Terminated and Insolvent Multiemployer Plans and Duties of Plan Sponsors
| Published date | 02 May 2019 |
| Citation | 84 FR 18715 |
| Record Number | 2019-08977 |
| Section | Rules and Regulations |
| Court | Pension Benefit Guaranty Corporation |
Federal Register, Volume 84 Issue 85 (Thursday, May 2, 2019)
[Federal Register Volume 84, Number 85 (Thursday, May 2, 2019)]
[Rules and Regulations]
[Pages 18715-18727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08977]
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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: Final rule.
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SUMMARY: The Pension Benefit Guaranty Corporation is amending 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: Effective date: This rule is effective July 1, 2019.
Applicability dates: The amendments to 29 CFR part 4041A that make
changes to the definitions, the content of the notice of termination,
and the determination of plan solvency; and the amendments to 29 CFR
parts 4245 and 4281 that make changes to the notices of insolvency,
notices of insolvency benefit level, and applications for financial
assistance will be applicable as of July 1, 2019.
The amendments to 29 CFR parts 4041A and 4245 that require plan
sponsors to file with PBGC withdrawal liability information will be
applicable for plan years ending after July 1, 2019.
The amendments to 29 CFR parts 4041A and 4245 that change the
annual actuarial valuation requirement will be applicable to actuarial
valuations prepared for plan years ending after July 1, 2019.
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:
[[Page 18716]]
Executive Summary--Purpose of the Regulatory Action
This final rule makes certain reporting and disclosure of
multiemployer information to PBGC and interested parties more efficient
and reflects the repeal of the multiemployer plan reorganization rules.
The rule reduces 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 reduces
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 final rule
reduces administrative burden by allowing a 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 final rule
adds a new requirement for plan sponsors of certain terminated plans
and 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 may file
alternative valuation information.
The plan sponsor of a multiemployer plan also is responsible for
determining, giving notice of, and collecting withdrawal liability. The
final rule requires plan sponsors of certain terminated plans and
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
The plan sponsor of 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, the plan sponsor of 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
final rule eliminates outdated information included in the notices and
changes the frequency of the notices. A plan sponsor is required 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 final rule also eliminates 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 final 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 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.
On July 16, 2018 (at 83 FR 32815), PBGC published a proposed rule
to 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 the 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 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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In response to PBGC's proposed rule, two commenters submitted
comments
[[Page 18717]]
generally supporting PBGC's efforts to reduce regulatory burden. These
commenters also made some suggestions and recommendations for changes.
In response to the comments, PBGC is making modifications to the forms
and instructions associated with this final rule, but the final rule is
substantially the same as the proposed rule. The public comments,
PBGC's responses, including modifications to the forms and
instructions, and the provisions of this final rule are discussed
below.
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 sponsor will continue to make periodic
determinations of plan solvency. The final rule revises 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 sponsor 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.
The final rule reduces 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
final rule increases the threshold requirement for plan sponsors and
allows them to use less frequent actuarial valuations. A plan sponsor
may 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 sponsor continues to be required to perform
actuarial valuations annually.\4\ Plans may move in and out of the 5-
year or annual valuation cycle, as applicable, as the value of
nonforfeitable benefits changes. Thus, a plan sponsor that had been
using an actuarial valuation for 5 years is 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 sponsor that had been performing
the actuarial valuation annually may 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 is adding
the annual actuarial valuation requirement for plan sponsors of
insolvent plans receiving financial assistance from PBGC (whether
terminated or not terminated) and plan sponsors of plans terminated by
plan amendment that are expected to become insolvent.\5\ The provision
allowing smaller plans to use less frequent actuarial valuations is
available to these plan sponsors. In addition, where the present value
of the plan's nonforfeitable benefits is $50 million or less, a plan
receiving financial assistance from PBGC may comply with the actuarial
valuation requirement by filing alternative information as 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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PBGC received two comments with respect to its proposed changes to
the actuarial valuation filing requirements. One commenter supported
PBGC's proposed change to allow plan sponsors of plans terminated by
mass withdrawal to use an actuarial valuation for 5 years if the
present value of the plan's nonforfeitable benefits is $50 million or
less. A second commenter raised concerns about the annual actuarial
valuation requirement for plan sponsors of insolvent plans receiving
financial assistance from PBGC. The commenter suggested that plan
sponsors of plans receiving financial assistance from PBGC be able to
comply with the actuarial valuation requirement by filing every 5 years
the alternative information specified in instructions. The commenter
stated that requiring actuarial valuations from plan sponsors of
insolvent plans with nonforfeitable benefits exceeding $50 million is
not an effective use of PBGC's limited resources.
