PBGC proposed regs would expand its missing participant program to DC, multiemployer DB, and other DB plans

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed regulations that expand its existing Missing Participants Program to cover terminated 401(k) and most other defined contribution (DC) plans, multiemployer defined benefit (DB) plans, and certain DB plans that are not currently covered by the program. The PBGC anticipates the expanded program will be implemented in 2018 (for plans that terminate after 2017), after publication of final regulations.

Background

Currently, the Missing Participants Program receives benefits from administrators of terminated single-employer DB plans covered by the Title IV insurance program when plan administrators have been unable to locate participants. The PBGC assumes the responsibility of locating the missing plan participants and paying benefits to those participants who are located.

Section 410 of the Pension Protection Act of 2006 (PPA; P.L. 109-280) provides for the participation of certain terminating plans not covered by the missing participants program. Specifically, PPA directs the PBGC to issue regulations for terminating multiemployer DB plans covered by Title IV similar to the current rules that apply to covered single-employer DB plans when they terminate. In addition, plan administrators of other plans not covered by Title IV will be permitted, but not required, to elect to transfer missing participant benefits to the PBGC. These plans include qualified defined contribution plans, defined benefit pension plans that have no more than 25 active participants and are maintained by professional service employers, and the portion of defined benefit pension plans that provide benefits based upon the separate accounts of participants and, therefore, are treated as defined contribution plans under ERISA.

Implementation of expanded program

The PBGC has issued proposed regulations that will implement the expansion of its Missing Participant Program by establishing rules to handle the benefits of missing participants and beneficiaries under terminated multiemployer plans covered by Title IV similar to the rules for covered single-employer plans, by providing for a similar voluntary program for terminated non-covered plans, and by authorizing the PBGC to prescribe related reporting requirements.

The PBGC explained that the missing participant program remains mandatory for PBGC-insured single-employer DB plans and will be mandatory for PBGC-insured multiemployer plans. Upon termination, these plans must either transfer the benefits of missing participants to the PBGC, or purchase annuities and send the PBGC information about the annuity provider. In contrast, terminated DC plans may transfer the accounts of missing participants to the PBGC or send the PBGC information about where the accounts of missing participants were transferred.

The PBGC proposes to completely redesign its existing missing participants program for single-employer DB plans and to adopt three new missing participants programs. The three new programs would be for multiemployer DB plans covered by Title IV, for professional service employer DB plans not covered by Title IV, and for most DC plans. All four programs would follow the same basic design. The PBGC has issued proposed forms and instructions for each of the programs, which may be viewed at http://pbgc.gov/prac/terminations/missing-participants/missing-participants-forms-instr.html?source=govdelivery&utm_medium=email&utm_source=govdelivery.

Some important changes to the existing program would be: (1) the provision for fees to be charged for plans to participate in the missing participants program; (2) a requirement to treat as “missing” non-responsive distributees with de minimis benefits subject to mandatory cash-out under the plan’s terms; (3) more robust requirements for diligent searches, using sponsor and related plan records, free web-search methods, and (subject to waiver) commercial locator services (which would be clearly defined); (4) fewer benefit categories and fewer sets of actuarial assumptions for determining the amount to transfer to the PBGC; and (5) changes in the rules for paying benefits to missing participants and their beneficiaries. In addition, the missing participants forms and instructions would require the reporting of the monthly amount of each missing participant’s accrued benefit in straight-life form assuming commencement at each exact age going forward from the later of the benefit transfer date or age 55 to the required beginning date under Code Sec. 401(a)(9)(C).

The PBGC noted that the program for terminated DC plans would be simpler than the programs for terminated DB plans in recognition of their different structure and regulatory framework. There would be no need for benefit valuation rules to determine the amount for a plan to transfer to the PBGC. Plans would just transfer account balances. The definition of “missing” and the diligent search requirements would reflect guidance already established by the Employee Benefits Security Administration (EBSA) and followed by terminated DC plans. Abandoned plans and qualified termination administrators winding up such plans, as defined under DOL regulations, would be able to participate in the missing participants program if they met the same requirements applicable to other DC plans.

Centralized search database

An important part of all of the missing participants programs would be a new unified pension search database, according to the PBGC. This database would be designed and operated for the PBGC according to best practices by a private-sector entity with expertise in such enterprises and will be implemented in a way that protects individuals’ privacy.

Fees

Fees would be set forth in the missing participant forms and instructions. The PBGC is proposing to charge a one-time $35 fee per missing distributee, payable when benefit transfer amounts are paid to the PBGC, without any obligation to pay the PBGC continuing “maintenance” fees or a distribution fee. There would be no charge for amounts transferred to the PBGC of $250 or less and no charge for plans that only send information about missing participant benefits to the PBGC.

Filing deadlines

The PBGC explained that basic filing rules would be the same under the proposed regulations as under the existing regulations. The filing deadline for Title IV single-employer DB plans would be similar to the current regulations—90 days after the distribution deadline in the PBGC’s regulation under ERISA Sec. 4041 on Termination of Single-Employer Plans. For all other plans, the filing deadline would be 90 days after completion of all distributions not subject to the missing participants program.

Comments

Comments are requested to be submitted by November 21, 2016. Comments, identified by Regulation Identifier Number (RIN) 1212-AB13, may be submitted by any of the following methods: Federal eRulemaking Portal: http://www.regulations.gov; E-mail: reg.comments@pbgc.gov; Fax: 202−326−4112; or Mail or Hand Delivery: Regulatory Affairs Group, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005−4026.

Source: 81 FR 64699, September 20, 2016.

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