American Benefits Council
Benefits Byte

2014-057

July 8, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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PBGC Announces 4062(e) Enforcement Moratorium for Remainder of 2014

On July 8, the Pension Benefit Guaranty Corporation (PBGC) posted a news release announcing a moratorium on the enforcement of ERISA Section 4062(e) through the end of 2014. The PBGC indicated that the moratorium will enable them to target their enforcement efforts on cases where pensions are genuinely at risk and will allow the agency to work with the business community, labor and other stakeholders.

The moratorium applies to both open and new cases. Notably, the news release also makes clear that companies should continue to report events occurring during the moratorium and does not prevent the PBGC from taking enforcement actions after its expiration. The Council commends the PBGC for today’s announcement and will continue to work with the PBGC and other parties to help find a permanent solution to this problem.

Under Section 4062(e), if an employer with a pension plan shuts down operations at a facility -- and, as a result of that shutdown, more than 20 percent of the employer's employees who are plan participants are separated from employment -- the employer is required to provide the PBGC with short-term financial guarantees in the form of a bond or escrow amount based on the plan's unfunded termination liability.

As previously reported, the Council recently met with PBGC officials to discuss the agency’s ongoing enforcement action. PBGC has in the last few years become very aggressive in its enforcement of this ERISA provision in many respects, giving rise to significant compliance challenges and large unexpected liabilities for many companies that have engaged in normal and often de minimis business transactions (such as the sale of a very small business unit or the consolidation of small operations at different facilities).

The Council also hosted a Benefits Briefing webinar on April 24 to discuss the matter in greater detail. (Digital recordings of the session can be requested by clicking here.) Additionally, two bills have been introduced to address these issues. Most recently, the USA Retirement Funds Act (S. 1979), sponsored by Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-IA), would impose a two-year moratorium on enforcement of Section 4062(e) to provide an opportunity for the issue to be studied. In 2013, Representative Richard Neal (D-MA) introduced the Retirement Plan Simplification and Enhancement Act of 2013 (H.R. 2117), which would have clarified -- consistent with Congress' original intent -- that Section 4062(e) only applies to major downsizing transactions, not routine business transactions. The Council worked extensively with the offices of Senator Harkin and Congressman Neal and will continue to work with Congress, the PBGC, the PBGC's board of directors, and the PBGC's plan sponsor advocate to achieve a resolution to this problem.

For more information, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement & compensation policy, at (202) 289-6700.



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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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