[[Page 18718]]
PBGC considered the comment, PBGC's need for data to measure its
liabilities, and the minimal cost of requiring plans to file actuarial
valuations, and decided to adopt in the final rule its proposed changes
to the annual actuarial valuation requirements. The final rule enables
PBGC to continue to have reasonably reliable data to measure its
liabilities, while reducing burden on plans that present smaller
exposure to PBGC. While PBGC currently obtains actuarial valuations for
plans receiving financial assistance by contacting plan sponsors, a
change in process is needed because of the increasing number of
insolvent plans. The final rule requires a plan sponsor to file the
plan's actuarial valuation or alternative valuation information with
PBGC within 180 days after the end of the plan year. Having plans file
the actuarial valuation or alternative valuation information within
that time period provides for a more efficient process for plan
sponsors and PBGC and is a more effective use of PBGC's resources.
The final rule also adopts the proposed rule's 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 of a plan terminated by
mass withdrawal 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. In the
year ended September 30, 2018, there were 78 insolvent plans that
received financial assistance from PBGC and 64 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 2018 Annual Report, page 93 at https://www.pbgc.gov/sites/default/files/pbgc-annual-report-2018.pdf.
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PBGC's rulemaking requires 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)), to 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
is specified in the withdrawal liability instructions on PBGC's
website. For each employer not yet assessed withdrawal liability,
information includes the name of the employer, contribution owed in the
plan year before withdrawal, and the reasons the employer has not yet
been assessed withdrawal liability. For each employer assessed
withdrawal liability, information includes the name of the employer and
whether there are scheduled periodic payments or there has been a lump-
sum settlement. For periodic payments, information includes 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 includes the amount and
date of payment. To satisfy the filing requirement for employers
assessed withdrawal liability, a plan sponsor may 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 final rule requires 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. If a plan sponsor has
previously filed the withdrawal liability information with PBGC, the
plan sponsor may satisfy the filing requirement by submitting a
statement that there is no change in the information from what was
filed in a previous year. Having plan sponsors file the withdrawal
liability information electronically and within the time period
provides for an efficient process for plan sponsors and PBGC.
The two commenters expressed concerns about the scope of the
withdrawal liability information required to be filed with PBGC,
including whether a plan is required to provide information as to its
entire historical experience. In response to these comments, PBGC is
modifying the withdrawal liability instructions to clarify that
withdrawal liability information for plan years ending before the
effective date of the final rule will not be required to be filed. For
a plan year filing, information will be required for each employer that
withdrew during the plan year and has not yet been assessed withdrawal
liability. For each employer that has been assessed withdrawal
liability, information will be required on payments received in the
plan year and/or expected to be received in future plan years. In
addition, PBGC is clarifying in the withdrawal liability instructions
that a plan sponsor is not required to file withdrawal liability
information already filed with PBGC. In December 2018, PBGC sent a
withdrawal liability survey to plan sponsors of terminated plans and
insolvent plans with 500 or more participants to obtain information
about withdrawal liability assessed and not yet assessed withdrawn
employers.\9\ The information obtained from this survey will provide
PBGC information about withdrawal liability that contributing employers
owe or owed in prior plan years.
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\9\ OMB control number 1212-0071 (expires November 30, 2021).
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The commenters also expressed concerns about the withdrawal
liability information becoming publicly available, especially with
respect to individual settlement of withdrawal liability and withdrawal
liability not yet assessed withdrawn employers. One commenter suggested
that PBGC collect aggregated information, or, if PBGC collects
information about a given employer's withdrawal liability, that
reasonable safeguards be put in place to ensure the protection of
confidential and proprietary information. PBGC considered these
comments and decided to adopt in the final rule the proposed amendment
to require filing of withdrawal liability information and to modify the
withdrawal liability instructions. As explained above, the withdrawal
liability information is required to be filed in the aggregate and on
an employer basis. PBGC needs this information, including by employer,
to estimate with more precision PBGC's
[[Page 18719]]
current and projected future financial assistance needs and the
financial position of the multiemployer insurance program. PBGC will
use employer information to corroborate filed information to financial
assistance requests and other plan records, which will allow for more
utility of information received. PBGC's rules providing and restricting
access to its records are set forth in PBGC's regulation on Examination
and Copying of PBGC Records (29 CFR part 4901). If PBGC receives a
request for confidential information, it notifies the submitter of the
records, and affords them a reasonable period of time to object to the
disclosure, pursuant to PBGC procedures and as required under Executive
Order 12600, Predisclosure Notification Procedures for Confidential
Commercial Information. If PBGC decides not to sustain a submitter's
objection in any request, it provides the submitter with a written
statement explaining why it has determined to disclose the information
within a reasonable number of days before a specified disclosure date.
