Statement of Regulatory and Deregulatory Priorities[November 29, 1996 (Volume 

61, Number 231)]

[Unified Agenda]

From the Federal Register Online via GPO Access [frwais.access.gpo.gov]

[Page 62186-62188]

Federal Register / Vol. 61, No. 231 / Friday, November 29, 1996

The Regulatory Plan

[[Page 62186]]

PENSION BENEFIT GUARANTY CORPORATION (PBGC)

Statement of Regulatory and Deregulatory Priorities

PBGC Insurance Programs

The Pension Benefit Guaranty Corporation administers two insurance programs 

under title IV of the Employee Retirement Income Security Act of 1974: a 

single-employer plan termination insurance program and a multiemployer plan 

insolvency insurance program. PBGC protects the pensions of nearly 42 million 

working men and women in about 55,000 private defined benefit plans, including 

about 2,000 multiemployer plans.

Under the single-employer program, PBGC pays guaranteed, and certain other, 

pension benefits to participants and beneficiaries if their plan terminates with 

insufficient assets (distress and involuntary terminations). At the end of 

fiscal year 1995, PBGC was trustee of about 2,000 plans, and paid $763 million 

in benefits to more than 182,000 people during 1995. Another 210,000 people will 

receive benefits when they retire in the future.

Most terminating defined benefit plans terminate with sufficient assets to pay 

all benefits. PBGC has administrative responsibility for these terminations 

(standard terminations), but its role is limited to seeing that proper 

procedures are followed and participants and beneficiaries receive their plan 

benefits.

The multiemployer program (which covers about 8.7 million workers and retirees 

in about 2,000 insured plans) is funded and administered separately from the 

single-employer program and differs in several significant ways. The 

multiemployer program covers only collectively bargained plans involving more 

than one unrelated employer. PBGC provides financial assistance (in the form of 

a repayable loan) to the plan if the plan is unable to pay benefits at the 

guaranteed level. Guaranteed benefits are generally less than a participant's 

full benefit under the plan (and less than the single-employer guaranteed 

benefit). PBGC financial assistance occurs infrequently.

PBGC receives no funds from general tax revenues. Operations are financed by 

insurance premiums, investment income, assets from pension plans trusteed by 

PBGC, and recoveries from the companies formerly responsible for the trusteed 

plans.

To carry out these functions, PBGC must issue regulations interpreting such 

matters as the termination process, establishment of procedures for the payment 

of premiums, and assessment and collection of employer liability.

Objectives and Priorities

PBGC regulatory objectives and priorities are developed in the context of the 

statutory purposes of title IV: (1) to encourage voluntary private pension 

plans, (2) to provide for the timely and uninterrupted payment of pension 

benefits to participants and beneficiaries, and (3) to maintain the premiums 

that support the insurance programs at the lowest possible levels consistent 

with carrying out the PBGC's statutory obligations (ERISA section 4002(a)).

PBGC implements its statutory purposes by developing regulations designed (1) to 

assure the security of the pension benefits of workers, retirees, and 

beneficiaries, (2) to improve services to participants, (3) to ensure that the 

statutory provisions designed to minimize losses for participants in the event 

of plan termination are effectively implemented, (4) to facilitate the 

collection of monies owed to plans and to the PBGC, while keeping the related 

costs as low as possible, and (5) to simplify the termination process.

Legislative Initiatives

On December 8, 1994, the Retirement Protection Act of 1994 was enacted. The 

Retirement Protection Act (1) accelerates the funding of underfunded 

single-employer pension plans, (2) phases out the cap on the variable rate 

portion of the premium paid to PBGC by underfunded single-employer plans, (3) 

provides PBGC with better tools to prevent employers from escaping their plan 

funding obligations through corporate transactions, (4) requires better 

information to participants in underfunded plans on plan funding status and PBGC 

guarantees, and

(5) helps assure that workers do not lose pensions because they have lost 

contact with a terminating pension plan covered by PBGC. In May 1996, the 

President submitted the Retirement Savings and Security Act to Congress. The 

RSAA would have expanded coverage, increased portability and worker protection, 

and simplified pension law. The proposal included a doubling of the guarantees 

in the multiemployer insurance program to address inflation since 1980, and 

expansion of PBGC's missing participant program to include terminating defined 

contribution plans and non-PBGC covered defined benefit plans. The Small 

Business Job Creation Act of 1996, signed by the President on August 20, 1996, 

included many of these provisions. It did not include the doubling of the 

multiemployer guarantee or the expansion of the missing participant program. 

