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Staff Responses to Practitioner Questions

Last updated July 25, 2018

The interpretations presented below reflect the views of the staff of PBGC. They are not rules, regulations, or statements of the Corporation.

These positions do not necessarily contain a discussion of all material considerations necessary to reach the conclusions stated, and they are not binding due to their informal nature. Accordingly, these responses are intended as general guidance and should not be relied on as definitive. There can be no assurance that the information presented in these interpretations is current, as the positions expressed may change without notice.

430(k) Liens



  1. Controlled Group


    Is the determination as to whether the total of missed contributions, including interest, exceeds $1,000,000 such that an IRC § 430(k) line arises, always made on a plan-by-plan basis?

    Yes, determinations are made on a plan-by-plan basis. For example, if an employer sponsors two PBGC-insured defined benefit plans, each with $750,000 missed contributions (including interest), the missed contributions for the two plans are not aggregated and a lien does not arise under IRC § 430(k).

  2. Effect of Corrective Contribution


    Assume that an IRC §430(k) lien arises because the total of missed contributions, including interest, exceeds $1M, and that thereafter the full amount of missed contributions including interest is paid so that the IRC § 430(k) lien amount is zero. Under IRC § 430(k), the lien continues to exist until the end of the first plan year in which the total of missed contributions, including interest, no longer exceeds $1M. Assume further that, during that same plan year, one or more other contributions are missed, at least in part, and that the highest total of such missed contributions, including interest, does not exceed $1M.

    Does the original lien that had been reduced to zero apply to these additional missed contributions, including interest, or does the original lien remain at zero, with the additional missed contributions, including interest, resulting in a lien only if and when they cross over the $1M threshold?

    The lien continues to exist until the end of the first plan year in which the total no longer exceeds $1M. Until then, the lien amount on any date equals the total amount of missed contributions plus interest.

  3. Perfecting a Lien


    When a lien arises under IRC § 430(k), the lien “may be perfected and enforced only by the [PBGC], or at the direction of the [PBGC], by the contributing sponsor (or any member of the controlled group of the contributing sponsor).” IRC § 430(k)(5). Has PBGC ever directed a plan’s contributing sponsor or a member of its controlled group to perfect or to enforce an IRC § 430(k) lien?

    PBGC does not make a practice of directing a plan’s contributing sponsor or a member of its controlled group to perfect or to enforce an IRC § 430(k) lien.

  4. Perfecting a Lien


    Is PBGC able to perfect IRC § 430(k) liens after termination of the plan? After trusteeship?

    Yes and yes – unless the liens have become unenforceable by reason of lapse of time.

  5. Perfecting a Lien


    Can PBGC perfect IRC § 430(k) liens for missed contributions that come due after a plan’s date of plan termination? For example, assume a catch-up payment is due for a 2016 calendar plan on 9/15/17 but the plan has terminated with a date of plan termination of 6/30/17.

    Yes. Any time a plan terminates in a distress or PBGC-initiated (involuntary) termination, the termination creates a short plan year under IRS regulations. That means a final “quarterly” contribution will come due 15 days after the plan termination date. Thus, for the example above, the contribution was due on 7/15/17, with a final catch-up contribution due 8 ½ months after the plan termination date. Also, the minimum required contribution for the short plan year is prorated based on where the plan termination date falls, which is exactly at the halfway point of the normal plan year for the example above. So, if the minimum required contribution was $10M, it will now be $5M and the remaining unpaid amount, if any, will come due on those two dates. Once either of those post-termination date required contributions is missed, PBGC may file IRC § 430(k) lien notices if the total missed contributions and interest as of the due date exceeds $1M.

  6. Timing


    Is the determination as to whether the total of missed contributions, including interest, exceeds $1M such that an IRC § 430(k) lien arises, determined only at the time of a missed contribution, or is it determined on a continuing basis by adding interest for the period following the most recent missed contribution date? For example, if the total of missed contributions (including interest) once the first quarterly contribution for a plan year is missed is $999K, could an IRC § 430(k) lien arise before the next required contribution is due and missed at least in part?

    The determination whether the $1M lien threshold is crossed occurs only at the time a required contribution is due. Therefore, in the hypothetical presented, an IRC § 430(k) lien could not arise until the next required contribution is due.