PBGC is adding this explanation about its rules providing and
restricting access to records to the Paperwork Reduction Act notice
included with the withdrawal liability instructions.
Finally, one of the commenters stated that the information
collected on why employers may not have been assessed withdrawal
liability suggests that PBGC may use the information for purposes
outside of its authority. PBGC's authority for requiring withdrawal
liability information to be filed by terminated plans and insolvent
plans and use of the information are amply explained in this preamble
and in the supporting statement for the information collection.
Terminated Plan 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. Plan
sponsors 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, plan sponsors 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 plan sponsors 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
a plan year in which a plan is insolvent. The final rule requires 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 timing of the delivery of the
notice of insolvency and the notice of insolvency benefit level is 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 final rule allows 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's
final rule eliminates most of the annual updates to the notices of
insolvency benefit level. The plan sponsor is required to 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 is only 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 are provided notices. One commenter
encouraged PBGC to finalize these changes to eliminate redundant notice
requirements for terminated plans and insolvent plans.
Plan sponsors are required to electronically file notices of
termination, notices of insolvency, and notices of insolvency benefit
level.\10\ The final rule moves 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.
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\10\ 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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One commenter expressed concern that the approach of moving
information from the rule to instructions will not give interested
parties enough notice about changes or the opportunity to comment on
recommended changes. PBGC does not agree. Although changes to the forms
and instructions need not always go through notice and comment
rulemaking under the Administrative Procedure Act, they often would
still be open to public comment and reviewed by OMB under the Paperwork
Reduction Act (PRA). The PRA requires two sequential public notices to
be published in the Federal Register, each with their own comment
periods, resulting in a total of 90 days for the public to comment.
PBGC posts Paperwork Reduction Act submissions on its website and
generally flags material changes to forms and instructions in its
regular ``What's New'' postings. Moving the information to the forms
and instructions will allow PBGC to be more flexible in responding to
future developments, such as changes in information technology.
The final rule also makes changes to the contents of the notice of
insolvency and notice of insolvency benefit level by eliminating
outdated information and,
[[Page 18720]]
consistent with MPRA, by removing references to reorganization in the
notice of insolvency regulation. The final rule changes the permissible
methods of issuance to alternate payees for the notices in parts 4245
and 4281 to exclude the methods of posting the notice at participants'
work sites or publishing the notice in a union newsletter or in a
newspaper of general circulation in the area or areas where
participants reside. The final rule also adopts the proposed rule's
clarifications and other editorial changes to parts 4245 and 4281.
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 final rule requires 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 final rule requires 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 makes other editorial changes. The contents of
the applications for financial assistance are moved from the
regulations to instructions on PBGC's website. One commenter suggested
that the final rule require a statement to be added to the annual
funding notice when a plan sponsor submits an application for financial
assistance to alert participants about the status of the plan. Because
the annual funding notice is an ERISA title I disclosure, PBGC does not
have the authority to require such a statement. However, as discussed
earlier in the preamble, the notice of insolvency and notice of
insolvency benefit level contain similar information to notify
participants about the solvency of the plan and, under the final rule,
are required to be issued by the later of 90 days before the beginning
of the insolvency year, or 30 days after the date the insolvency
determination is made.
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 final 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 final rule is associated with PBGC's ongoing
retrospective review program to identify and ameliorate
inconsistencies, inaccuracies, and requirements made irrelevant over
time.
Although this is not a significant regulatory action under
Executive Order 12866, PBGC has examined the economic implications of
this final rule and has concluded that the amendments to the annual
actuarial valuation requirements and notice of insolvency and notice of
insolvency benefit level will reduce costs for multiemployer plans by
approximately $540,400. The analysis is as follows.