These changes remain legislative objectives.

Regulatory and Deregulatory Initiatives To implement the new requirements of the 

Retirement Protection Act, PBGC issued regulations:

Requiring plan administrators of underfunded plans to annually notify 

participants and beneficiaries about the plan's funding status and the limits on 

PBGC's guarantee of benefits (final rule, June 30, 1995).

Creating a clearinghouse in PBGC to locate and pay benefits to missing 

participants in terminating fully funded pension plans (final rule, December 1, 

1995).

Requiring certain corporate groups with large underfunded pension plans to 

provide annually to PBGC financial and actuarial information (final rule, 

December 20, 1995).

Requiring plans administrators and sponsors to report to PBGC certain 

``reportable events'' that may jeopardize workers' pensions and the pension 

insurance system (proposed rule, July 23, 1996). This rule was developed using a 

negotiated rulemaking process for the first time.

These regulations seek to facilitate compliance. Regulations on participant 

notice and corporate reporting allow use of information prepared for other 

purposes. The reportable events regulation waives reporting in many cases to 

minimize the number of plans affected and uses existing information for 

reporting thresholds. Both the reportable events and participant notice 

regulations include optional notice forms. The missing participants regulation 

ties reporting to forms and deadlines already provided for under the termination 

regulations. In July 1996, PBGC reduced the volume of its regulations by 20 

percent. It reorganized and renumbered all of its regulations to make them more 

accessible, and ``reinvented'' a number of its regulations to eliminate 

unnecessary rules and simplify those that are needed. The regulations are now 

keyed to the numbering system of the statutory sections they implement. PBGC is 

continuing to review its regulations to look for further simplification 

opportunities.

The PBGC's regulatory plan for October 1, 1996, to September 30, 1997,

[[Page 62187]]

consists of two significant regulatory actions.

__________________________

PBGC

-----------

PROPOSED RULE STAGE

-----------

142. CALCULATION AND PAYMENT OF UNFUNDED NONGUARANTEED BENEFITS

Priority:

Other Significant

Legal Authority:

29 USC 1302(b)(3); 29 USC 1322(c)

CFR Citation:

29 CFR 4022 subpart C

Legal Deadline:

None

Abstract:

In the Pension Protection Act, Congress created a scheme by which to channel 

employer liability recoveries to plan participants and beneficiaries (amended 

ERISA section 4022(c)). Under section 4022(c), participants no longer have a 

direct claim for employer liability. Instead, the PBGC's claim covers both its 

shortfall (unfunded guaranteed benefits) and participants' losses (unfunded 

nonguaranteed benefits (UNBs)). In turn, the PBGC is to pay a portion of its 

employer liability recovery to pay UNBs to participants and beneficiaries.

Statement of Need:

Section 4022(c) contains several ambiguities and also leaves to the PBGC the 

development of specific rules and procedures necessary to make this system work. 

Thus, a regulation is needed to implement these statutory provisions.

Summary of the Legal Basis:

The PBGC has the authority to issue rules and regulations necessary to carry out 

the purposes of title IV of ERISA.

[November 29, 1996 (Volume 61, Number 231)]

[Unified Agenda]

From the Federal Register Online via GPO Access [frwais.access.gpo.gov]

[Page 62186-62188]

Federal Register / Vol. 61, No. 231 / Friday, November 29, 1996

The Regulatory Plan

[[Page 62186]]

PENSION BENEFIT GUARANTY CORPORATION (PBGC)

Statement of Regulatory and Deregulatory Priorities

PBGC Insurance Programs

The Pension Benefit Guaranty Corporation administers two insurance programs 

under title IV of the Employee Retirement Income Security Act of 1974: a 

single-employer plan termination insurance program and a multiemployer plan 

insolvency insurance program. PBGC protects the pensions of nearly 42 million 

working men and women in about 55,000 private defined benefit plans, including 

about 2,000 multiemployer plans.