  7. Withdrawal of a 430(k) Lien


    In what types of situations does PBGC withdraw IRC § 430(k) lien notices?

    PBGC may withdraw IRC § 430(k) lien notices in a variety of circumstances including the following:

     
    The total of missed contributions and interest equals $1M or less as of the end of a plan year.
     
    A minimum funding waiver granted by IRS with PBGC consultation reduces the lien amount to $0 or to $1M or less and the sponsor or other controlled group members have granted consensual liens in favor of the plan to secure the amount waived.
     
    PBGC agrees to withdraw a lien on specific property, typically property subject to a pending sale agreement, in exchange for a contribution of net proceeds into the plan.
     
    PBGC agrees to a termination liability settlement under which it has agreed to withdraw the lien notices.
Bankruptcy Claims

What bankruptcy claims does PBGC file?

  • PBGC files unpaid minimum funding contribution claims, on behalf of a plan, under 26 USC §§ 412 and 430 and 29 USC §§ 1082, 1342, and 1362(c).
  • PBGC files claims for unfunded benefit liabilities, on its own behalf as statutory guarantor, under 29 USC § 1362(b).
  • PBGC files claims for unpaid flat-rate, variable, or termination premiums, on its own behalf as statutory guarantor, under 29 USC § 1362(b).
Premiums

Two-step transaction to reduce premiums


PBGC’s premium regulations (29 CFR Part 4006) provide that:

 

A single-employer plan exiting the defined benefit system (via a standard termination) is exempt from the variable-rate premium (VRP) in its final year, and

 

Premiums are pro-rated for new plans created as the result of a spinoff from another plan if the new plan’s initial plan year is a short plan year (i.e., less than 12 months).

In each of these situations, the plan owes a significantly lower PBGC premium that it would have had the applicable special rule not applied.

Some plans are considering a strategy to avoid paying a significant portion of the statutory VRP by doing a two-step transaction under which (1) most plan participants are spun off late in the year into a new plan that is virtually identical to the old plan, but with a new name, EIN, and plan number, leaving only a small group of retirees in the original plan and (2) what’s left of the original plan is terminated (i.e., annuities are purchased for the remaining retirees). If the premium rules noted above apply to plans doing these transactions, the aggregate premium would be significantly lower than the premium that would have been owed had the plan remained intact and simply purchased annuities for that group of retirees. Do the special premium rules noted above apply in this situation?

ERISA section 4006 does not provide for reducing the premium obligation in either of the situations noted above (i.e., when a plan is exiting the DB system or when the plan year is less than 12 months). PBGC adopted the special rules noted above because it seemed overly burdensome to charge the entire statutory premium in a year when either of these one-time events took place.  For example, with respect to first special rule noted above, it did not seem appropriate to require a terminating plan to pay a VRP based on the underfunding at the beginning of the year when, by the time the premium is due, the sponsor had fully funded the plan, distributed all accrued benefits (i.e., purchased annuities or paid lump sums) and PBGC coverage had ceased. 

However, with the strategy noted above, the benefits of the vast majority of the participants who were in the plan at the beginning of the year have not been fully funded or paid in full, and PBGC coverage is still in effect for these participants.

The federal common law under ERISA and cases that look to the substance and not the form of a transaction suggest that this two-step transaction, and similar types of transactions, should be disregarded and premiums assessed as if such transaction had not occurred.  We are especially skeptical of this strategy because it seems plausible that some plans could engage in this sort of two-step transaction year after year. 

Distress Terminations
  1. Controlled Group


    To qualify for a distress termination of a plan, each member of the controlled group maintaining the plan must qualify for at least one of the four distress tests. Under what circumstances will PBGC approve a distress termination where there is a controlled group member that does not qualify for any of the distress tests, but is essentially a shell (i.e., it has no or only minimal assets, no employees, and no ongoing business), and thus clearly cannot assist in maintaining an ongoing plan?

    PBGC usually finds that shell entities have a de minimis value. Thus, PBGC typically disregards shell corporations that are part of a controlled group for purposes of determining whether a plan meets the distress termination criteria. PBGC makes such findings on a case‐by‐case basis.

