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PBGC Proposed Rule May Offer DC Plans New Tool for Finding Missing Participants

October 7, 2016

Authors

Denise Erwin and Steven Schaffer

PBGC Proposed Rule May Offer DC Plans New Tool for Finding Missing Participants

October 7, 2016

by: Denise Erwin and Steven Schaffer

where-are-youFor many years, the PBGC has been helping reunite missing participants with their benefits under single-employer defined benefit plans. Now, a new PBGC proposed rule may open up the program to missing participants under other terminated plans.

Under this proposed rule, terminated defined contributions plans may choose to transfer benefits of missing participants to the PBGC or to establish an IRA to receive the transfer and send information to the PBGC about the IRA provider.   The PBGC will attempt to locate the missing participants and add them to a searchable database. The PBGC notes that once the program is established, it may issue guidance making the reporting requirement mandatory for defined contribution plans as authorized under section 4050 of ERISA.

The PBGC will accept the transfer of accounts of

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De-Risking? The PBGC Wants to Know About It

April 1, 2015

Authors

Denise Erwin

De-Risking? The PBGC Wants to Know About It

April 1, 2015

by: Denise Erwin

Risk BoggleIn the past few years, several large pension plan sponsors have sought to decrease the risk associated with their pension plans by purchasing group annuities to cover future payments or by offering a lump sum window during which eligible participants were permitted to elect a cash lump sum buyout. Many other plan sponsors are considering following suit. This trend has been accelerating in response to higher PBGC premiums, lower interests rates and updated mortality tables reflecting increased longevity.

The PBGC has an interest in tracking this activity because the decrease in the number of participants reduces the per-participant premiums collected by the PBGC making it more difficult for it to fulfill its role in protecting pension benefits. As a result, beginning with the PBGC premium filings for 2015,

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2014 Year-End Qualified Retirement Plan Checklist

October 9, 2014

Authors

benefitsbclp

2014 Year-End Qualified Retirement Plan Checklist

October 9, 2014

by: benefitsbclp

CheckIt’s time to ensure year-end qualified plan deadlines are satisfied. Below is a checklist designed to help employers with this process.  This checklist addresses both year-end deadlines and January 2015 deadlines which sponsors of qualified retirement plans may wish to begin preparing for now.

A.        DEADLINES APPLICABLE TO QUALIFIED RETIREMENT PLANS

  • Cycle D Sponsors.  Individually designed plans are on five-year cycles for renewing their determination letters with the IRS.  For most Cycle D sponsors (i.e., those sponsors with an employer identification number ending in either 4 or 9), the five-year cycle will end on January 31, 2015.  Generally, multiemployer plans are assigned to Cycle D.

Individually designed plan Cycle D sponsors (and multiemployer plan sponsors) who have not already renewed their determination letter this cycle should be prepared to

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Thanks, ERISA, and Happy 40th!

September 3, 2014

Authors

benefitsbclp

Thanks, ERISA, and Happy 40th!

September 3, 2014

by: benefitsbclp

Forty years ago yesterday, September 2, 1974, Congress passed the Employees Retirement Income Security Act of 1974.  Most, maybe all, of the people reading this blog owe their careers to a single piece of legislation that has spawned growth industries and cottage industries.  The acronym “ERISA” has special meaning to all who work in the employee benefits industry.

ERISA exists in no small measure due to three factors:  (1) the ineptitude and greed of those running the automobile manufacturer, Studebaker–Packard Corporation back in the early 1960s; (2) the mismanagement and abuse (likely theft with no federal recourse to protect participants) of the world’s then largest pension fund by the executives of the Teamsters Union; and (3) the legislative tenacity of Senators Jacob Javits and Harrison Williams.  These factors forged together over a decade to get ERISA passed.  The legislative debate was one of the most significant management versus

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Smoothing Pensions to Smooth Highways

August 14, 2014

Authors

Chris Rylands

Smoothing Pensions to Smooth Highways

August 14, 2014

by: Chris Rylands

Last Friday, the President signed the highway trust funding bill.  One part of the debate over the bill was how it would be funded.  Ultimately, the bill was paid for using  so-called “pension smoothing” that some decried as a “gimmick.” But what is it and might it be beneficial?

Pensioners Driving on the HighwayTo understand smoothing, we have to first understand how pension plans are funded.  Pensions are typically funded with company contributions.  Put simply, the amount of these contributions are determined by an actuary based on the expected future benefits to be paid (i.e., the future liability) relative to the amount of assets already in the plan.

