On June 19, 2015, the Pension Benefit Guaranty Corporation (PBGC) published an interim final rule to implement the application process and notice requirements for partitions of eligible multiemployer plans under Title IV of the Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Reform Act (MPRA).
The agency has published a final rule with minor changes to the interim final regulation in response to public comments received. The minor revisions are with respect to information requirements, the time period for PBGC’s initial review of an application for partition, and the coordinated application process for partition and benefit suspension.
The legislation enables PBGC to expand its efforts to help prevent the insolvency of financially troubled multiemployer pension plans. Under the rule, troubled plans may apply to PBGC for financial assistance to fund a portion of their benefit liabilities in order to remain solvent.
The agency’s partition authority previously was limited to situations involving bankruptcy by some of a plan’s contributing employers. Partitions required benefits to be reduced to PBGC guarantee levels. Under the new rule, plans that are projected to run out of money within 20 years may be able to ask PBGC to approve a partition.
Before PBGC can provide help to a plan, the law requires that the plan must have taken all reasonable measures to remain solvent. Those measures include making certain benefit reductions to ward off larger benefit reductions in the future.
The amendments in the final rule will apply to applications for partition submitted to PBGC on or after January 22, 2016.
Based on a review of financial resources available for partition, PBGC says it expects that fewer than 20 plans would be approved for partition over the next three years (about six plans per year), and that the total financial assistance PBGC will provide to those plans will be less than $60 million per year.
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