  2. Conversion to PBGC-Initiated Termination under § 4042


    Can a distress termination convert to a PBGC-initiated termination?

    Yes. PBGC has authority to convert a distress termination into a PBGC-initiated termination under ERISA § 4042. PBGC will convert cases only if it determines that the ERISA § 4042 criteria are met. If a sponsor has initiated a distress termination and believes it may be appropriate to convert to a PBGC-initiated termination, the sponsor should contact PBGC case team assigned to the distress termination. PBGC may convert a distress termination to a PBGC-initiated termination on its own.

  3. Meaning of “Will be Unable to Pay Benefits when Due” Involuntary Termination


    One of the criteria for initiation of a PBGC-initiated termination is that the plan “will be unable to pay benefits when due.” Under what circumstances does PBGC believe this criterion is met?

    Historically, the “will be unable to pay benefits when due” PBGC-initiated termination criterion of  § 4042(a)(2) has meant one of two things: either the plan is underfunded on a termination basis and is unlikely to be able to pay benefits at some point in the future, taking into consideration the plan sponsor’s ability to fund the plan; or the plan is or will be abandoned and thus no one will be present to administer the plan.

    PBGC evaluates each case based on its individual facts and circumstances. Two examples of cases in which PBGC initiated a termination based on meeting the “will be unable to pay benefits when due” criterion are: (1)  the plan sponsor sold the bulk of its operations and the limited business that remained was unable to fund the plan, and (2) the plan sponsor was liquidating and there was a small window of time during which the plan would continue to be administered. Many terminations involve companies that have gone out of business and liquidated outside of bankruptcy. In such cases, distress terminations are less common than PBGC-initiated terminations. A recurring problem for PBGC is not finding out about such cases until after the liquidation has been completed, and then having difficulty locating records and effectuating a smooth transition to PBGC trusteeship. PBGC encourages all employers who are under financial pressure that may affect their ability to fund their pension plans to contact PBGC as early as possible before the situation deteriorates and excise taxes or liens are triggered. PBGC will work with the employer to find solutions. PBGC welcomes suggestions as to further outreach to let its customers know of the importance of contacting PBGC early.

  4. PBGC Review of Compliance with § 436


    When PBGC becomes statutory trustee of a pension plan that underwent a distress or involuntary termination, does PBGC review the plan’s compliance with the rules governing benefit restrictions under § 436? If PBGC believes that a plan did not comply with these rules, what action, if any, does PBGC take?

    Yes. PBGC takes the § 436 restrictions into account. For example, if no AFTAP calculation has been certified, PBGC will apply the § 436 funding status presumptions, which could result in a benefit freeze prior to termination. If the plan did not comply with the § 436 rules, PBGC will adjust benefits and take any other appropriate actions.

Overview on Distress Terminations, Procedural Information, and Forms

Guaranteed Benefits



  1. Application of “Earliest PBGC Retirement Date” Rules


    Assume that a plan is terminated in a distress or involuntary termination during the bankruptcy proceeding of the plan sponsor, that the plan allows for unsubsidized early retirement at age 55 with 10 years of service, and that the plan’s normal retirement age is age 65. Assume also the following: Participants A, B, C, and D are each at least 55 years old and no more than 64 years old at all relevant times.

    Participants A and B each attain 10 years of service between the bankruptcy petition date and the plan’s termination date, and Participants C and D each attain 10 years of service between the plan’s termination date and the date the termination and trusteeship agreement is signed by the plan administrator of the plan and PBGC.

    Participants A and C each go into pay status immediately upon attaining 10 years of service.

    Participants B and D have not yet gone into pay status, or elected to do so, by the time the termination and trusteeship agreement is signed.

    What is the “Earliest PBGC Retirement Date” for Participants A, B, C, and D?

    PBGC determines a participant’s earliest PBGC retirement date (EPRD) under the rules in PBGC Reg. § 4022.10.

    For Participants A and B, who met the requirements for an early retirement benefit by the plan’s termination date, EPRD is the date the participant reaches age 55 (or if later, the date he attains 10 years of service). The guaranteed benefit for each participant, however, is based on the amount of his service and the amount of his compensation, if applicable, as of the bankruptcy filing date rather than the termination date. See 29 USC § 4022(g) and 29 CFR § 4022.3(b).

