[Federal Register Volume 81, Number 108 (Monday, June 6, 2016)]
[Proposed Rules]
[Pages 36229-36243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13083]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4231

RIN 1212-AB31


Mergers and Transfers Between Multiemployer Plans

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend PBGC's regulation on Mergers 
and Transfers Between Multiemployer Plans to implement section 121 of 
the Multiemployer Pension Reform Act of 2014. The proposed rule would 
also reorganize and update the existing regulation.

DATES: Comments must be submitted on or before August 5, 2016.

ADDRESSES: Comments, identified by Regulation Identifier Number (RIN) 
1212-AB31, may be submitted by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the Web site instructions for submitting comments.
     Email: [email protected].
     Fax: 202-326-4112.
     Mail or Hand Delivery: Regulatory Affairs Group, Office of 
the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington, DC 20005-4026.

All submissions must include the Regulation Identifier Number for this 
rulemaking (RIN 1212-AB31). Comments received, including personal 
information provided, will be posted to www.pbgc.gov. Copies of 
comments may also be obtained by writing to Disclosure Division, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington DC 20005-4026, or calling 202-326-4040 during 
normal business hours. (TTY and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)

FOR FURTHER INFORMATION CONTACT: Joseph J. Shelton 
([email protected]), Assistant General Counsel, Office of the 
General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street 
NW., Washington DC 20005-4026; 202-326-4400, ext. 6559; Theresa B. 
Anderson ([email protected]), Attorney, Office of the General 
Counsel, 202-326-4400, ext. 6353.

SUPPLEMENTARY INFORMATION: 

Executive Summary--Purpose of the Regulatory Action

    This rulemaking is needed to implement statutory changes under the 
Multiemployer Pension Reform Act of 2014 (MPRA) affecting mergers of 
multiemployer plans under title IV of the Employee Retirement Income 
Security Act of 1974 (ERISA). The proposed rule also would reorganize 
and update the existing regulatory requirements applicable to mergers 
and transfers between multiemployer plans.
    PBGC's legal authority for this action is based on section 
4002(b)(3) of ERISA, which authorizes PBGC to issue regulations to 
carry out the purposes of title IV of ERISA, and section 4231 of ERISA, 
which sets forth the statutory requirements for mergers and transfers 
between multiemployer plans.

Executive Summary--Major Provisions of the Regulatory Action

    Section 121 of MPRA amends the existing rules under section 4231 of 
ERISA by adding a new section 4231(e), which clarifies PBGC's authority 
to

[[Page 36230]]

facilitate the merger of two or more multiemployer plans if certain 
statutory requirements are met. For purposes of section 4231(e), 
``facilitation'' may include training, technical assistance, mediation, 
communication with stakeholders, and support with related requests to 
other government agencies. In addition, subject to the requirements of 
section 4231(e)(2), PBGC may provide financial assistance (within the 
meaning of section 4261 of ERISA) to facilitate a merger it determines 
is necessary to enable one or more of the plans involved to avoid or 
postpone insolvency.
    The proposed rule would provide guidance on the process for 
requesting a facilitated merger under section 4231(e) of ERISA, 
including a request for financial assistance under section 4231(e)(2). 
The proposed rule would also reorganize and update the existing 
regulation.

Background

PBGC and the Multiemployer Insurance Program

    PBGC is a Federal corporation created under title IV of ERISA to 
guarantee the payment of pension benefits earned by more than 40 
million American workers and retirees in over 23,000 private-sector 
defined benefit pension plans.
    PBGC administers two insurance programs--one for single-employer 
defined benefit pension plans, and a second for multiemployer defined 
benefit pension plans. This proposed rule would apply only to the 
multiemployer program.

Multiemployer Mergers and Transfers Under ERISA

    Under section 4231(b) of ERISA, mergers of two or more 
multiemployer plans and transfers of assets and liabilities between 
multiemployer plans must comply with four requirements:
    (1) The plan sponsor must notify PBGC at least 120 days before the 
effective date of the merger or transfer;
    (2) No participant's or beneficiary's accrued benefit may be lower 
immediately after the effective date of the merger or transfer than the 
benefit immediately before that date;
    (3) The benefits of participants and beneficiaries must not be 
reasonably expected to be subject to suspension as a result of plan 
insolvency under section 4245 of ERISA; and
    (4) An actuarial valuation of the assets and liabilities of each of 
the affected plans must have been performed during the plan year 
preceding the effective date of the merger or transfer, based upon the 
most recent data available as of the day before the start of that plan 
year, or as prescribed by PBGC's regulation.
    Section 4231(a) of ERISA grants PBGC authority to vary these 
requirements by regulation. Part 4231 of PBGC's regulations implements 
and interprets these requirements by providing a procedure under which 
plan sponsors must notify PBGC of any merger or transfer between 
multiemployer plans.