Annual Actuarial Valuation Requirement
PBGC has estimated the value of this final rule for the annual
actuarial valuation requirements for plans terminated by mass
withdrawal that are not insolvent. PBGC has assumed an annual actuarial
valuation cost of $12,000 per plan for plans whose nonforfeitable
benefits have a present value of $25 million or less and a cost of
$30,000 per plan for plans whose nonforfeitable benefits have a present
value in the range of $25 to $50 million.\11\ In the year ended
September 30, 2018, there were 64 terminated plans that were not
insolvent. Of that total, there were 46 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 $73,600 (46 x $12,000 x .1333 (1/3-1/5)) and 9
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
$216,000 (9 x $30,000 x .8 (1-1/5)). PBGC estimates annual aggregate
savings of approximately $289,600 to these plans. In the year ended
September 30, 2018, there were 78 insolvent plans. Of that total, there
were 14 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 final rule for performing
insolvent plan actuarial valuations.
---------------------------------------------------------------------------
\11\ 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.
---------------------------------------------------------------------------
The savings under the final rule are offset by the annual cost of
the actuarial valuation and alternative valuation filing requirements.
PBGC estimates that each year, approximately 34 plans will file
actuarial valuations and approximately 12 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.
The annual aggregate savings offset by the annual cost of the
filing requirements is $280,100 ($289,600-$1,500-$8,000).
Withdrawal Liability Filing
Under the final 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 hour burden of preparing the notice of
insolvency and notice of insolvency benefit level without the final
rule is approximately 1,320 hours (20 + 1,300) at an estimated dollar
equivalent of $99,000 and the annual aggregate cost is
[[Page 18721]]
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 reduces the annual hour burden to 256 hours (16 + 240) at
an estimated dollar equivalent of $19,200 and the annual aggregate cost
to $380,400 ($10,000 + $370,400), saving plans approximately $326,800
($99,000-$19,200 + $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 a regulatory flexibility analysis at
the time of the publication of the final 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 final 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 \12\ and is consistent with
certain requirements in title I of ERISA \13\ and the Code,\14\ as well
as the definition of a small entity that the Department of Labor has
used for purposes of the Regulatory Flexibility Act.\15\
---------------------------------------------------------------------------
\12\ See, e.g., special rules for small plans under part 4007
(Payment of Premiums).
\13\ 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.
\14\ 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.
\15\ See, e.g., Department of Labor's final rule on Prohibited
Transaction Exemption Procedures, 76 FR 66637, 66644 (Oct. 27,
2011).
---------------------------------------------------------------------------
Thus, PBGC believes that assessing the impact of the final 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 requested comments on the appropriateness of the size
standard used in evaluating the impact on small entities of the
proposed amendments. PBGC did not receive any such comments.
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 2018 fiscal year, PBGC estimates that only 15 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
final rule. While this is not a substantial number of small plans, the
final rule provides less burdensome filing requirements for small
plans. Most small plans are not required to file actuarial valuations.
An estimated 12 of the small plans are insolvent and have
nonforfeitable benefits less than $50 million, enabling these plans to
file alternative valuation information. In addition, the final rule
will reduce administrative burden for preparing notices for terminated
plans and insolvent plans, including small plans. 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. 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 final
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, 2021). PBGC estimates
that without the final rule there would be 2,111 notices and responses
and that the notice of termination and other requirements in part 4041A
would have an annual burden of 69 hours and an annual cost of $50,000.
PBGC estimates that the changes to file withdrawal liability
information electronically will have a minimal hour and cost burden as
it is expected that the information is easily accessible and that most
plans will use documents already prepared containing withdrawal
liability information. PBGC estimates that approximately 140 plans will
file withdrawal liability information and that it will take each plan
sponsor approximately 2 hours to electronically file the information.
PBGC further estimates that the filings will be completed by pension
fund office staff (50%) and outside attorneys (50%). The total hour
burden is 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 is approximately $56,000 (based on 140 contracted hours
assuming an average hourly rate of $400).
PBGC expects that an estimated 34 plans (23 plans with
nonforfeitable benefits that exceed $50 million plus 11 plans with
nonforfeitable benefits of $50 million or less) will file actuarial
valuations and that it will take each plan 30 minutes to file the
information electronically (approximately 17 hours for 34 plans). PBGC
expects that an estimated 12 plans receiving financial assistance from
PBGC will file alternative valuation information and that it will take
each plan 2 hours to file the information electronically (approximately
24 hours for 12 plans). PBGC further estimates that the filings will 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 is
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). PBGC estimates the
total cost burden is $8,000 (based on approximately 20 contracted hours
assuming an average hourly rate of $400).
