PBGC Issues Correction to Single-Employer Pension Termination Rule

The Pension Benefit Guaranty Corporation issued corrections on Thursday to its recent regulation on the termination of single-employer pension plans, clarifying requirements for majority owners that choose to waive their plan benefits.

The original rule, published on August 15, updated procedures for standard terminations of single-employer defined benefit plans. Among its revisions, the PBGC modified how constructive ownership rules apply when determining whether a majority owner can elect to forgo their benefits.

The correction, scheduled to be published Thursday in the Federal Register, ensures that the regulation properly reflects the PBGC’s intent, according to the PBGC.

Specifically, it clarifies that majority owners, through constructive ownership, must meet all requirements for a standard termination of a single-employer plan under the Employee Retirement Income Security Act.

According to the PBGC, the requirements include:

• The election to waive benefits must be made in writing;
• Spousal consent must be obtained, where applicable;
• Neither the owner’s election nor the spouse’s consent may conflict with a qualified domestic relations order; and
• Elections and consents must occur during the timeframe beginning with the first notice of intent to terminate and ending with the last distribution.

The amendments also reaffirm that, to qualify as a majority owner, a person must have a direct ownership interest of at least 5%.