8/12/2019 PBGC Changes Multi-Employer Plan Regulations to Ease Burdens on Plans and Sponsors

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To comply with ERISA, the final rule allows these plans to use the most recently performed valuation forthe next two plan years. As a result, the plan could technically move in and out of three-year or annual

valuation cycles as the value of a plan's non-forfeitable benefits changes.

All other plans must continue to perform valuations annually, except:

   plans that received financial assistance from the PBGC under ERISA Section 4261

   plans that are closed out in accordance with PBGC guidance

These two exceptions remain from the existing regulations.

Mark Johnson, Ph.D., J.D.817-909-0778

mark@erisa-benefits.com 

Consulting services in:

• Fiduciary liability 

• 401(k) and ESOPs 

• Pension benefits 

• Bankruptcy 

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• Retiree medical plans 

• Severance benefits 

• Survivor benefits 

• Third party administrators 

• VEBA plans 

PBGC Changes Multi-Employer Plan Regulations to Ease

Burdens on Plans and SponsorsBy Mark Johnson, Ph.D., J.D.

Acting now to help multi-employer plans function proficiently inthe future, the Pension Benefit Guaranty Corporation (PBGC)recently announced amendments to existing regulations placed onmulti-employer plans. These changes aim to reduce administrativecosts and preserve assets by: making plans and their sponsors moreeffective and efficient; reducing regulatory burdens; and facilitating

 plan merger transactions.

The agency published its final rule on May 28, 2014 in the FederalRegister. These revisions, which become effective on June 27,2014, also impact the regulatory actions on annual valuations,insolvency notices and updates. The final rule has not changed fromthe proposed rule the agency set forth on January 28, 2014.

Valuations for Mass Withdrawals May Not Be Needed Annually

When a multi-employer plan terminated under the existing

regulations, a mandatory annual valuation of the plan’s assets and

 benefits had to be performed to determine whether the plan had toexclude benefits that were not eligible for the PBGC's guarantee.

 Now, under the amended rule, valuations for plans terminated bymass withdrawal may occur every three years if:

  that plan is not insolvent

  the value of non-forfeitable plan benefits is $25 million or less

8/12/2019 PBGC Changes Multi-Employer Plan Regulations to Ease Burdens on Plans and Sponsors

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Filing Requirements for Mergers are Shortened

Plans preparing to merge are required to jointly file a notice with PBGC before the transaction. The finalrule now shortens the time required to notify the agency from 120 days to 45 days in cases where acompliance determination isn't requested.

Existing reporting requirements will remain in effect when:  a compliance determination is requested

  transactions involve a transfer of plan assets or benefit liabilities, due to the fact that transfers takemore time to analyze

The shortened reporting requirement still gives the PBGC sufficient time to review merger notices butalleviates much of the agency’s need to grant waivers. 

Final Rule Ends Requirement for Annual Insolvency Notices and Updates

Current PBGC regulations stipulated that if a multi-employer plan was to become insolvent, it had to provide a series of notices to PBGC, plan participants and beneficiaries on an annual basis. The final rule

now ends this requirement, since the agency has found that once a multi-employer plan becomesinsolvent, it typically stays that way. Therefore, annual updates haven’t been useful to PBGC or the plan participants and beneficiaries.

In addition, the final rule eliminates the requirement for a plan sponsor of a terminated multi-employer plan to provide annual updates to the notice of insolvency.

Systematic & Practical

PBGC currently insures more than 1,400 multi-employer plans covering more than 10 million people inindustries such as construction, mining, supermarkets, transportation, manufacturing, and hotels andrestaurants.

In a news release issued by the agency, the U.S. Chamber of Commerce, a trade group that representsAmerican businesses, applauds these revisions because they address concerns that many reportingrequirements are too costly and lack merit.

The Chamber said the rule, “acknowledges this reality and eliminates requirements where theadministrative burdens and costs outweigh the usefulness of the information provided."

ABOUT THE AUTHOR . Mark Johnson, Ph.D., J.D., is a highly experienced ERISA expert. As aformer ERISA Plan Managing Director and plan fiduciary for a Fortune 500 company, Dr. Johnson has practical knowledge of plan documents as well as an in-depth understanding of ERISA obligations. Heworks as an expert consultant and witness on 401(k), ESOP and pension fiduciary liability; retiree

medical benefit coverage; third party administrator disputes; individual benefit claims; pension benefits in bankruptcy; long term disability benefits; and cash conversion balances. He can be reached at 817-909-

0778 or  www.erisa-benefits.com. 

 ERISA Benefits Consulting, Inc. by Mark Johnson provides benefit consulting and advisory services anddoes not engage in the practice of law. June, 2014