    For Participants C and D, who had not met the requirements for an early retirement benefit as of the plan’s termination date, EPRD is the date the participant reaches age 65, unless there is another early retirement benefit for which they have met the requirements by the plan’s termination date.

  2. Application of Title IV Guarantee Limitations to Participants’ Plan Benefits


    In what order does PBGC apply the three principal guarantee limitations—the “accrued-at-normal” limitation, the “maximum guarantee” limitation, and the “phase-in” limitation—to participants’ plan benefits?

    PBGC applies these limitations by first determining the plan benefit, and by then applying the limitations in “A-M-P” order: i.e., first the “accrued-at-normal” limitation, then the “maximum guarantee” limitation, and then the “phase-in” limitation.

    How is the accrued-at-normal limitation in § 4022.21 of PBGC’s regulations applied when there are early retirement factors and/or reductions for a form of benefit other than life-only?

    Here is an example showing how the accrued-at-normal limitation is applied.

    Assumptions:

     
    A plan has an early retirement benefit that is reduced by 5% for each year by which commencement precedes age 62. Participants who retire prior to age 62 with 30 or more years of service receive a $400 monthly early retirement supplement. The supplement ends at age 62. No Title IV limitation other than the accrued-at-normal limit applies.
     
    Employee A retires at age 60 with a 50% J&S option, 30 years of service, and a life-only accrued benefit of $1,000. The 50% J&S option factor is 91%.


    Application of the accrued-at-normal limitation:

    A participant’s guaranteed benefit under § 4022.21 is limited to his or her life-only accrued benefit payable at normal retirement. For Employee A, this limit is $1,000. Therefore, PBGC would guarantee payment of $1,000 to Employee A from ages 60 to 62 and $819 after age 62. Employee A’s early retirement benefit adjusted for form is $1,000 x .9 x .91 = $819. The plan would pay Employee A $819 for life plus a $400 supplement from ages 60 to age 62 (for a total of $1,219 before age 62).

  3. Merger With a Multiemployer Plan


    If a single-employer defined benefit plan is merged into a multiemployer defined benefit plan, and the multiemployer plan subsequently receives financial assistance from PBGC, is the benefit of any former participant (active, deferred, or in pay status) in the single-employer plan subject to PBGC’s guarantee limit for multiemployer plans or the guarantee limit for single-employer plans?

    The entire accrued benefit of a participant whose benefit liabilities are transferred to a multiemployer plan would be subject to the multiemployer guarantee limit under § 4022A(c) of ERISA.

    Plan M is a multiemployer plan. Because of withdrawals, only one employer is required to make contributions to Plan M. Is the plan subject to PBGC’s guarantee limit for multiemployer plans or the guarantee limit for single-employer plans?

    The accrued benefit of a participant in Plan M would be subject to the multiemployer guarantee limit under § 4022A(c) of ERISA. See Opinion Letter 01-2.

  4. Partial Lump Sum Payments


    How does PBGC take into account a partial lump-sum payment previously received by a participant from the same plan (as part of the accrued benefit) for purposes of determining guaranteed benefits under ERISA § 4022?

    For purposes of determining guaranteed benefits under ERISA § 4022, when a participant has received part of his or her benefit in the form of a lump-sum payment, PBGC will offset the participant’s maximum guaranteeable benefit by the annuity equivalent of the lump-sum payment received by the participant.

    Normal Retirement Example: Assume that a participant had earned a monthly $6,000 annuity payable at age 65 (the participant’s normal retirement age under the plan) and (as permitted by the plan document) elected to take half of his benefit in the form of a lump-sum at age 63 and the other half as a $3,000 annuity payable at age 65. Assume that the only potential limitation on benefits is the maximum guarantee and that this plan’s termination date is in 2004, one week before the participant turns age 65. The limitation on the maximum guaranteeable benefit for this participant is $3,698.86 per month. However, since the participant has already received part of his benefit in a lump-sum, the $3,698.86 per month must be offset. The amount of the offset is equal to the early retirement annuity equivalent of the lump-sum, using the plan’s factors. In this case, assume an early retirement factor of .9 at age 63. Thus, the early retirement annuity equivalent is $2,700 (.9 x $3,000). Therefore, the participant’s remaining guaranteed monthly annuity from PBGC would be $998.86 ($3,698.86 - $2,700).

