any insolvency year following the
initial insolvency year, if there is a change in insolvency benefit
level that affects plan payees generally, provide the notices of
insolvency benefit level to PBGC and to plan payees.
(2) For any insolvency year following the initial insolvency year,
if there is a change in the insolvency benefit level that affects only
one plan payee or a class of plan payees but not plan payees generally
(treating commencement of a person's benefits for this purpose as a
change in the insolvency benefit level for that person), provide the
notices of
[[Page 32825]]
insolvency benefit level to PBGC and to each affected plan payee.
(b) Combined notices. The plan sponsor may combine a notice of
insolvency benefit level under this section and a notice of insolvency
under Sec. 4281.43 for the same plan year.
(c) When to provide notice--(1) Except as provided in paragraph
(c)(2) of this section, the plan sponsor must provide the notices under
this section by the later of--
(i) 90 days before the beginning of the insolvency year, or
(ii) 30 days after the date the insolvency determination is made.
(2) Participants and beneficiaries in or entering pay status. The
plan sponsor may deliver the notices required under this section to
participants and beneficiaries who are in pay status or reasonably
expected to enter pay status during the insolvency year for which the
notice is given concurrently with the first benefit payment made after
the date the insolvency determination is made.
(d) Method of issuance to participants and beneficiaries. The
issuance of the notice of insolvency benefit level to participants and
beneficiaries who are in pay status or reasonably expected to enter pay
status during the insolvency year for which the notice is given must be
made by a method permitted under the rules in subpart B of part 4000 of
this chapter.
0
29. Revise Sec. 4281.46 to read as follows:
Sec. 4281.46 Contents of notice of insolvency benefit level.
(a) Notice to PBGC. A notice of insolvency benefit level required
by Sec. 4281.45(a) to be filed with PBGC must contain the information
and certification specified in the notice of insolvency benefit level
instructions on PBGC's website (www.pbgc.gov).
(b) Notice to participants and beneficiaries in or entering pay
status. A notice of insolvency benefit level required by Sec.
4281.45(a) to be delivered to plan participants and beneficiaries in
pay status or reasonably expected to enter pay status during the
insolvency year must contain all of the following information--
(1) The name of the plan.
(2) The insolvency year for which the notice is being sent.
(3) The monthly benefit that the participant or beneficiary may
expect to receive during the insolvency year.
(4) A statement that in subsequent plan years, depending on the
plan's available resources, this benefit level may be increased or
decreased but not below the level guaranteed by PBGC, and that the
participant or beneficiary will be notified in advance of the new
benefit level if it is less than the participant's full nonforfeitable
benefit under the plan.
(5) The amount of the participant's or beneficiary's monthly
nonforfeitable benefit under the plan.
(6) The amount of the participant's or beneficiary's monthly
benefit that is guaranteed by PBGC.
(7) The name, address, and telephone number of the plan
administrator or other person designated by the plan sponsor to answer
inquiries concerning benefits.
0
30. In Sec. 4281.47:
0
a. Amend the first sentence in paragraph (a) by removing ``plan
sponsor'' and adding in its place ``plan sponsor of a plan'' and by
removing ``shall'' and adding in its place ``must''; the second
sentence is amended by removing ``shall'' and adding in its place
``must'' and by removing ``prescribed in paragraph (b) of this
section.'' and adding in its place ``under paragraph (b) of this
section and contain the information under paragraph (c) of this
section.''; and the third and fourth sentences are removed.
0
b. Revise paragraphs (b) and (c);
0
c. Remove paragraphs (d) and (e).
The revisions read as follows:
Sec. 4281.47 Application for financial assistance.
* * * * *
(b) When, how, and where to apply--(1) Initial application. Except
as provided in the next sentence, a plan sponsor must apply for
financial assistance no later than 90 days before the first day of the
month for which the plan sponsor has determined the resource benefit
level will be below the level of guaranteed benefits. If a plan sponsor
cannot practicably apply for financial assistance no later than 90 days
before such date, the application must be made as soon as practicable.
(2) Recurring application. A plan sponsor must apply for financial
assistance as soon as practicable after the plan sponsor determines
that the plan will be unable to pay guaranteed benefits when due for a
month.
(3) How and where to apply. Application to PBGC for financial
assistance must be made in accordance with the rules in subpart A of
part 4000 of this chapter. See Sec. 4000.4 of this chapter for
information on where to apply.
(c) Contents of application--(1) Initial application. A plan
sponsor applying for financial assistance because the plan's resource
benefit level is below the level of guaranteed benefits must file an
application that includes the information specified in the instructions
for an application for initial financial assistance on PBGC's website
(www.pbgc.gov).
(2) Recurring application. A plan sponsor applying for financial
assistance because the plan is unable to pay guaranteed benefits for
any month must file an application that includes the information
specified in the instructions for an application for recurring
financial assistance on PBGC's website (www.pbgc.gov).
(3) Additional information. PBGC may request any additional
information that it needs to calculate or verify the amount of
financial assistance necessary as part of the conditions of granting
financial assistance pursuant to section 4261 of ERISA.
Issued in Washington, DC.
William Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2018-15076 Filed 7-13-18; 8:45 am]
BILLING CODE 7709-02-P