Under the single-employer program, PBGC pays guaranteed, and certain other, 

pension benefits to participants and beneficiaries if their plan terminates with 

insufficient assets (distress and involuntary terminations). At the end of 

fiscal year 1995, PBGC was trustee of about 2,000 plans, and paid $763 million 

in benefits to more than 182,000 people during 1995. Another 210,000 people will 

receive benefits when they retire in the future.

Most terminating defined benefit plans terminate with sufficient assets to pay 

all benefits. PBGC has administrative responsibility for these terminations 

(standard terminations), but its role is limited to seeing that proper 

procedures are followed and participants and beneficiaries receive their plan 

benefits.

The multiemployer program (which covers about 8.7 million workers and retirees 

in about 2,000 insured plans) is funded and administered separately from the 

single-employer program and differs in several significant ways. The 

multiemployer program covers only collectively bargained plans involving more 

than one unrelated employer. PBGC provides financial assistance (in the form of 

a repayable loan) to the plan if the plan is unable to pay benefits at the 

guaranteed level. Guaranteed benefits are generally less than a participant's 

full benefit under the plan (and less than the single-employer guaranteed 

benefit). PBGC financial assistance occurs infrequently.

PBGC receives no funds from general tax revenues. Operations are financed by 

insurance premiums, investment income, assets from pension plans trusteed by 

PBGC, and recoveries from the companies formerly responsible for the trusteed 

plans.

To carry out these functions, PBGC must issue regulations interpreting such 

matters as the termination process, establishment of procedures for the payment 

of premiums, and assessment and collection of employer liability.

Objectives and Priorities

PBGC regulatory objectives and priorities are developed in the context of the 

statutory purposes of title IV: (1) to encourage voluntary private pension 

plans, (2) to provide for the timely and uninterrupted payment of pension 

benefits to participants and beneficiaries, and (3) to maintain the premiums 

that support the insurance programs at the lowest possible levels consistent 

with carrying out the PBGC's statutory obligations (ERISA section 4002(a)).

PBGC implements its statutory purposes by developing regulations designed (1) to 

assure the security of the pension benefits of workers, retirees, and 

beneficiaries, (2) to improve services to participants,

(3) to ensure that the statutory provisions designed to minimize losses for 

participants in the event of plan termination are effectively implemented, (4) 

to facilitate the collection of monies owed to plans and to the PBGC, while 

keeping the related costs as low as possible, and (5) to simplify the 

termination process.

Legislative Initiatives

On December 8, 1994, the Retirement Protection Act of 1994 was enacted. The 

Retirement Protection Act (1) accelerates the funding of underfunded 

single-employer pension plans, (2) phases out the cap on the variable rate 

portion of the premium paid to PBGC by underfunded single-employer plans, (3) 

provides PBGC with better tools to prevent employers from escaping their plan 

funding obligations through corporate transactions, (4) requires better 

information to participants in underfunded plans on plan funding status and PBGC 

guarantees, and (5) helps assure that workers do not lose pensions because they 

have lost contact with a terminating pension plan covered by PBGC.

In May 1996, the President submitted the Retirement Savings and Security Act to 

Congress. The RSAA would have expanded coverage, increased portability and 

worker protection, and simplified pension law. The proposal included a doubling 

of the guarantees in the multiemployer insurance program to address inflation 

since 1980, and expansion of PBGC's missing participant program to include 

terminating defined contribution plans and non-PBGC covered defined benefit 

plans. The Small Business Job Creation Act of 1996, signed by the President on 

August 20, 1996, included many of these provisions. It did not include the 

doubling of the multiemployer guarantee or the expansion of the missing 

participant program. These changes remain legislative objectives.

Regulatory and Deregulatory Initiatives

To implement the new requirements of the Retirement Protection Act, PBGC issued 

regulations:

Requiring plan administrators of underfunded plans to annually notify 

participants and beneficiaries about the plan's funding status and the limits on 

PBGC's guarantee of benefits (final rule, June 30, 1995).