    Early Retirement Example: Assume the same facts as in the previous example, except that the participant elected to take his benefit in two parts as follows: (1) at age 57, he received a lump-sum payment representing the value of a $3,000 monthly annuity payable at age 65; and (2) at age 60, he will start to receive a straight life annuity of $3,000 per month, reduced for early commencement. Assume the plan reduces benefits by an amount equal to 5% times the number of years prior to age 65 the benefit commences. Assume the plan’s termination date is one week before the participant turns age 60. The limitation on the maximum guaranteeable benefit for this participant is $2,404.26 per month ($3,698.86 reduced using PBGC early retirement factor of .65). However, this monthly amount is offset by $1,800. This amount represents the portion of the participant’s monthly annuity benefit that has been paid as a lump-sum, adjusted to age 57 using the plan’s early retirement factor (.6). Thus, the participant’s remaining guaranteed monthly annuity from PBGC would be $604.26 ($2,404.26 - $1,800).

Overview of Single-Employer Guaranteed Benefits

Overview of Multiemployer Guaranteed Benefits

Reportable Events



 

  1. Asset Sales Transaction


    Company Q is selling the assets of an operating division to Company R. Company Q sponsors a pension plan and participants in the plan are employed by the operating division. A portion of the assets and liabilities in the pension plan will be transferred from Company Q to Company R when the asset sale closes. What types of reportable events must be reported to PBGC and when?

    Since a portion of the pension plan will be transferred from Company Q to Company R, a transfer of benefit liabilities reportable event must be reported 30 days after the transfer occurs. If Company Q meets the criteria to report events in advance, a transfer of benefit liabilities event must be reported 30 days before the transfer occurs. See ERISA § 4043(b).

  2. Change in Controlled Group or Contributing Sponsor Events


    A company acquired a new business and added a new controlled group member. Does this change in the controlled group need to be reported?

    No. Under ERISA § 4043.29, a reportable event occurs for a plan when there is a transaction that results, or will result, in one or more persons' ceasing to be members of the controlled group (other than by merger involving members of the same controlled group). Only changes in the controlled group that result in a person ceasing to be a member of the controlled group are required to be reported.

  3. Change in Controlled Group or Contributing Sponsor Events


    Does a change in contributing sponsor need to be reported if the sponsorship moves from one entity to another entity within the same controlled group?

    No. Similar to mergers within the controlled group, changes in sponsorship within the same controlled group do not need to be reported.

  4. Low Default Risk Waiver


    A company meets the commercial measures criterion of the low default risk waiver under PBGC’s reportable events regulation if “[t]he probability that the company will default on its financial obligations is not more than four percent over the next five years or not more than 0.4 percent over the next year, in either case determined on the basis of widely available financial information on the company's credit quality.”

    What are some examples of third party commercial measures companies can use to determine whether they meet this criterion?

    Companies that are investment grade rated (as indicated by Moody’s, S&P, and Fitch for example) have probabilities of default that are not more than four percent over the next five years or not more than 0.4 percent over the next year. Similarly, smaller companies may use a Dun and Bradstreet Financial Stress Score to measure their risk of default. According to current scores from DNB, companies with a DNB Financial Stress Score of 1477 or higher have a probability of default that is not more than four percent over the next five years or not more than 0.4 percent over the next year.

    Does the contributing sponsor and the highest-level U.S. parent have to use the same criteria to meet the low default risk waiver requirements?

    The contributing sponsor and the highest-level U.S. parent may use different criteria to meet the low default risk waiver. For example, the highest-level U.S. parent can meet the waiver requirements by satisfying the probability of default and secured debt criteria while the contributing sponsor can meet the waiver requirements by satisfying any four of the seven criteria.

    For purposes of meeting the low-default risk waiver, how should holding company situations be treated?