PBGC estimates that with the final rule there will be approximately
2,300 notices and responses each year and that the total annual burden
of the collection of information is an hour burden of about 229 hours
for pension
[[Page 18722]]
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, 2021). PBGC estimates
that only 1 plan will issue new notices of insolvency under part 4245
and that each year there will be 1,038 notices or combined notices
issued to participants and beneficiaries, PBGC, and other interested
parties. PBGC estimates that without the final rule the annual hour
burden would be 20 hours and the annual cost burden would be $12,000.
The final rule will 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 that the final rule will reduce the
annual hour burden to 16 hours of pension fund office time at an
estimated dollar equivalent of $1,200 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, 2021). 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 estimates that
without the final rule the annual hour burden would be 1,300 hours at
an estimated dollar equivalent of $97,500 and the annual cost burden
would be $615,400. Under the final rule, most of the annual updates to
the notice of insolvency benefit level will be eliminated unless there
is a change in benefit level. PBGC estimates the change will 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 will be issued annually under part 4281. PBGC estimates
that the final rule will reduce the annual hour burden of pension fund
office time to 240 hours at an estimated dollar equivalent of $18,000
and the annual cost burden for work by outside consultants to $370,400.
List of Subjects in 29 CFR Parts 4041A, 4245, and 4281
Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.
For the reasons given above, PBGC is amending 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. Revise the introductory text;
0
b. Remove the phrase ``In addition, for purposes of this part:'';
0
c. Add in alphabetical order a definition for ``Actuarial valuation'';
0
d. Amend the definition of ``Available resources'' by removing ``, for
a plan year,'';
0
e. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
f. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
g. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
h. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that a plan is'' and by removing the second sentence; and
0
i. Amend the definition of ``Nonguaranteed benefits'' by removing ``the
PBGC's'' and adding in its place ``PBGC's''.
The revision and addition read as follows:
Sec. 4041A.2 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
annuity, ERISA, insurer, IRS, mass withdrawal, multiemployer plan,
nonforfeitable benefit, PBGC, plan, and plan year. In addition, for
purposes of this part:
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.
* * * * *
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 paragraph (b) by:
0
i. In the paragraph heading, removing ``shall'' and adding in its place
``must''; and
0
ii. Removing ``shall sign and file the Notice'' and adding in its place
``must sign and file the notice'';
0
c. Amend paragraphs (c)(1) and (2) by removing ``the Notice shall be
filed with the PBGC'' and adding in its place ``the notice must be
filed with PBGC''; and
0
d. Amend paragraph (d) by removing ``Filings to PBGC'' and adding in
its place ``Filings with PBGC''.
0
4. Revise Sec. 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''; and
0
b. Amend the second sentence by removing ``shall be'' and adding in its
place ``is''.
0
6. In Sec. 4041A.23:
0
a. Revise the section heading;
0
b. Designate the undesignated text as paragraph (a) and add a heading
for newly designated paragraph (a);
0
c. Amend newly designated paragraph (a) by:
0
i. Removing ``the PBGC'' and adding in its place ``PBGC'';
0
ii. Removing ``shall be responsible for determining, imposing and
collecting'' and adding in its place ``must determine, give notice of,
and collect''; and
0
iii. Removing ``part 4219, subpart C,'' and adding in its place
``subpart C of part 4219''; and
0
d. Add paragraph (b).
The revision and additions read as follows:
Sec. 4041A.23 Withdrawal liability.
(a) Collection of 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
[[Page 18723]]
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 of this chapter.
(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 (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 the plan sponsor's 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. This
paragraph (c) 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.
(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''; and
0
c. Revise paragraph (d).
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.
* * * * *
(d) Insolvency notices. 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 provide notices of insolvency
and notices of insolvency benefit level to PBGC and to participants and
beneficiaries in
[[Page 18724]]
accordance with subpart D of part 4281 of this chapter.
0
9. Under the authority of 29 U.S.C. 1302(b)(3), revise the heading for
subchapter J to read as follows:
SUBCHAPTER J--INSOLVENCY, TERMINATION, AND OTHER RULES APPLICABLE TO
MULTIEMPLOYER PLANS
PART 4245--DUTIES OF PLAN SPONSOR OF AN INSOLVENT PLAN
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 set forth above.
