WASHINGTON — Today the Pension Benefit Guaranty Corporation announced a moratorium, until the end of 2014, on the enforcement of 4062(e) cases. The moratorium will enable PBGC to ensure that its efforts are targeted to cases where pensions are genuinely at risk. The six-month period will also allow us to work with the business community, labor, and other stakeholders.
ERISA section 4062(e) permits PBGC to protect pensions when a company ceases operations at a facility through a shut down or sale and 20 percent of workers in a pension plan lose their jobs. Its goal is to prevent workers who have been laid off from losing their pensions, too. Typically, PBGC asks the company to increase the plan's funding, so it's less likely to fail. In the past seven years, PBGC has used 4062(e) to protect pensions covering 180,000 people in 35 states.
Responding to business concerns, in 2012 PBGC began targeting its 4062(e) enforcement, focusing on those cases where there was real risk of substantial plan failure. This change exempted more than 90% of plan sponsors from 4062(e) enforcement. In FY2013, only 63 companies were found to have taken actions within the law's purview, and PBGC declined to enforce in 80% of those cases.
Despite these changes, some businesses still report uncertainty about whether and how PBGC enforces the law and companies have raised objections about specific cases. PBGC will use the moratorium to consider further targeting and to work with plan sponsors to minimize effects on necessary business activities.
"PBGC's mission is to preserve pensions and jobs," said PBGC Director Josh Gotbaum. "We have targeted our enforcement efforts to be mindful of both. This latest action will give PBGC time to be more thoughtful and more effective."
During the moratorium, from July 8 to December 31, 2014, PBGC will cease enforcement efforts on open and new cases. Companies should continue to report new 4062(e) events, but PBGC will take no action on those events during the moratorium.
For more information contact Marc Hopkins at (202) 229-4149.
PBGC protects the pension benefits of more than 42 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, investment income, and with assets and recoveries from failed plans. Learn more at PBGC.gov