Because actuaries don’t have crystal balls, they have to make certain assumptions in making these calculations. The assumptions center around the anticipated

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PBGC Adopts Uniform Premium Due Date

March 19, 2014

Authors

Hal Morgan

PBGC Adopts Uniform Premium Due Date

March 19, 2014

by: Hal Morgan

In the latest step of a rulemaking process begun in 2013, on March 11 the Pension Benefit Guaranty Corporation published a final rule which provides that both flat rate and variable rate premiums for small defined benefit plans will be due 9½ months after the beginning of the plan year for which they are payable.  This change, which eliminates the system under which premium due dates varied based on the type of premium and the size of the plan, will accelerate the premium due date for small plans, which has been four months after the end of the premium payment year, by 6½ months.  While the final rule is applicable for 2014 and later plan years, a transition rule provides a four month delay in the new due date for small plans for the first plan year beginning after 2013 in order to ease potential cash flow problems

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PBGC Simplifies Premium Payments for Large Plans

January 7, 2014

Authors

Hal Morgan

PBGC Simplifies Premium Payments for Large Plans

January 7, 2014

by: Hal Morgan

On January 3, 2014, the Pension Benefit Guaranty Corporation published a rule changing the due date for flat rate premium payments by large defined benefit plans with 500 or more participants. Effective immediately for plan years beginning on or after January 1, 2014, the flat rate premium for large plans will be due 9½ months after the beginning of the plan year, which is the same date that the variable rate premium is due. As a result, the flat rate premium for large calendar year plans will be due on October 15, 2014.

This change should simplify the administration of premium payments for large plans and reduce potential penalties and interest for late payments. Previously, large plans have been required to pay the flat rate premium by the end of the second month of the plan year. Since the flat rate premium is generally based on

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PBGC Premium Rates Increase in 2014 for Single-Employer Plans – Time to Cash-out Some Deferred Vested Participants?

November 15, 2013

Authors

benefitsbclp

PBGC Premium Rates Increase in 2014 for Single-Employer Plans – Time to Cash-out Some Deferred Vested Participants?

November 15, 2013

by: benefitsbclp

Earlier this month, the Pension Benefit Guaranty Corporation (“PBGC”) announced the flat and variable premium rates that defined benefit pension plans must pay in 2014.

  • Single-employer plans. The flat rate premium for 2014 is $49 per participant. This is a $7 per participant increase from 2013. The variable premium rate will increase in 2014 to $14 per every $1,000 in unfunded vested benefits, with a cap of $412 per participant, which is an increase in the variable premium rate of $9 in 2013. Note that smaller plans may be subject to a lower per participant cap on the variable premium rate.
  • Multiemployer plans. The flat rate premium rate for these plans is $12 a participant in 2014, which remains unchanged from 2013. Multiemployer plans do not pay a variable rate premium.

With these premium increases on the horizon for single-employer plans, this may be a good time to

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Piercing the Veil: Private Equity Fund Found to be “Trade or Business” Under MPPAA

August 6, 2013

Authors

benefitsbclp

Piercing the Veil: Private Equity Fund Found to be “Trade or Business” Under MPPAA

August 6, 2013

by: benefitsbclp

On July 24, 2013, in a case of first impression (Sun Capital Partners III LP vs. New England Teamsters & Trucking Indus. Pension Fund, No.12-2312), the First Circuit held that a private equity fund was a “trade or business” under ERISA as amended by the Multiemployer Pension Plan Amendment Act (“MPPAA”), and thus potentially liable for withdrawal liability incurred by its portfolio company if that company was under common control with the fund.* The court applied an “investment plus” test and found that the private equity fund was not merely a “passive investor” but had sufficient management and operational involvement with its portfolio company so as to make it a trade or business.

Sun Fund IV and Sun Fund III (collectively, the “Sun Funds”) are two funds held by private equity firm Sun Capital Advisors, Inc. Together, the Sun Funds held 100% of the

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ERISA 4062(e)asier?

November 7, 2012

Authors

Chris Rylands

ERISA 4062(e)asier?

November 7, 2012

by: Chris Rylands

Last Friday, the Pension Benefit Guaranty Corporation officially announced a change in enforcement under ERISA § 4062(e) that had been encountered some time ago by practitioners.  This is the “Third Act” in the unfolding saga of 4062(e) enforcement.

In broad terms, 4062(e) gives the PBGC the authority to seek protection for a defined benefit pension plan by forcing an employer to fund, or post security to fund, a pension plan if there is a substantial cessation of operations at one or more facilities covered by the plan.  Essentially, if there was a 20% or greater reduction in headcount at a facility, the PBGC could force the employer to fund the pension plan with respect to the terminated employees.   This provision has been in the law since 1974, but

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