| | 77-164 |
| | September 8, 1977 |
| | REFERENCE: |
| | 4041 Termination by Plan Administrator |
| | 4042 Termination by PBGC |
| | 4022 Benefits Guaranteed |
| | 29 CFR 2605. Guaranteed Benefits |
| | 4064 Liability of Employers in Multiple Employer & Multiemployer Plans |
| | OPINION: |
| | This is in response to your letter to * * * (the "PBGC"), regarding the termination of the * * * (the "Plan"). Your letter set |
| | forth your opinion as representative of * * *, a participating employer in the Plan. |
| | It is noted that no statutory Notice of Intent to Terminate the Plan has been filed by the administrator of the Plan. Thus, |
| | voluntary termination proceedings pursuant to Section 4041 of the Employee Retirement Income Security Act of 1974 |
| | ("ERISA"), 29 U.S.C. § 1341 (Supp. V, 1975), have not been initiated as of the date of this letter. The PBGC is currently |
| | investigating the appropriateness of involuntary termination of the Plan pursuant to Section 4042 of ERISA, 29 U.S.C. § |
| | 1342, since the withdrawal of * * * has caused the Plan to have no participating employer, a condition that would have |
| | triggered an automatic allocation of assets to participants if it had occurred prior to the enactment of ERISA. See, Plan, * |
| | * * Article IX, Section 2. |
| | You first ask whether the Plan is exempt from coverage under Title IV of ERISA as a plan that did not provide for |
| | employer contributions on behalf of part of its participants since enactment of ERISA, or as an individual account plan. |
| | As I understand the pertinent facts, the Plan is a tax qualified pension plan to which more than one employer contributes. |
| | The Plan has consistently, from its commencement, provided for employer contributions, see, Plan, Article VII, Section 1, |
| | and Plan Amendments 2 and 4, and separate accounts have never been maintained for individual participants. See, Plan, |
| | Article VI, Section 3; Article IX, Section 3 as amended by Plan Amendment 3. Accordingly, the Plan is not excluded from |
| | coverage under * * * Title IV of ERISA. |
| | You next ask whether the benefits promised by the Plan are guaranteed under Title IV of ERISA, since you feel that the |
| | Plan did not guarantee benefits over or above the value of the fund, especially in light of the fact that the minimum |
| | vesting standards of Title I of ERISA may not have applied to the Plan at the time the last employer withdrew.In its |
| | Regulation on Guaranteed Benefits, 29 C.F.R. § 2605.6(a), the PBGC has defined nonforfeitable benefits subject to |
| | PBGC's guarantee as those benefits for which a participant has satisfied the conditions precedent to entitlement; that is, |
| | once the participant has become vested in the benefit under the terms of the plan, it is nonforfeitable. For purposes of |
| | the guarantee, a limitation-of-liability provision such as that found in Article VII, Section 1(c) of the Plan, does not render |
| | vested benefits forfeitable; the prevalence of such provisions was one of the major reasons for the enactment of the plan |
| | Additionally, the effective date of the minimum vesting standards of Title I of ERISA does not control the effective date |
| | of the plan termination insurance program. Congress intended to insure all covered plans terminating after the effective |
| | date of Title IV, September 2, 1974, and, in fact, extended coverage retroactively to plans which terminated between July |
| | 1, 1974, and September 2, 1974. See, Section 4082(b) of ERISA, 29 U.S.C. § 1382(b). |
| | You further stated that, since retirees of terminated employers ceased accruals prior to the enactment of ERISA, and |
| | contributions on their behalf ceased after their employers terminated participation in the Plan, the benefits of such refirees |
| | should not be covered by Title IV of ERISA. Such retirees, regardless of the ongoing participation in the Plan by their |
| | employer, may look to the entire fund for benefit payments rather than to the contributions of their employer alone. |
| | Therefore, contributions made to the fund by any employer after their retirement were made on behalf of such retirees. |
| | See, e.g., Plan, Article IX, Section 2(a). Their rights to a guaranteed benefit under ERISA are not affected by the identity |
| | of their employer or the timing of his withdrawal from participation in the Plan. |
| | Your final question asks about the possible allocation of employer liability in this case, and suggests parties to whom |
| | allocation would be appropriate. Employer liability in the case of termination of a plan to which more than one employer |
| | contributes is determined by Section 4064 of ERISA, 29 U.S.C. § 1364. That section applies to employers who maintain |
| | the plan at its termination or who made or were required to make contributions to the plan during the five years preceding |
| | its termination. The legislative history makes it clear that an employer "maintains" a plan at its termination if he is making |
| | contributions at its termination. See, H.R. Rep. No. 93-1280, 93rd Cong., 2d Sess. 380 (1974). The discretion given the |
| | PBGC in Section 4064 to determine employer liability on any other equitable basis must be exercised by the adoption of |
| | regulations. See, ERISA, Section 4064(b), 29 U.S.C. § 1364(b). The PBGC is currently examining the policy |
| | considerations relevant to a regulation on this subject. Your suggested alternative has been brought to the attention of |
| | I hope that this proves to be of assistance. |
| |
Henry Rose |
| |
General Counsel |