[Federal Register Volume 73, Number 58 (Tuesday, March 25, 2008)]
[Proposed Rules]
[Pages 15688-15694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-5855]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2540

RIN 1210-AB26


Model Notice of Multiemployer Plan in Critical Status

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Proposed rule.

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SUMMARY: The Pension Protection Act of 2006 amended the Employee 
Retirement Income Security Act (ERISA) and the Internal Revenue Code 
(Code) to require that sponsors of multiemployer defined benefit 
pension plans that are in, or will be in, endangered or critical status 
for a plan year provide notice of this status to participants, 
beneficiaries, the bargaining parties, the Pension Benefit Guaranty 
Corporation and the Department of Labor. This document contains a model 
notice that is intended to facilitate compliance with this notification 
requirement under ERISA and the Code.

DATES: Written comments should be received by the Department of Labor 
on or before April 24, 2008.

ADDRESSES: You may submit comments, identified by RIN 1210-AB26, by one 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include ``Notice of Critical 
Status: RIN 1210-AB26'' in the subject line of the message.
     Mail: Office of Regulations and Interpretations, Employee 
Benefits Security Administration, Room N-5655, U.S. Department of 
Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attention: 
Model Notice of Critical Status.
    Instructions: All submissions received must include the agency name 
and Regulatory Information Number (RIN) for this rulemaking. Comments 
received will be posted without change to http://www.regulations.gov 
and http://www.dol.gov/ebsa, and available for public inspection at the 
Public Disclosure Room, N-1513, Employee Benefits Security 
Administration, 200 Constitution Avenue, NW., Washington, DC 20210, 
including any personal information provided. Persons submitting 
comments electronically are encouraged not to submit paper copies.

FOR FURTHER INFORMATION CONTACT: Susan Elizabeth Rees, Office of

[[Page 15689]]

Regulations and Interpretations, Employee Benefits Security 
Administration (EBSA), U.S. Department of Labor, (202) 693-8500. This 
is not a toll-free number.

SUPPLEMENTARY INFORMATION: 

A. Background

    Section 202 of the Pension Protection Act of 2006, Public Law 109-
280 (PPA), amended the Employee Retirement Income Security Act of 1974 
(ERISA or Act) by adding section 305, and section 212 of the PPA 
amended the Internal Revenue Code (Code) by adding section 432, to 
provide additional rules for multiemployer defined benefit pension 
plans in endangered status or critical status. All references to 
section 305 of ERISA should be read to include section 432 of the Code. 
Pursuant to Reorganization Plan No. 4, the Department of the Treasury 
has interpretive authority over the minimum funding rules of Title I of 
ERISA, including section 305 of ERISA.\1\
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    \1\ Reorganization Plan No. 4 of 1978, 43 FR 47713 (Oct. 17, 
1978).
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    In general, section 305(b)(3)(A) of ERISA provides that not later 
than the 90th day of each plan year, the actuary of a multiemployer 
defined benefit pension plan shall certify to the Secretary of the 
Treasury and to the plan sponsor \2\--(i) whether or not the plan is in 
endangered status for such plan year and whether or not the plan is or 
will be in critical status for such plan year, and (ii) in the case of 
a plan which is in a funding improvement or rehabilitation period, 
whether or not the plan is making the scheduled progress in meeting the 
requirements of its funding improvement or rehabilitation plan.
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    \2\ Section 3(16)(B)(ii) of ERISA defines the term ``plan 
sponsor'' to mean, in the case of a plan established or maintained 
by two or more employers or jointly by one or more employers and one 
or more employee organizations, the association, committee, joint 
board of trustees, or other similar group of representatives of the 
parties who establish or maintain the plan.
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    Section 305(b)(3)(D)(i) of ERISA provides that, in any case in 
which it is certified under section 305(b)(3)(A) that a multiemployer 
plan is or will be in endangered or critical status for a plan year, 
the plan sponsor shall, not later than 30 days after the date of the 
certification, provide notification of the endangered or critical 
status to participants and beneficiaries, the bargaining parties, the 
Pension Benefit Guaranty Corporation, and the Secretary of Labor.
    Section 305(b)(3)(D)(ii) of ERISA provides that if it is certified 
under section 305(b)(3)(A) that a multiemployer plan is or will be in 
critical status, the plan sponsor shall include in the notice an 
explanation of the possibility that--(i) adjustable benefits (as 
defined in section 305(e)(8) of ERISA) may be reduced, and (ii) such 
reductions may apply to participants and beneficiaries whose benefit 
commencement date is on or after the date such notice is provided for 
the first plan year in which the plan is in critical status.
    Section 305(b)(3)(D)(iii) provides that the Secretary of Labor 
shall prescribe a model notice that a multiemployer plan may use to 
satisfy the requirements of section 305(b)(3)(D)(ii) of ERISA. The 
Department consulted with both the PBGC and the IRS in developing the 
model notice.
    Other provisions in section 305 define when a plan is in endangered 
or critical status and what corrective steps must be taken, by when, 
and by whom. These other provisions are beyond the scope of this 
notice. The Department of the Treasury and IRS have advised that they 
are developing guidance on these other provisions.
    Section 202(f)(1) of the PPA provides, generally, that the 
amendments made by this section shall apply with respect to plan years 
beginning after 2007, while section 202(f)(3) provides a special rule 
in the case of plans having certain restored benefits.
    Section 202(f)(2) of the PPA provides that in any case in which a 
plan's actuary certifies that it is reasonably expected that a 
multiemployer plan will be in critical status under section 305(b)(3) 
of the ERISA, with respect to the first plan year beginning after 2007, 
the notice required under section 305(b)(3)(D) of ERISA may be provided 
at any time after the date of enactment, so long as it is provided on 
or before the last date for providing the notice under such 
subparagraph.

