PBGC issues moratorium on enforcement of 4062(e) cases

The Pension Benefit Guaranty Corporation (PBGC) has announced a moratorium, until the end of 2014, on the enforcement of 4062(e) cases. The moratorium will enable the PBGC to ensure that its efforts are targeted to cases where pensions are genuinely at risk.

ERISA Sec. 4062(e) permits the PBGC to protect pensions when a company ceases operations at a facility through a shutdown or sale and 20% of employees in a pension plan lose their jobs. Responding to business concerns, in 2012 the Agency began targeting its 4062(e) enforcement, focusing on those cases where there was real risk of substantial plan failure. This change exempted more than 90% of plan sponsors from 4062(e) enforcement. In FY 2013, only 63 companies were found to have taken actions within the law’s purview, and the PBGC declined to enforce in 80% of those cases. Despite these changes, some businesses still report uncertainty about whether and how the PBGC enforces the law and companies have raised objections about specific cases.

The PBGC said that it will use the moratorium to consider further targeting and to work with plan sponsors to minimize effects on necessary business activities. During the moratorium, from July 8 to December 31, 2014, the PBGC will cease enforcement efforts on open and new cases. Companies should continue to report new 4062(e) events, but the PBGC will take no action on those events during the moratorium.

Source: PBGC press release No. 14-09, July 8, 2014.

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