[The Regulatory Plan and Unified Agenda of Federal Regulations]
[Pension Benefit Guaranty Corporation Regulatory Plan]
[From the U.S. Government Printing Office, www.gpo.gov]
PENSION BENEFIT GUARANTY CORPORATION (PBGC)
Statement of Regulatory Priorities
PBGC Insurance Programs
The Pension Benefit Guaranty Corporation (PBGC) administers two
insurance programs under title IV of the Employee Retirement Income
Security Act of 1974, as amended (ERISA): a single-employer plan
termination insurance program and a multiemployer plan insolvency
insurance program.
Under the single-employer insurance program, the PBGC has two primary
roles. First, when a plan with insufficient assets to pay guaranteed
benefits terminates, PBGC pays participants and beneficiaries their
guaranteed benefits and any unfunded nonguaranteed benefits that are
payable based on recoveries from employers. Second, PBGC is responsible
for providing plan sponsors and plan administrators with guidance in
complying with title IV's termination rules and procedures and for
administering the plan termination process (a process that all
terminating single-employer plans covered by title IV must go through).
To finance itself, the PBGC is also responsible for collecting premiums
paid by covered pension plans and employer liability amounts arising
from the termination of plans without sufficient assets to pay all plan
benefits.
In order to carry out these functions, the PBGC must issue regulations
interpreting a number of complicated statutory provisions. The areas
covered include implementation of the termination process,
establishment of procedures for the payment of premiums, and assessment
and collection of employer liability.
Under the Multiemployer Insurance Program, as revised by the
Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), PBGC has a
more limited role than under the Single-Employer Program. The primary
purpose of MPPAA was to strengthen and foster the continuation of
multiemployer pension plans by ensuring that employers could not avoid
their obligation to share in the funding of plan benefits by
withdrawing from participation in a multiemployer plan. To this end,
MPPAA imposed withdrawal liability on an employer for either a partial
or complete withdrawal from a plan. An employer's withdrawal liability
is generally based on its allocable share of the plan's unfunded vested
benefits. This liability is calculated, assessed, and collected by the
multiemployer plan. Disputes arising from the assessment of liability
are to be resolved first through arbitration and then, if necessary,
through the courts.
PBGC's insurance function under MPPAA is limited to the provision of
financial assistance (in the form of a repayable loan) to a plan that
does not have sufficient assets to pay benefits currently due at the
guaranteed level. Under MPPAA, guaranteed benefits are generally less
than a participant's full benefit under the plan. Plan insolvency
necessitating PBGC financial assistance occurs infrequently. During
fiscal year 1993, PBGC provided financial assistance to only six
multiemployer plans.
The multiemployer regulations fall into several general categories: (1)
rules relieving potential administrative burdens imposed by the statute
on multiemployer plans; (2) rules waiving or reducing employer
withdrawal liability in certain limited circumstances; and (3) rules
authorizing multiemployer plans to adopt their own rules in lieu of
following certain of the statutory rules.
Regulatory Objectives and Priorities
PBGC regulatory objectives and priorities are developed in the context
of the statutory purposes of title IV of ERISA: (1) to encourage the
continuation and maintenance of voluntary private pension plans, (2) to
provide for the timely and uninterrupted payment of pension benefits to
participants and beneficiaries, and (3) to maintain the premiums that
support the insurance programs at the lowest possible levels consistent
with carrying out the PBGC's statutory obligations (ERISA section
4002(a)).
In the context of its regulatory program, the PBGC implements its
statutory purposes by developing regulations that are designed (1) to
assure the security of the pension benefits of workers, retirees, and
beneficiaries, (2) to improve services to participants through more
responsive benefit payment policies and accelerated determinations of
final benefits, (3) to ensure that the several statutory provisions
designed to minimize losses for participants in the event of plan
termination are fully and effectively implemented and enforced, (4) to
facilitate the collection of monies owed to plans and to the PBGC,
while keeping the related costs as low as possible and (5) to simplify
the termination process for plans as much as possible.
Legislative Initiatives
In order to assure that the PBGC can accomplish its statutory purposes,
the Secretary of Labor established an interagency task force in March
1993. The task force, which was made up of representatives of PBGC, the
Departments of Labor, the Treasury and Commerce, the Office of
Management and Budget, and the National Economic Council, took a
comprehensive look at PBGC insurance. Based on the recommendations of
the Task Force, the Administration sent to the Congress the Retirement
Protection Act of 1993 (H.R. 3396, introduced October 28, 1993, and S.
