The Pension Benefit Guaranty Corporation (PBGC) proposes to amend its regulations on guaranteed benefits and asset allocation. These amendments would incorporate statutory changes to the rules for participants with certain ownership interests in a plan sponsor.
The amendments in the proposed rule would be applicable to single-employer defined benefit (DB) plan terminations under section 4041(c) of the Employee Retirement Income Security Act (ERISA) with respect to which notices of intent to terminate are provided under section 4041(a)(2) of ERISA after December 31, 2005; and under section 4042 of ERISA with respect to which notices of determination are provided under that section after December 31, 2005.
The agency says the proposed rule is necessary to conform the regulations of the PBGC to current law and practice. It proposes to incorporate statutory changes affecting guaranteed benefits and asset allocation when a plan has one or more participants with certain ownership interests in the plan sponsor.
The proposed rule would amend PBGC’s benefit payment regulation by replacing the guarantee limitations applicable to substantial owners with a new limitation applicable to majority owners.
Additionally, the proposed rule would amend PBGC’s asset allocation regulation by prioritizing funding of all other benefits in priority category 4 ahead of those benefits that would be guaranteed but for the new, owner-participant limitation. The proposed rule also clarifies that plan administrators may continue to use the simplified calculation in the existing rule to estimate benefits funded by plan assets. Finally, it provides new examples to aid in implementation.PBGC seeks public comment on its proposal. Text of the proposed rule is here.
« Tax Reform Changes HSA Limit for Family Coverage