Creating a clearinghouse in PBGC to locate and pay benefits to missing 

participants in terminating fully funded pension plans (final rule, December 1, 

1995).

Requiring certain corporate groups with large underfunded pension plans to 

provide annually to PBGC financial and actuarial information (final rule, 

December 20, 1995).

Requiring plans administrators and sponsors to report to PBGC certain 

``reportable events'' that may jeopardize workers' pensions and the pension 

insurance system (proposed rule, July 23, 1996). This rule was developed using a 

negotiated rulemaking process for the first time.

These regulations seek to facilitate compliance. Regulations on participant 

notice and corporate reporting allow use of information prepared for other 

purposes. The reportable events regulation waives reporting in many cases to 

minimize the number of plans affected and uses existing information for 

reporting thresholds. Both the reportable events and participant notice 

regulations include optional notice forms. The missing participants regulation 

ties reporting to forms and deadlines already provided for under the termination 

regulations. In July 1996, PBGC reduced the volume of its regulations by 20 

percent. It reorganized and renumbered all of its regulations to make them more 

accessible, and ``reinvented'' a number of its regulations to eliminate 

unnecessary rules and simplify those that are needed. The regulations are now 

keyed to the numbering system of the statutory sections they implement. PBGC is 

continuing to review its regulations to look for further simplification 

opportunities.

The PBGC's regulatory plan for October 1, 1996, to September 30, 1997,

[[Page 62187]]

consists of two significant regulatory actions.

___________________________

PBGC

-----------

PROPOSED RULE STAGE

-----------

142. CALCULATION AND PAYMENT OF UNFUNDED NONGUARANTEED BENEFITS

Priority:

Other Significant

Legal Authority:

29 USC 1302(b)(3); 29 USC 1322(c)

CFR Citation:

29 CFR 4022 subpart C

Legal Deadline:

None

Abstract:

In the Pension Protection Act, Congress created a scheme by which to channel 

employer liability recoveries to plan participants and beneficiaries (amended 

ERISA section 4022(c)). Under section 4022(c), participants no longer have a 

direct claim for employer liability. Instead, the PBGC's claim covers both its 

shortfall (unfunded guaranteed benefits) and participants' losses (unfunded 

nonguaranteed benefits (UNBs)). In turn, the PBGC is to pay a portion of its 

employer liability recovery to pay UNBs to participants and beneficiaries.

Statement of Need:

Section 4022(c) contains several ambiguities and also leaves to the PBGC the 

development of specific rules and procedures necessary to make this system work. 

Thus, a regulation is needed to implement these statutory provisions.

Summary of the Legal Basis:

The PBGC has the authority to issue rules and regulations necessary to carry out 

the purposes of title IV of ERISA.

Alternatives:

The statute provides that the amounts of UNBs that the PBGC will pay under 

terminated plans be based in most cases on the PBGC's recoveries on its 

statutory claims for employer liability with respect to plans that terminate 

during a prescribed time period. However, the statute does not prescribe when 

the PBGC is to determine its recovery experience during the applicable 

historical period. An earlier determination would mean that fewer recoveries 

would be included in the historical average. While the historical average could 

be updated when more recoveries can be included, this would result in differing 

payments depending on when the PBGC makes benefit determinations for a plan 

subject to the historical average. A later determination would ensure more 

complete data for inclusion in the historical average, but may delay benefit 

determinations.

Anticipated Costs and Benefits:

Because of the complexities involved, it may take a long time for the PBGC to 

determine what its recovery will be. In addition, it may be difficult to value a 

recovery in cases where the PBGC receives assets other than cash or readily 

marketable securities. Thus, the accuracy of the PBGC's computation of the 

amounts payable to participants would be enhanced by waiting longer to make that 

computation. However, long delays are not generally in the best interest of plan 

participants. The regulation will address these concerns in developing rules 

governing the calculation of the historical average.

Risks:

Not applicable.