1780, introduced November 23, 1993). The Retirement Protection Act, if
enacted, would (1) accelerate the funding of underfunded single-
employer pension plans, (2) phase out the cap on the variable rate
portion of the premium paid to PBGC by underfunded single-employer
plans, (3) provide PBGC with better information to prevent employers
from escaping their plan funding obligations through corporate
transactions, (4) provide better information to participants in
underfunded plans on plan funding status and PBGC guarantees, and (5)
help assure that workers do not lose pensions because they have lost
contact with a terminating pension plan covered by PBGC. The PBGC's
1994 Regulatory Plan is consistent with the Retirement Protection Act
and current law.
The PBGC's Regulatory Plan for October 1, 1994, to September 30, 1995,
consists of one significant regulatory action.
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PBGC
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PROPOSED RULE STAGE
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187. CALCULATION AND PAYMENT OF UNFUNDED NONGUARANTEED BENEFITS
Legal Authority:
29 USC 1302(b)(3); 29 USC 1322(c)
CFR Citation:
29 CFR 2623; 29 CFR 2627
Legal Deadline:
None
Abstract:
The Pension Protection Act repealed ERISA sections 4049 and 4062(c).
Those provisions established new employer liability to plan
participants and beneficiaries in the event of a distress termination
or involuntary termination by the PBGC of a plan without sufficient
assets to pay all benefit commitments; the section 4049 trust was the
vehicle for collecting and distributing these liability amounts. This
system proved flawed in several respects.
In the Pension Protection Act, Congress created a new scheme by which
to channel employer liability recoveries to plan participants and
beneficiaries (amended ERISA section 4022(c)). Under new section
4022(c), participants no longer have a direct claim for employer
liability. Instead, the PBGC's claim covers both its shortfall
(unfunded guaranteed benefits) and participants' losses (unfunded
nonguaranteed benefits (UNBs)). In turn, the PBGC is to pay a portion
of its employer liability recovery to pay UNBs to participants and
beneficiaries.
Statement of Need:
Section 4022(c) contains several ambiguities and also leaves to the
PBGC the development of specific rules and procedures necessary to make
this system work. Thus, a new regulation is needed to implement these
statutory provisions.
Summary of the Legal Basis:
The PBGC has the authority to issue rules and regulations necessary to
carry out the purposes of Title IV of ERISA.
Alternatives:
The statute provides that the amounts of UNBs that the PBGC will pay
under terminated plans be based upon the amounts that the PBGC recovers
on its statutory claims for employer liability against the sponsors of
those plans and the other trades or businesses under common control
with the plan sponsors. However, the statute does not prescribe when
the PBGC is to perform its valuation of its recovery with respect to a
plan. There are two competing objectives: (1) prompt payment to
participants of their UNBs and (2) precise calculation of benefit
entitlements. The PBGC could promote prompt payment at the expense of
precision of calculation by valuing recoveries whenever the PBGC is
otherwise ready to calculate benefits under a plan. On the other hand,
the PBGC could promote precision of calculation at the expense of
prompt payment by deferring valuation until the collection process is
finished, even if that means delaying benefit calculations.
Anticipated Costs and Benefits:
Because of the complexities involved, it may take a long time for the
PBGC to determine what its recovery will be. In addition, it may be
difficult to value a recovery in cases where the PBGC receives assets
other than cash or readily marketable securities. Thus, the accuracy of
the PBGC's computation of the amounts payable to participants would be
enhanced by waiting longer to make that computation. However, long
delays are not generally in the best interest of plan participants. The
regulation will attempt to balance adequacy of precision in benefit
determinations, avoidance of increased administrative costs, and timely
payment of benefits.
Risks:
Not applicable.
Timetable:
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Action DFR Cite
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NPRM 04/00/95
NPRM Comment Period End 06/00/95
Small Entities Affected:
None
Government Levels Affected:
None
Agency Contact:
Peter H. Gould
Senior Counsel
Pension Benefit Guaranty Corporation
Office of the General Counsel
1200 K St. NW.
Washington, DC 20005-4026
202 326-4116
RIN: 1212-AA54
BILLING CODE 7708-01-F