July 8, 2014
- PBGC Announces 4062(e) Enforcement Moratorium for Remainder of 2014
- NOTE: This Benefits Byte was also sent in our old format via Outlook.
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.
NOTE: This Benefits Byte was also sent in our old format via Outlook.
You will likely receive multiple versions. If this version is erroneously routed to a SPAM filter or blocked by a firewall, please (1) consult with your technical support staff or (2) ask us to assist you with ensuring your system will accept emails from our new “send-from” address. For more information, contact Jason Hammersla, senior director, communications, at (202) 289-6700.