PBGC issues final regs providing application process, notice requirements for partitions of multiemployer DB plans

The Pension Benefit Guaranty Corporation (PBGC) has finalized previously issued interim final regulations that provide 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 has made minor changes to the interim final regulations, based on public comments received. The final regulations are effective January 22, 2016 and applicable to applications for partition submitted to the PBGC on or after January 22, 2016.

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 purpose of the PBGC final regulations is to implement the application and notice requirements under MPRA. The PBGC 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 the 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.

Changes to regulations

The PBGC’s final regulations make minor revisions to certain regulations with respect to information requirements, the time period for PBGC’s initial review of an application for partition, and the coordinated application process for partition and benefit suspension. In response to a comment about the requirements for a complete application under PBGC Reg. §4233.4, the PBGC has clarified its discretion to determine when an application is complete by substituting the word “may” for “will.” Therefore, as revised, PBGC Reg. §4233.4(a) will provide that if any of the information required under part 4233 is not included with an application for partition, “the application may not be considered complete.”

Although the PBGC did not receive comments on PBGC Reg. §4233.7, which identifies the actuarial and financial information requirements for an application for partition, the PBGC is amending the regulation to clarify that the benefit payment information required under PBGC Reg. §§4233.7(a)(3)(iii), PBGC Reg. §4233.7(a)(5)(iii), and PBGC Reg. §4233.7(a)(8) must be organized by participant status (e.g., active, retiree, terminated vested, beneficiary). The PBGC has determined that organizing benefit payment information in this manner is necessary to calculate the aggregate amount of benefits subject to transfer under ERISA Sec. 4233(c). The PBGC is also amending the information requirements under PBGC Reg. §4233.7 to require long-term projections of pre-partition benefit disbursements at the PBGC-guarantee level and, if applicable, maximum benefit suspensions under ERISA Sec. 305(e)(9).

In addition, the PBGC is amending PBGC Reg. §4233.8, which describes the types of participant census data to include in an application for partition, to add information about gender to the list of required census data. The PBGC has decided that this information is needed to accurately determine the present value of plan liabilities.

In response to comments about the lack of a time limit in which the PBGC should initially determine if an application is complete, the PBGC has amended PBGC Reg. §4233.10 to add a 14-calendar day review period. The PBGC believes that this time limit will provide sufficient time to complete the initial review of an application and will provide plan sponsors, participants, and beneficiaries with more certainty on when the 270-day statutory review period under ERISA Sec. 4233(a)(1) and the 30-day notice period under ERISA Sec. 4233(a)(2) will begin.

PBGC interim final PBGC Reg. §4233.13 described a conditional approval process for plan sponsors who file applications for partition and suspension of benefits. In response to a comment, the PBGC has amended PBGC Reg. §§4233.6 and PBGC Reg. §4233.13 to clarify that in any case in which an application for partition is made in combination with a suspension of benefits, the effective date of the proposed partition must satisfy the requirements of ERISA Sec. 305(e)(9)(D)(v). Also, the PBGC has been advised by the Department of the Treasury that the PBGC’s issuance of a conditional approval within the 225-day period under ERISA Sec. 305(e)(9)(G) will be deemed to satisfy Temporary Reg. §1.432(e)(9)-1T(d)(7).

Source: 80 FR 79687.

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