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. Plan sponsors of 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 required notices to
interested parties under this part 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 in pay status or reasonably expected to enter pay status
during the insolvency year for which the notice is given, and other
than alternate payees, 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. Except with respect to an alternate payee, 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 introductory text;
0
b. Remove the phrase ``In addition, for purposes of this part:'';
0
c. Revise the definition of ``Actuarial valuation'';
0
d. Amend the definition of ``Available resources'' by removing ``, for
a plan year,'';
0
e. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
f. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
g. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
h. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that a plan is'' and by removing the second sentence;
0
i. Add in alphabetical order a definition for ``Interested parties'';
and
0
j. Remove the definition of ``Reorganization''.
The revisions and addition read as follows:
Sec. 4245.2 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
Employer, ERISA, IRS, multiemployer plan, nonforfeitable benefit, PBGC,
person, plan, and plan year. In addition, for purposes of this part:
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
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 (which, for purposes of this
section, means participants and beneficiaries in pay status or
reasonably expected to enter pay status during the insolvency year).
[[Page 18725]]
(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 participants and beneficiaries in pay status or
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 under Sec. 4245.5(a)
required to be delivered to participants and beneficiaries in pay
status or 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. 4245.3 or Sec. 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 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. Revise the introductory text;
0
b. Remove the phrase ``In addition, for purposes of this part:'';
0
c. Add in alphabetical order a definition for ``Actuarial valuation'';
0
d. Amend the definition of ``Available resources'' by removing ``, for
a plan year,'';
0
e. Amend the definition of ``Benefits subject to reduction'' by
removing ``the PBGC's'' and adding in its place ``PBGC's'';
0
f. Amend the definition of ``Financial assistance'' by removing ``the
PBGC'' and adding in its place ``PBGC'';
0
g. Amend the definition of ``Insolvency benefit level'' by removing
``the PBGC'' and adding in its place ``PBGC'';
0
h. Amend the definition of ``Insolvent'' by removing in the first
sentence ``that a plan is'' and by removing the second sentence; and
0
i. Amend the definition of ``Pro rata'' by removing ``shall'' and
adding in its place ``must''.
The revision and addition read as follows:
Sec. 4281.2 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
annuity, employer, ERISA, fair market value, IRS, insurer, irrevocable
commitment, mass withdrawal, multiemployer plan, nonforfeitable
benefit, normal retirement age, PBGC, person, plan, plan administrator,
and plan year. In addition, for purposes of this part:
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 under this part must be issued
to participants and beneficiaries 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:
0
i. In the paragraph heading, removing ``Annual valuations'' and adding
in its place ``Annual actuarial valuation'';
0
ii. Removing ``annual valuation'' and adding in its place ``annual
actuarial valuation'';
0
iii. Removing ``shall be'' and adding in its place ``are''; and
[[Page 18726]]
0
iv. 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''; and
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''; and
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.
Sec. 4281.32 [Amended]
0
26. In Sec. 4281.32(c):
0
a. Amend the paragraph heading by removing ``to interested parties''
and adding in its place ``to participants and beneficiaries''; and
0
b. Remove in two places ``interested parties'' and add in their place
``participants and beneficiaries''.
0
27. 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) Ninety (90) days before the beginning of the insolvency year;
or
(ii) Thirty (30) days after the date the insolvency determination
is made.
(2) 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 in pay
status or reasonably expected to enter pay status during the insolvency
year for which the notice is given, and other than alternate payees,
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. Except with
respect to an alternate payee, notice to a participant is deemed notice
to that participant's beneficiary or beneficiaries.
0
28. 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
29. 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 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) Ninety (90) days before the beginning of the insolvency year;
or
(ii) Thirty (30) days after the date the insolvency determination
is made.
(2) The plan sponsor may deliver the notices required under this
section to participants and beneficiaries 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 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
30. Revise Sec. 4281.46 to read as follows:
[[Page 18727]]
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
31. In Sec. 4281.47:
0
a. Amend paragraph (a) by:
0
i. In the first sentence, removing ``plan sponsor determines'' and
adding in its place ``plan sponsor of a plan determines'' and removing
``shall apply to the PBGC'' and adding in its place ``must apply to
PBGC'';
0
ii. In the second sentence, removing ``shall'' and adding in its place
``must'' and removing ``prescribed in paragraph (b) of this section''
and adding in its place ``specified under paragraph (b) of this section
and must contain the information under paragraph (c) of this section'';
and
0
iii. Removing the third and fourth sentences;
0
b. Revise paragraphs (b) and (c); and
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 by the date in the
preceding sentence, the application must be made as soon as practicable
after the plan sponsor has made the determination in the preceding
sentence.
(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. 2019-08977 Filed 5-1-19; 8:45 am]
BILLING CODE 7709-02-P
