Section 4062(e): New law is enacted; moratorium ends
On December 16, President Obama signed into law H.R. 83, which made major changes to the provision of ERISA that created liability in certain situations where there was a reduction in active participants in a plan as a result of a cessation of operations (section 4062(e)).
With the new law in effect, PBGC will not continue the six-month moratorium on the enforcement of section 4062(e) that expired December 31.
The new law generally applies both to future cessations of operations and to those that have already occurred, except where a settlement agreement was entered into before June 1, 2014.
PBGC has outlined some of the major changes in the law and provided a point of contact for questions in "Important Changes to ERISA Section 4062(e)". Further guidance will be issued in the future.
In 2006, PBGC issued a regulation clarifying how liability to PBGC under sections 4062(e) and 4063 of ERISA is calculated. This liability may arise when an employer ceases operations at a facility and employees in a single-employer plan are separated from employment as a result. While the regulatory clarification has resulted in more consistent enforcement of the statute, PBGC’s ability to identify these events depends on timely notice from affected employers. Similarly, our ability to determine liability under section 4063 when a substantial employer withdraws from a multiple employer plan requires timely notice to PBGC.
Under sections 4062(e) and 4063(a) of ERISA, the administrator of a single-employer plan must notify PBGC if an employer who is a contributing sponsor ceases operations at a facility with a resulting separation from employment of more than 20% of the participants in the plan. Notice is also required under section 4063 if a substantial employer withdraws from a multiple employer plan. The notice under section 4063 is in addition to any Reportable Event notice that may be required under section 4043.
PBGC expects to make a form available for this purpose at a future date. For now no special format is required, but the notice should identify the affected plan and employer, and include a statement that there has been a cessation of operations under ERISA section 4062(e) or a withdrawal by a substantial employer from a multiple employer plan, and a request that PBGC determine the resulting liability.
The notice must be filed with the PBGC’s Corporate Finance & Restructuring Department (CFRD) within 60 days of the cessation or withdrawal. It may be mailed to CFRD at 1200 K Street, NW, Washington, DC 20005-4026, faxed to 202-842-2643, or emailed to email@example.com.
See also Question 22 in the 2006 Enrolled Actuaries Meeting Blue Book: http://www.pbgc.gov/Documents/2006bluebook.pdf.