Timetable:

_____________ Action DFR Cite

____________________ NPRM 03/00/97

NPRM Comment Period End 05/00/97

Small Entities Affected:

None

Government Levels Affected:

None

Agency Contact:

Peter H. Gould

Senior Counsel

Pension Benefit Guaranty Corporation

Office of the General Counsel

1200 K St. NW.

Washington, DC 20005-4026

Phone: 202 326-4116

TDD: 202 326-4179

RIN: 1212-AA54

______________________

PBGC

-----------

FINAL RULE STAGE

-----------

143. REPORTABLE EVENTS REQUIREMENTS

Priority:

Other Significant

Reinventing Government:

This rulemaking is part of the Reinventing Government effort. It will revise 

text in the CFR to reduce burden or duplication, or streamline requirements.

Legal Authority:

29 USC 1302(b); 29 USC 1343

CFR Citation:

29 CFR 4043

Legal Deadline:

None

Abstract:

Section 4043 of ERISA requires reporting to the PBGC of certain events that may 

indicate a need for the PBGC to take action to protect pension plan participants 

and the plan termination insurance program. The Retirement Protection Act of 

1994 amended the reportable event requirements in ERISA section 4043 by: (1) 

applying to contributing sponsors (as well as plan administrators) the 

requirement to notify the PBGC of a reportable event within 30 days after a 

person knows or has reason to know of its occurrence; (2) specifying four 

additional types of events for which notice is required (except as waived by the 

PBGC); and (3) requiring that, under limited circumstances, a contributing 

sponsor must notify the PBGC in advance of the occurrence of an event specified 

in the RPA or prescribed by PBGC regulations.

The PBGC issued a proposed regulation to implement these statutory changes. The 

regulation contains extensive waivers and reporting extensions. In developing 

the proposed regulation, the PBGC for the first time used a negotiated 

rulemaking committee.

Statement of Need:

RPA significantly amended the reportable events requirements in ERISA section 

4043. A new regulation is needed to implement these statutory provisions, as 

well as to reduce and simplify reporting requirements where possible.

[[Page 62188]]

Summary of the Legal Basis:

The PBGC has the authority under ERISA section 4043 to prescribe regulations 

waiving any statutory reportable events requirements and requiring the reporting 

of any event not specified in the statute that may be indicative of a need to 

terminate a plan.

Alternatives:

In developing the consensus on which the proposed regulation is based, the 

negotiated rulemaking committee attempted to strike a balance between the 

interest of plan administrators, contributing sponsors, and the PBGC in avoiding 

undue reporting and report processing, and the interest of the PBGC and plan 

participants in ensuring PBGC's timely receipt of sufficient information to 

enable it to take action when necessary to protect benefits and the termination 

insurance program.

Anticipated Costs and Benefits:

The benefits of the proposed regulation result from the PBGC's receiving timely 

notice of events that indicate plan or contributing sponsor financial problems. 

The PBGC will use the information to determine what, if any, action it needs to 

take to ensure the continued payment of benefits to plan participants and their 

beneficiaries or to prevent unreasonable increases in its losses.

The costs of the proposed regulation are the costs to plan administrators and 

contributing sponsors of providing the information and to the PBGC of reviewing 

the information. The regulation reduces the burden by providing many reporting 

waivers and extensions. In addition, the regulation provides for the use of 

optional reportable events forms calling for reduced initial information 

submissions.

Risks:

Not applicable.

Timetable:

________________

Action DFR Cite

________________

Notice of Intent 60 FR 41033d Rulemaking) 08/11/95

Notice of Intent Comment/ Application Period End 09/15/95

Notice of First 60 FR 49531gotiated Rulemaking) 09/26/95

Notice of Establ 60 FR 52135Negotiated Rulemaking Advisory Commi 10/05/95

Notice of Meetin 60 FR 54619ted Rulemaking) 10/25/95

Notice of Meetin 61 FR 13117ed Rulemaking) 03/26/96

NPRM 61 FR 38409 07/24/96

NPRM Comment Period End 09/23/96

Final Rule 11/00/96

Small Entities Affected:

None

Government Levels Affected:

None

Agency Contact:

James L. Beller

Attorney

Office of the General Counsel

Pension Benefit Guaranty Corporation

1200 K Street NW.

Washington, DC 20005-4026

Phone: 202 326-4024

TDD: 202 326-4179

RIN: 1212-AA80

BILLING CODE 7708-01-F