Senate panel approves ERISA shutdown benefits bill

The Senate Health, Education, Labor, and Pensions (HELP) Committee on July 23, 2014 approved S. 2511, a bill that would clarify the definition of “substantial cessation of operations” under ERISA Sec. 4062(e). The bill enjoys bipartisan support and is sponsored by Sen. Tom Harkin (D-IA), the chairman of the Senate HELP Committee.

According to a HELP Committee news release, the bill is designed to “bring clarity to the pension downsizing liability rules and will ensure that there is a workable mechanism to protect pension benefits when employers show symptoms of financial distress.”

Under the bill, an employer would not be treated as having a cessation of operations under ERISA Sec. 4062(e) unless: “(A) all operations at a facility in a location are ceased and (i) such cessation is reasonably expected to be permanent; (ii) no portion of such operations is moved to another facility at a different location; (iii) no portion of such operations is assumed by or otherwise transferred to another employer; and (iv) no other operations are reasonably expected to be maintained at such facility; and (B) as a result of the cessation described in subparagraph (A), more than 20 percent of the employees of the employer have a termination of employment that is reasonably expected to be permanent.”

American Benefits Council applauds bill’s approval

The American Benefits Council said that the bill “institutes a number of common-sense measures.”
“This measure returns enforcement of the law to its original purpose,” said Council President James A. Klein. “In recent years, the PBGC’s enforcement policy has given rise to significant compliance challenges and large unexpected liabilities for many companies that have engaged in normal business transactions (such as the sale of a very small business unit or the consolidation of small operations at different facilities) where there is no actual cessation of operation,” Klein said.

Source: Senate HELP Committee news release, July 23, 2014. American Benefits Council news release, July 23, 2014.
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