    For example, assume a holding company has no operations or separate financials of its own but has 20 wholly-owned U.S. subsidiaries, of which three are contributing sponsors, and ten are wholly-owned foreign subsidiaries. Assume the holding company would therefore be the highest-level U.S. parent.

    Holding companies should be treated as the highest U.S. level parent and must meet the low default risk waiver along with the contributing sponsor. In our experience, most holding companies consolidate financial statements so that the operations of subsidiaries should provide the information necessary to determine whether the waiver is available. However, we understand that some holding companies do not consolidate financial statements. While such holding companies may generate no income from operations when not consolidated with the contributing sponsor, they do have separate financials (and are often required to file tax returns). As a result, they more than likely will have information available to determine whether the low default risk waiver is available.

    Here is an example:

    A holding company does not consolidate its financials with its operating subsidiaries and does not have a measure of its credit quality prepared by a third party. The holding company has no debt (since the debt is held at the operating companies) but does have assets in the form of investments in subsidiaries. A holding company may be able to meet the low default risk waiver by meeting the four criteria listed below. It can meet the first two criteria below since the secured debt is $0 and can also meet the last two criteria if there have been no loan defaults and no missed contributions.

    Criteria:

     
    The company’s secured debt (with some exceptions) does not exceed 10 percent of its total asset value.
     
    The company’s ratio of total-debt-to-EBITDA is 3.0 or less.
     
    The company has not missed a contribution in the past two years unless reporting is waived.
     
    The company has not experienced a loan default in the past two years regardless of whether reporting was waived.
     
  5. Public Company Waiver


    A reporting waiver applies for various reportable events “if any contributing sponsor of the plan before the transaction is a public company and the contributing sponsor timely files a SEC Form 8-K disclosing the event under an item of the Form 8-K other than under Item 2.02 (Results of Operations and Financial Condition) or in financial statements under Item 9.01 (Financial Statements and Exhibits).”

    What level of detail must be included in the 8-K for this waiver to apply?

    The Form 8-K should include the following:

    All Events

     
    Plan Name
     
    Brief description of the pertinent facts relating to each event
     
    Date of the event
     
    Type of event


    Active Participant Reduction

     
    Single cause event - statement explaining the cause of the reduction, such as facility shutdown or sale, discontinued operations, winding down of the company, or reduction in force
     
    Attrition event – statement of factors involved in the attrition such as frozen plan, aging workforce, or improved operational efficiencies that do not require replacing departing active participants


    Transfer of Benefit Liabilities

     
    Name, contributing sponsor, and EIN/PN of transferee plan
     
    Name of transferor plan and its plan administrator or contributing sponsor
     
    Description of the transferor’s controlled-group structures, including the name of each controlled group member


    Change in Contributing Sponsor or Controlled Group

     
    Description of the change in the controlled group structure
     
    Name of each plan maintained by any member of the old and new controlled groups, its contributing sponsor(s) and EIN/PN


    Extraordinary Dividend or Stock Redemption

     
    Name and EIN of person making the distribution
     
    Date and amount of cash distribution(s) during fiscal year
     
    Description, fair market value, and date or dates of any non-cash distributions
     
    Statement whether the recipient was a member of the controlled group

Overview of Reportable Events

Valuations
  1. 4044 Asset Allocation


    When performing a valuation under Part 4044, how does PBGC allocate the expense load?

    PBGC determines the expense load based on the total participant count and the total benefit liability (through Priority Category 6), and then allocates the entire expense load in proportion to the liabilities in each priority category.

  2. Asset Allocation Category for Temporary Supplements


    Plan N is being terminated. The plan was not amended during the five years prior to plan termination. The plan provides for a temporary early retirement supplement (not a QSUPP) of $300 monthly payable from early retirement to age 62. This provision is not being amended out of the plan as part of the plan termination.

    One day before the beginning of the 3-year period ending on the plan termination date, Participant A retired at age 55, the plan’s earliest retirement age. At retirement, the participant’s accrued deferred retirement benefit commencing at normal retirement age (65) was $1000 monthly. The individual’s reduced early retirement benefit was $800 monthly, and the participant was eligible for the temporary supplement of $300 monthly payable until age 62. Thus, as of the plan termination three years later, the participant is age 58 and receiving $1100 monthly.