MPRA

    In December 2014, Congress enacted, and the President signed, the 
Consolidated and Further Continuing Appropriations Act, 2015,\1\ of 
which MPRA is a part. MPRA contains a number of statutory reforms to 
assist financially troubled multiemployer plans, and to improve the 
financial condition of PBGC's multiemployer insurance program.
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    \1\ Division O of the Consolidated and Further Continuing 
Appropriations Act, 2015, Public Law 113-235 (128 Stat. 2130 
(2014)).
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    Section 201 of MPRA amended the rules under section 305 of ERISA to 
add a new ``critical and declining'' status for financially troubled 
multiemployer plans (described below in the discussion of 
``multiemployer facilitated mergers under MPRA''). Generally, a plan is 
in critical and declining status if it is in critical status under any 
subparagraph of section 305(b)(2), and is projected to become insolvent 
within 15-20 years. Plans in critical and declining status may suspend 
benefits under section 305(e)(9) of ERISA under certain conditions. The 
Department of the Treasury (Treasury) has interpretative jurisdiction 
over the subject matter in section 305.
    Sections 121 and 122 of MPRA provide PBGC with new statutory 
authority to assist critical and declining status plans under certain 
conditions. Section 121 of MPRA, which is the subject of this 
rulemaking, authorizes PBGC to facilitate multiemployer plan mergers, 
including with financial assistance (within the meaning of section 
4261) if certain statutory conditions--such as the condition that one 
or more of the plans involved be in critical and declining status--are 
met. Section 122 of MPRA amended section 4233 of ERISA to create a new 
statutory framework for partitions of critical and declining status 
plans.\2\
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    \2\ PBGC issued an interim final rule under section 4233 of 
ERISA on June 19, 2015 (80 FR 35220), and a final rule on December 
23, 2015 (80 FR 79687).
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    Finally, section 131 of MPRA increased the annual premium that 
multiemployer plans pay to PBGC for 2015 from $13 to $26 per 
participant. For plan years beginning after 2015, the annual premium 
increases based on increases in the national average wage index. The 
annual premium for 2016 is $27 per participant.

Multiemployer Facilitated Mergers--Before MPRA

    PBGC provides financial assistance under section 4261 of ERISA to 
multiemployer plans that are or will be insolvent under section 4245 of 
ERISA. Generally, a plan is insolvent when it is unable to pay benefits 
when due during the plan year. PBGC provides financial assistance to an 
insolvent plan in the form of a loan sufficient to pay its 
participants' and beneficiaries' guaranteed benefits.
    In a few cases before the enactment of MPRA, PBGC provided 
financial assistance (within the meaning of section 4261 of ERISA) to 
facilitate the merger of a soon-to-be insolvent multiemployer plan into 
a larger, more financially secure multiemployer plan. The financial 
assistance provided was a single payment that covered the cost of 
guaranteed benefits under the failing plan. In exchange, the larger, 
more financially secure plan assumed responsibility for paying the full 
plan benefits of the participants and beneficiaries in the failing plan 
with which it merged. As a result, the participants and beneficiaries 
in the failing plan received more than they would have in the absence 
of a facilitated merger from a financially secure plan that was more 
likely to remain ongoing. In addition, the financial assistance 
provided was generally less than PBGC's valuation of the present value 
of future financial assistance to the failing plan.
    For a number of reasons, including the deteriorating financial 
condition of PBGC's multiemployer insurance program, PBGC was only able 
to facilitate a few financial assistance mergers before MPRA.