B. Model

    Pursuant to section 305(b)(3)(D)(iii) of ERISA, the Department is 
publishing a model notice, entitled Notice of Critical Status, that a 
multiemployer plan may use to satisfy the content requirements of 
section 305(b)(3)(D) of ERISA.\3\ The IRS advises that it will consider 
the sponsor of a plan in critical status who uses the model notice to 
notify participants and others of the status of the plan to have 
satisfied its content obligations under 432(b)(3)(D) of the Code. While 
the model notice contained in this document specifically relates to 
plans in critical status, the Department believes that the model may be 
useful in preparing notices required to be furnished by plans in 
endangered status.
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    \3\ Plans may not use the model notice published herein to 
satisfy the notice requirement under section 305(e)(8)(C) of ERISA.
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    To discharge the obligation to furnish a notice to the Department 
of Labor, plans may mail notices to U.S. Department of Labor, Employee 
Benefits Security Administration, Public Disclosure Room, N-1513, 200 
Constitution Ave., NW., Washington, DC 20210. Alternatively, notices 
may be e-mailed to [email protected]. Critical Status 
notices received by the Department will be available for public 
inspection at the Public Disclosure Room, and accessible on EBSA's Web 
site at: http://www.dol.gov/ebsa.
    To discharge the obligation to furnish a notice to the Pension 
Benefit Guaranty Corporation, plans may mail notices to Multiemployer 
Program Division, Pension Benefit Guaranty Corporation, 1200 K Street, 
NW., Suite 930, Washington, DC 20005. Alternatively, notices may be e-
mailed to [email protected].

C. Effective Date

    This regulation will be effective 60 days after the date of 
publication of the final regulation in the Federal Register. However, 
because section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the 
Code are effective with respect to plan years beginning after 2007, the 
Department, as well as Treasury and IRS, will, for purposes of notices 
required to be furnished prior to the effective date of a final 
regulation, view utilization of the model notice contained in this 
document, if accurately completed and timely furnished, as satisfying 
the notice requirements of section 305(b)(3)(D) of ERISA and 
432(b)(3)(D) of the Code.

D. Regulatory Impact Analysis

Summary

    The Notice of Critical Status (``Model Notice'') in paragraph (b) 
of the proposed regulation will help sponsors of plans in critical 
status who use the model notice to satisfy their obligations under 
section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the Code. 
While the Model Notice is not mandatory, the sponsor of a plan in 
critical status who uses the model notice to notify participants and 
others of the status of the plan will be considered to have satisfied 
its obligations under ERISA and the Code. The anticipated benefit of 
the Model Notice, therefore, is to help plan sponsors fulfill their 
disclosure responsibilities with greater certainty and less cost.

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Executive Order 12866

    Under Executive Order 12866 (58 FR 51735), the Department must 
determine whether a regulatory action is ``significant'' and therefore 
subject to review by the Office of Management and Budget (OMB). Section 
3(f) of the Executive Order defines a ``significant regulatory action'' 
as an action that is likely to result in a rule (1) having an annual 
effect on the economy of $100 million or more, or adversely and 
materially affecting a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local or tribal governments or communities (also referred to as 
``economically significant''); (2) creating serious inconsistency or 
otherwise interfering with an action taken or planned by another 
agency; (3) materially altering the budgetary impacts of entitlement 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) raising novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in the Executive Order. It has been determined that this 
action is not significant under section 3(f) of the Executive Order.

Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department conducts a preclearance consultation program to 
provide the general public and federal agencies with an opportunity to 
comment on proposed and continuing collections of information in 
accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 
3506(c)(2)(A)). This helps to ensure that requested data can be 
provided in the desired format, reporting burden (time and financial 
resources) is minimized, collection instruments are clearly understood, 
and the impact of collection requirements on respondents can be 
properly assessed.
    The Department is not soliciting comments concerning an information 
collection request (ICR) pertaining to the Model Notice. As noted 
above, pursuant to Reorganization Plan No. 4, the Department of the 
Treasury has interpretive authority over the minimum funding rules of 
Title I of ERISA, including section 305 of ERISA, and it has advised 
that it is developing guidance under this provision. Costs and burdens 
associated with complying with the notice requirement in section 
305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the Code, therefore, 
will be accounted for in an ICR associated with the Treasury guidance. 
To the extent the Model Notice includes an ICR, persons are not 
required to respond to, and generally are not subject to any penalty 
for failing to comply with, the ICR unless the ICR has a valid OMB 
control number.\4\
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    \4\ See 5 CFR 1320.1 through 1320.18.
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Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are 
likely to have a significant economic impact on a substantial number of 
small entities. Unless an agency certifies that a proposed rule is not 
likely to have a significant economic impact on a substantial number of 
small entities, section 603 of RFA requires that the agency present an 
initial regulatory flexibility analysis at the time of the publication 
of the notice of proposed rulemaking describing the impact of the rule 
on small entities and seeking public comment on such impact. Small 
entities include small businesses, organizations and governmental 
jurisdictions.
    The Department has deemed that an employee benefit plan shall be 
considered a small entity if it has fewer than 100 participants.\5\ By 
this standard, data from the EBSA Private Pension Bulletin 2004 (the 
latest available information) show that only 67 multiemployer pension 
plans or 4% of all multiemployer pension plans are small entities. The 
Department does not consider this to be a substantial number of small 
entities. Therefore, pursuant to section 605(b) of RFA, the Department 
hereby certifies that the proposed rule is not likely to have a 
significant economic impact on a substantial number of small entities. 
Further, to the Department's knowledge, there are no federal 
regulations that might duplicate, overlap, or conflict with the 
proposed rule.
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    \5\ The basis for this definition is found in section 104(a)(2) 
of the Act, which permits the Secretary of Labor to prescribe 
simplified annual reports for pension plans that cover fewer than 
100 participants.
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Congressional Review Act

    The Model Notice being issued here is subject to the Congressional 
Review Act provisions of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and, if finalized, will be 
transmitted to Congress and the Comptroller General for review.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, the proposal does not include 
any Federal mandate that may result in expenditures by State, local, or 
tribal governments, and does not impose an annual burden exceeding $100 
million on the private sector, adjusted for inflation.

Federalism Statement

    Executive Order 13132 (August 4, 1999) outlines fundamental 
principles of federalism, and requires the adherence to specific 
criteria by Federal agencies in the process of their formulation and 
implementation of policies that have substantial direct effects on the 
States, the relationship between the national government and States, or 
on the distribution of power and responsibilities among the various 
levels of government. This proposed rule does not have federalism 
implications because it has no substantial direct effect on the States, 
on the relationship between the national government and the States, or 
on the distribution of power and responsibilities among the various 
levels of government. Section 514 of ERISA provides, with certain 
exceptions specifically enumerated, that the provisions of Titles I and 
IV of ERISA supersede any and all laws of the States as they relate to 
any employee benefit plan covered under ERISA. The proposed rule does 
not alter the fundamental reporting and disclosure requirements of the 
statute with respect to employee benefit plans, and as such have no 
implications for the States or the relationship or distribution of 
power between the national government and the States.

List of Subjects in 29 CFR Part 2540

    Employee benefit plans, Pension plans, Multiemployer plans.

    For the reasons set forth above, the Department proposes to amend 
Chapter XXV of Title 29 of the Code of Federal Regulations by adding 
Subchapter E to read as follows:

Subchapter E--Funding

PART 2540--MINIMUM FUNDING STANDARDS

    Authority: 29 U.S.C. 1135 and Secretary of Labor's Order No. 1-
2003, 68 FR 5374 (Feb. 3, 2003). Section 2540.305-1 is also issued 
under 29 U.S.C. 1085(b)(3)(D)(iii).

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Sec.  2540.305-1  Model Notice of Critical Status for Multiemployer 
Plans.

    (a) Pursuant to section 305(b)(3)(D)(iii) of the Employee 
Retirement Income Security Act of 1974 (ERISA or Act), paragraph (b) of 
this section provides a model notice that a multiemployer plan may use 
to satisfy the content requirements under section 305(b)(3)(D) of ERISA 
and section 432(b)(3)(D) of the Code. Use of the model notice is not 
mandatory. However, the plan sponsor of a plan in critical status who 
uses the model notice to notify participants and others of the status 
of the plan is considered to have satisfied its content obligations 
under section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the 
Code.
    (b) Model notice:
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    Signed at Washington, DC, this 18th day of March, 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. E8-5855 Filed 3-24-08; 8:45 am]
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