    Participant B is also 58 years old and could have retired at the same time as Participant A and with the same benefits. However, Participant B is still actively employed by the plan sponsor.

    Participant C is 55 years old and just retired with the same benefits as Participant A.

    Participant D is 55 years old and could retire with the same benefits as Participant A, but is still actively employed.

    Into which priority categories do the benefits for each of these participants fall?

    For all four participants, the temporary supplement is a nonforfeitable benefit as defined for purposes of plan termination under 29 CFR § 4001.2 by reference to ERISA § 4001(a)(8). The first $200 of the monthly temporary supplement is a basic-type benefit, as defined in § 4001.2. Because of the operation of § 4022.21(a)(1), the remaining $100 of the monthly temporary supplement is a non-basic-type benefit and not guaranteed. For Participants A and B, both the $800 early retirement benefit and the entire $300 temporary supplement fall into priority category (PC) 3. Thus, even though $100 of the temporary monthly supplement is a non-basic-type benefit and not guaranteed, plan assets may be allocated to this benefit in PC3, subject to the allocation rules detailed in § 4044.10(e) and (f). For Participants C and D, the $800 early retirement benefit and $200 of the monthly temporary supplement fall into PC4 as basic-type, guaranteed benefits. The remaining $100 of monthly temporary supplement falls into PC5 as a nonforfeitable benefit that has not been assigned to an earlier priority category.

  3. Definition of “Normal Form” for XRA Purposes


    Under 29 CFR § 4044.55(b)(1), the participant’s monthly benefit payable at unreduced retirement age is determined “in the normal form payable under the terms of the plan.” For this purpose, does “normal form” mean the automatic form of benefit payable under the terms of the plan absent an election otherwise, or the form of benefit in which the plan's formula expresses the benefit?

    PBGC generally considers “normal form” for this purpose to be the form in which the plan's formula expresses the benefit.

  4. Social Security Supplement


    A plan provides a benefit that is not protected under the anti-cutback rules of IRC § 411(d)(6), such as a social security supplement that is not a qualified social security supplement. Must that benefit be included in benefit liabilities for purposes of determining whether a plan may terminate in a standard termination under § 4041 of ERISA?

    Yes. Unless the benefit is amended out of the plan on or before the termination date, the full benefit must be included in benefit liabilities for purposes of a standard termination under § 4041 of ERISA. (For information on post-termination amendments, see 29 CFR § 4041.8.)

  5. XRA for Ages Outside the Table Range


    How does PBGC determine an Expected Retirement Age (XRA) using Tables II-A, II-B, and II-C from Appendix D to PBGC’s regulation on Allocation of Assets in Single-Employer Plans (29 CFR Part 4044) when either or both of the ages needed to enter the tables (the unreduced retirement age and the earliest retirement age) are outside the range of ages shown in the table?

    PBGC uses an extended version of the tables. PBGC would consider it reasonable for a plan administrator to use these extended table to determine XRAs in cases where ages fall outside the range of the tables in Appendix D to the regulation. PBGC would not consider it reasonable to simply use the age in the Appendix D table that is at the end of the range nearest to the actual age for any age that is outside the range in the Appendix D table.

Other
  1. Counting Days for Deadline Purposes


    How does PBGC count days for purposes of deadlines?

    The time between two dates, for purposes of PBGC’s regulations, is measured using calendar days. See 29 CFR part 4000, subpart D (§§ 4000.41-43). Those provisions contain detailed information about how to count days, special rules for weekends and holidays, etc.

  2. Treatment of § 4062(c) Claims


    What is the relationship between due and unpaid minimum funding contributions (the “DUEC Claim”) and the claim against the employer for certain shortfall amortization charges and installments (and, where applicable, for certain waiver amortization charges and installments) under § 4062(c) (the “§4062(c) Claim”)?

    PBGC interprets the PPA 2006 amendments to refer to the same liability as under the pre‐PPA provision—i.e., liability for due and unpaid minimum required contributions. Under this interpretation, there is no duplication between the DUEC Claim and the §4062(c) Claim; they are one and the same. Accordingly, we file a single claim for this liability.