PBGC Proposes Simplifying Rules to Terminate Fully-funded Pensions
FOR IMMEDIATE RELEASE
March 13, 1997
The Pension Benefit Guaranty Corporation (PBGC) today announced proposed regulatory changes to extend deadlines and simplify procedures companies must follow in closing out fully-funded pension plans insured by PBGC.
The proposed regulation, in the March 14, 1997, Federal Register, was developed after conducting focus groups with pension plan practitioners and takes into account participant concerns and PBGC's experience.
The current rules used to end a fully-funded single-employer pension plan insured by PBGC have caused some plan administrators to miss deadlines and restart the process, which added cost and time to the process and delayed payments to participants.
The proposed changes would give plan administrators more time to meet deadlines. The deadline for filing a standard termination notice with PBGC would be extended from 120 days to 180 days after the proposed termination date. Plan administrators would also have up to 120 days, rather than the current 60 days, to distribute the plan assets after they have received a clearance letter from the IRS. Plan assets are normally distributed through the purchase of annuities or lump sum payments.
The proposal waives penalties for late filing of the post-distribution certification if it is filed within 90 days after the distribution deadline. A separate notice in the March 14, 1997, Federal Register applies the waiver immediately.
The proposal adds a new requirement that plan administrators inform participants about state guarantees that apply to their benefits in the event the annuity provider encounters financial problems. To make it easier for administrators to comply, PBGC has developed a model notice.
To further simplify the termination process, PBGC has also developed a model notice of intent to terminate that plan administrators may use to inform plan participants of the intended plan termination and the effect it will have on their benefits.
Both model notices would become part of the forms and instructions in the standard termination package.
Comments on the proposal must be received by May 13, 1997, and may be sent by Internet e-mail to firstname.lastname@example.org.
PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by workers. It covers nearly 42 million American workers and retirees participating in about 55,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
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PBGC No. 97-16