[Congressional Record Volume 160, Number 133 (Wednesday, September 17, 2014)]
[Senate]
[Pages S5687-S5688]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      AMENDING THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

  Mr. HARKIN. Mr. President, as chairman of the Health, Education, 
Labor, and Pensions Committee, the pension community approached me with 
their concerns that the Pension Benefit Guaranty Corporation was 
interpreting section 4062(e) of the Employee Retirement Income Security 
Act of 1974 too broadly. That provision was intended to protect pension 
plan participants in the event of a cessation of operations at a 
facility. However, the pension community was able to provide 
substantial evidence that the corporation's enforcement efforts were 
out of line with congressional intent to such an extent that section 
4062(e) had become a major impediment to businesses' efforts to 
restructure. After a thorough review of the situation and consultation 
with employers, employees, retirees, and the Obama administration, it 
became abundantly clear that enforcement efforts under section 4062(e) 
were failing to protect either pensions or the corporation.
  Consequently, I worked with the ranking member, Senator Alexander, on 
a new approach that we introduced as S. 2511. That legislation, which 
passed out of committee on a unanimous vote, will restore the original 
intent of section 4062(e) by clarifying the types of cessations of 
operations that trigger downsizing liability. The legislation will give 
plan sponsors certainty with respect to their obligations, and it will 
also ensures that participants are protected when workforce reductions 
signal that the ongoing viability of a plan sponsor is in question.
  Overall, S. 2511 represents a significant compromise between the 
needs of employers, employees, and retirees, and I think it will give 
everyone a lot more clarity with regard to their obligations under 
section 4062(e). However, there are a few points about the bill that I 
would like to clarify.
  First, there may be questions as to how the terms ``facility'' and 
``location'' should be interpreted. They are not explicitly defined in 
S. 2511 because we intend for them to be interpreted according to their 
natural usage. For example, if an employer maintains several buildings 
that are physically adjacent to each other, that would be a single 
facility at a single location. However, if the employer maintains a 
building in one part of a city and another building in another part of 
the city, those buildings would be separate facilities at separate 
locations.
  Second, S. 2511 is intended to allow employers to make conditional 
elections. The legislation allows employers that have a substantial 
cessation under section 4062(e) to elect a new, alternative means of 
satisfying their liability. The election must be made not later than 30 
days after the earlier of the date that the employer notifies the 
corporation of a substantial cessation of operations or the date that 
the corporation makes a final administrative determination both that a 
substantial cessation of operations has occurred and of the amount of 
the alternative liability. Of course, there may be instances in which 
it is uncertain as to whether such a cessation has occurred or the 
amount of the alternative liability, if any, even after a final 
administrative determination has been made by the corporation. In those 
cases, the employer would certainly not be required to make a binding 
election to pay amounts that may later be determined not to be due. 
Thus, in all cases, an election by the employer would become 
inapplicable to the extent that a court subsequently rules or the 
corporation later agrees that a cessation has not occurred or that the 
alternative liability amount is lower than the amount determined by the 
corporation.
  To the extent that an election becomes inapplicable, any 
contributions previously made by the employer to satisfy such 
inapplicable liability amount should be treated as additional funding 
contributions that are not subject to the provisions of the bill. 
Consequently, such additional funding contributions could be treated as 
increasing the employer's prefunding balance. In addition, we fully 
intend for the corporation and the courts to have the power to stay, in 
whole or in part, an employer's obligation to make alternative 
liability payments until the court has determined whether there has 
been a substantial cessation and/or the alternative liability amount.
  In other cases, a substantial cessation may have occurred, but there 
is no liability of any kind due to the corporation's enforcement 
policy. We expect that some employers may want to make an election of 
the alternative liability amount in case the employer's financial 
condition changes and the corporation asserts a liability under section 
4062(e). In such cases, the annual amount due under the alternative 
liability method would be zero until the corporation makes a final 
administrative determination that the corporation's enforcement policy 
no longer applies to such employer. To ensure that a substantial 
cessation in one year cannot cause liabilities 10 or 20 years later, 
for example, the 7-year payment period for the alternative liability 
amount would include years in which the amount due is zero.
  In order to ensure that any reporting requirement that may later be 
determined to apply is satisfied, an employer may notify the 
corporation of

[[Page S5688]]

an event that the employer does not believe constitutes a substantial 
cessation of operations. If the employer informs the corporation in 
writing, the notification will not trigger the 30-day period for making 
an election, and the 30-day period will begin when the employer agrees 
that the event constitutes a substantial cessation of operations or 
when the corporation makes a final administrative determination to that 
effect and similarly determines the amount of the alternative 
liability.
  Third, S. 2511 is intended to prevent employers from being subject to 
retroactive liability and to other unreasonable payment deadlines. The 
legislation generally requires the first contribution under the 
alternative liability method to be paid not later than the earlier of 
(1) the due date for the minimum required contribution for the year in 
which the substantial cessation occurred and (2) in the case of the 
first contribution, the date that is 1 year after the later of (a) the 
date that the employer notifies the corporation of the substantial 
cessation or (b) the date that the corporation makes a final 
administrative determination that a substantial cessation has occurred 
and of the amount of the alternative liability, with subsequent 
contributions due on the same date in the following years. The intent 
is to ensure that in all cases the employer has at least 1 year's 
advance notice of the need to make the first contribution.
  Thus, clause (2) controls where otherwise an employer could have less 
than a year's advance notice of the liability. That is especially 
important where there is uncertainty as to whether a substantial 
cessation has occurred or regarding the alternative liability amount 
because the corporation's final determination might not even be made 
until after the due date for contributions for the year of the 
substantial cessation. Similarly, the substantial cessation could occur 
in a year when the employer is not subject to section 4062(e) liability 
pursuant to the corporation's enforcement policy, but in a later year, 
the employer becomes subject to section 4062(e) liability with respect 
to that earlier cessation. To prevent retroactive liability and other 
problems, clause (2) is controlling regarding the timing of the first 
contribution in all cases where the employer would otherwise have less 
than a year's advance notice of the liability. Where clause (2) is 
controlling, the seven annual payments would start with the first one 
required by clause (2).
  In some cases, an employer may have notified the corporation of a 
substantial cessation and elected the alternative liability method in a 
specific amount. We intend for the same timing rules to apply in 
determining the due date of the first payment of such amount. However, 
the corporation may later challenge the amount of the alternative 
liability and seek a higher amount. In such cases, the higher amount 
would become due pursuant to the timing rules so that there may be 
separate 7-year periods, one for the originally elected amount and one 
for the higher amount determined by the corporation.
  Fourth, if an employer fails to pay the amount due for any year by 
the due date, the employer will be liable for the balance of all 
amounts due for subsequent years under the alternative liability 
method, though the corporation may waive or settle such accelerated 
liability in its discretion. Of course, any such acceleration should be 
stayed during the pendency of any administrative or judicial proceeding 
to determine whether there has been a substantial cessation and/or the 
amount of the alternative liability amount. In addition, if the 
corporation or a court finds that the employer had a reasonable basis 
to contest any material portion of the corporation's determination, 
then the acceleration provision shall not apply, but the employer would 
owe past due payments plus interest.
  S. 2511 is a commonsense solution to the concerns of the pension 
community, and I appreciate the work of Senator Alexander, the members 
of the HELP Committee and the Obama administration in getting this 
important legislation across the finish line.

                          ____________________