PBGC's Risk-based Policy Keeps Almost $1 Billion in Pension Obligations from Healthy Companies
FOR IMMEDIATE RELEASE
March 18, 2013
WASHINGTON — The Pension Benefit Guaranty Corporation said today that shifting its enforcement policy away from companies unlikely to default on their pensions benefited about 50 businesses by almost $1 billion since the start of a pilot program announced in November.
The new approach screens out financially sound companies and small plans with less than 100 people, which excludes 92 percent of businesses that sponsor plans from the agency's enforcement efforts.
"By focusing on companies that pose real risk, we hope to preserve and encourage companies to continue to offer traditional pensions," said PBGC Director Josh Gotbaum.
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.
Under the pilot program, 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 agency's policy change follows a Presidentially-mandated review of regulations and feedback from companies that said PBGC targeted businesses even when plans posed little or no risk of defaulting on pension obligations. Under a section of pension law called 4062(e), when a company ceases operations at a facility, and 20 percent of workers in the pension plan lose their jobs, 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.
Additional information about our 4062(e) pilot program and the Guidelines for Enforcement of ERISA section 4062(e) are available on the agency's website.
PBGC protects the pension benefits of more than 40 million Americans in private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans. For more information, visit PBGC.gov.
On April 11, 2013, PBGC updated this press release with a link to the 4062(e) enforcement guidelines. The rest of this press release remains the same.
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PBGC No. 13-05