PBGC says its new risk-based policy benefited healthy companies by nearly $1 billion

According to the Pension Benefit Guaranty Corporation (PBGC), a new policy that shifts its enforcement efforts away from companies unlikely to default on their pensions has benefited about 50 businesses by almost $1 billion since the start of a pilot program announced in November 2012. The new approach screens out financially sound companies and small plans with less than 100 people, which excludes 92% of businesses that sponsor plans from the Agency’s enforcement efforts.

Under ERISA §4062(e), when a company ceases operations at a facility, and 20% of workers in the pension plan lose their jobs, the PBGC requires financial assurance to support benefits earned by plan participants. Typically companies provide that assurance through additional contributions to the plan or a letter of credit guaranteeing future contributions.

Under the pilot program, the PBGC didn’t enforce pension liabilities of about $475 million on 30 companies that were financially sound. Additionally, the Agency ended pre-existing enforcement agreements originally valued at $450 million with 17 companies because they were unlikely to default on pension benefits for their workers and retirees. The PBGC said that the shift in policy exempted financially sound companies such as Anheuser-Busch InBev, Procter & Gamble Co., and Whirlpool Corp., from having to address pension liabilities after ending operations at their work sites.

Source: PBGC News Release No. 13-05, March 18, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

Visit our News Library to read more news stories.