PBGC interim final regs specify application process, notice requirements for partitions of multiemployer DB plans under MPRA

The Pension Benefit Guaranty Corporation (PBGC) has issued interim final regulations that specify the application process and notice requirements for partitions of eligible multiemployer defined benefit (DB) plans under ERISA Title IV, as amended by the Multiemployer Pension Reform Act of 2014 (MPRA), Division O of the Consolidated and Further Continuing Appropriations Act (P.L. 113-235). The PBGC interim final regulations are effective June 19, 2015 and applicable to applications for partition submitted to the PBGC on or after June 19, 2015. The PBGC is seeking comments, which must be submitted on or before August 18, 2015.

MPRA contains a number of statutory reforms that are intended to help financially troubled multiemployer plans, which include new conditions and requirements that must be met before the PBGC may partition a multiemployer plan under ERISA §4233. Among other things, an eligible multiemployer plan must be in critical and declining status, as defined in ERISA §305. Before the PBGC may order a partition, it must determine if the plan sponsor has taken all reasonable measures to avoid insolvency, including benefit suspensions under ERISA §305(e)(9) (Code Sec. 432(e)(9)), if applicable. The IRS has issued guidance on benefit suspensions in form of temporary and proposed regulations, and Rev. Proc. 2015-34 (see the story above).

The PBGC expects that most applicants for partition will also apply to the Department of the Treasury for a suspension of benefits because there are only a limited number of circumstances when a plan would be able to file only an application for partition. In any event, the PBGC strongly encourages plan sponsors to file concurrent applications for partition and for suspension of benefits because of the interplay between these provisions. The PBGC notes that, among other things, the two agencies must make overlapping findings and participant communications might be simplified if participants and beneficiaries receive a notice of partition at the same time as they receive a notice of suspension.

The purpose of the PBGC interim final regulations is to implement the application and notice requirements under MPRA. The PBGC explains that it will review each application for partition on a case-by-case basis in accordance with the statutory criteria in ERISA §4233(b). The regulations provide guidance on the process for submitting an application for partition, the information required to be included in an application, notice requirements under ERISA §4233(a)(2) (including the form and manner of the notice), the notification process for PBGC decisions on applications for partition, the content of a partition order, and the scope of PBGC’s continuing jurisdiction under a partition order. In the Appendix to the regulations, the PBGC provides model notices to be furnished to participants and beneficiaries when the plan sponsor is applying for partition only and when the plan sponsor is filing coordinated applications for partition and suspension of benefits.

Source: PBGC interim final regs.

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