| | 76-76 |
| | June 8, 1976 |
| | REFERENCE: |
| | 4041 Termination by Plan Administrator |
| | 4003(e)(1) Investigatory Authority; Cooperation with other Agencies; Civil Actions Maintainable by PBGC |
| | 4048 Date of Termination |
| | OPINION: |
| | Thank you for your letter of May 18, 1976. You asked three questions concerning * * * (the "Plan"), to which I will respond |
| | serially: 1) the position of the Pension Benefit Guaranty Corporation (the "PBGC") with respect to the requirements of |
| | trustees under the Employee Retirement Income Security Act (the "Act") in terminating a pension plan; 2) the PBGC's |
| | position if a notice of termination is not approved by the trustees of a pension plan; and 3) an explanation of whether a |
| | notice of termination at this time would help employees receiving benefits and employees with long periods of creditable |
| | service, but who are not vested. |
| | Our answers are as follows: |
| | 1) A fiduciary n1 to a plan is obligated by § 404(a)(1) of the Act, 29 U.S.C.A. § 1004(a)(1) (1975), to |
| | discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and -- |
| | (A) for the exclusive purpose of: |
| | (i) providing benefits to participants and their beneficiaries; and |
| | (ii) defraying reasonable expenses of administering the plan. . . . |
| | n1 Defined by § 3(14)(A), 29 U.S.C.A. § 1003(14)(A) (1975), to include an administrator, who by § (16)(A)(i) is the |
| | "person" designated by the plan document, such as the Trustees under Art. V, § 1 of your Plan. |
| | Subsection (D) provides that these duties must be fulfilled "in accordance with the documents and instruments governing |
| | the plan insofar as such documents and instruments are consistent with the provisions of this title." |
| | Section 4041(a) of the Act, 29 U.S.C.A. § 1341(a), mandates that a plan administrator (the Trustees under Art. V, § 1 of |
| | your Plan) "shall file" a notice of termination with the PBGC before the effective date of termination. The PBGC's position |
| | is, as the Act states, that filing a notice of termination is a mandatory requirement. In addition to the PBGC's authority to |
| | sue for involuntary plan termination, the PBGC may at the same time sue to redress violations of Title IV, § 4003(e)(1), |
| | 29 U.S.C.A. § 1303(e)(1), which would include a failure to terminate as required by the Act. |
| | 2) Article VII, S 2 of the Plan appears to charge the Trustees with responsibility for terminating the Plan. By Art. XI § § 4- |
| | 6 of the Agreement and Declaration of Pension Trust of * * * (the "Trust Agreement"), specific procedures governing |
| | actions taken by Plan Trustees are set forth. n2 If the Trust Agreement so provides, unanimity is not required. |
| | n2 Art. V, § 1 of the Plan incorporates by reference the provisions of the Trust Agreement with respect to administration |
| | of the Plan. |
| | 3) The most critical question, as addressed in your several phone conversations with Case Officer * * * and in our May 17, |
| | 1976 conversation, is how the Trustee's filing a notice of termination will affect your fiduciary responsibilities to both the |
| | vested and non-vested employees. |
| | We must refer you to the Department of Labor to answer any questions you might have whether the Trustees' submitting |
| | an appropriate notice of termination under § 4041 will subject you to liability for breach of fiduciary duties for following the |
| | mandatory requirements of the Act. Filing a notice of termination cannot, and will not, however, cut off any participants |
| | otherwise qualified for receiving PBGC guarantees. |
| | The PBGC will make a determination based on the facts and circumstances of the case as to when the Plan terminated. |
| | The criteria for this determination include date (or dates) the employees ceased work, the date benefit accruals ceased, |
| | and the date employer contributions ceased, as well as the date proposed by the Trustees. Furthermore, the Trustees' |
| | delay in filing a notice and thereby causing the PBGC to proceed under the provisions for involuntary termination, § 4042, |
| | 29 U.S.C.A. § 1342 will not ultimately change the date the PBGC assigns to the termination. Section 4048(2), 29 |
| | U.S.C.A. § 1348(2). Section 4048(3) also provides that, when the PBGC or Plan Administrator (the Trustees) cannot |
| | agree on a date of termination, a court may fix the date. While we cannot prejudge what date a court would assign, the |
| | PBGC will take the position that the date of termination in this case is not deferrable in order to wait for more employees to |
| | vest. Therefore, the PBGC will contend in any court proceeding that the Trustees' actions in deferring filing a notice of |
| | termination or in awaiting the PBGC to terminate involuntarily this Plan do not extend the date of plan termination to such |
| |
I hope that this explanation has satisfied your inquiries. You should be aware that the PBGC and the Trustees can agree |
| |
to termination and appointment of a trustee under § 4042(c), 29 U.S.C.A. § 1342(c). If the Trustees want to proceed by |
| |
agreement, notify me, and we can discuss the wording of an agreement for signature by the PBGC and Plan Trustees. |
| |
Christine O. Cook |
| |
Attorney |
| |
Office of the General Counsel |