Multiemployer Facilitated Mergers Under MPRA

    Section 4231(e)(1) of ERISA provides that upon request by the plan 
sponsors, PBGC may take such actions as it deems appropriate to promote 
and facilitate the merger of two or more multiemployer plans. 
Facilitation may include training, technical assistance, mediation, 
communication with stakeholders, and support with related requests to 
other government agencies. The decision to facilitate a merger is 
within PBGC's discretion. Furthermore, before PBGC may exercise this 
discretion, it must first determine--in consultation with the 
Participant and Plan Sponsor

[[Page 36231]]

Advocate \3\--that the merger is in the interests of the participants 
and beneficiaries of at least one of the plans, and is not reasonably 
expected to be adverse to the overall interests of the participants and 
beneficiaries of any of the plans.
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    \3\ The Participant and Plan Sponsor Advocate position was 
created in 2012 by the Moving Ahead for Progress in the 21st Century 
Act (MAP-21), Public Law 112-141 (126 Stat. 405 (2012)). See section 
4004 of ERISA for the rules governing this position. PBGC is not 
defining the Participant and Plan Sponsor Advocate's consultative 
role in determining how the merger affects the interests of the 
participants and beneficiaries of the plans involved, but will let 
that role evolve based on experience implementing this proposed 
rule.
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    Under section 4231(e)(2), PBGC may also provide financial 
assistance (within the meaning of section 4261) to facilitate a merger 
that it determines is necessary to enable one or more of the plans 
involved to avoid or postpone insolvency, if the following statutory 
conditions are satisfied:
    Critical and declining status. In accordance with section 
4231(e)(2)(A) of ERISA, one or more of the plans involved in the merger 
must be in critical and declining status as defined in section 
305(b)(6). A plan is in critical and declining status if the plan is in 
critical status under any subparagraph of section 305(b)(2), and is 
projected to become insolvent within the meaning of section 4245 during 
the current plan year or any of the 14 succeeding plan years (or 19 
succeeding plan years if the plan has a ratio of inactive participants 
to active participants that exceeds two to one, or if the funded 
percentage of the plan is less than 80 percent). Section 
305(b)(3)(A)(i) requires an annual certification from the plan actuary 
on whether a plan is or will be in critical and declining status for 
the plan year. Treasury has interpretative jurisdiction over the 
subject matter in section 305.
    Long-term loss and plan solvency. In accordance with section 
4231(e)(2)(B), PBGC must reasonably expect that--
     Financial assistance will reduce PBGC's expected long-term 
loss with respect to the plans involved; and
     Financial assistance is necessary for the merged plan to 
become or remain solvent.
    Certification. In accordance with section 4231(e)(2)(C), PBGC must 
certify that its ability to meet existing financial assistance 
obligations to other plans will not be impaired by the financial 
assistance.
    Source of funding. In accordance with section 4231(e)(2)(D), 
financial assistance must be paid exclusively from the PBGC fund for 
basic benefits guaranteed for multiemployer plans.

PBGC Notice of Financial Assistance

    Section 4231(e)(2) requires that, not later than 14 days after the 
provision of financial assistance, PBGC provide notice of the financial 
assistance to the Committee on Education and the Workforce of the House 
of Representatives; the Committee on Ways and Means of the House of 
Representatives; the Committee on Finance of the Senate; and the 
Committee on Health, Education, Labor, and Pensions of the Senate.

PBGC Request for Information

    On February 18, 2015, PBGC published in the Federal Register (80 FR 
8712) a request for information (RFI) to solicit information from 
interested parties on issues PBGC should consider in implementing 
sections 4231 and 4233 of ERISA. PBGC received 20 comments in response 
to the RFI.\4\ This proposed rule reflects public input on facilitated 
mergers stemming from the comments.
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    \4\ The RFI and comments are accessible at http://www.pbgc.gov/prac/pg/other/guidance/multiemployer-notices.html.
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    In general, commenters expressed strong support for MPRA's changes 
to the merger rules under section 4231 of ERISA, and urged PBGC to 
issue timely guidance to the public on the types of information, 
documents, data, and actuarial projections needed for a request to be 
complete. Many of these same commenters urged that whenever possible 
and consistent with statutory requirements, any new regulatory 
information requirements should be based on information that plans are 
already required to prepare, or information that plans could easily 
develop.
    A number of commenters also suggested that PBGC provide guidance on 
the factors and criteria it will use to evaluate proposed facilitated 
mergers, while another suggested that proposed facilitated mergers 
should be analyzed individually on a case-by-case basis. In addition, 
one commenter suggested that PBGC provide guidance on any general 
limitations it may establish on the amount of financial assistance 
available for facilitated mergers.
    PBGC considered these and other comments and decided it will 
determine whether to provide further guidance on the evaluation 
criteria for facilitated mergers, and any limitations PBGC may impose 
relating to the amount of financial assistance available, based on the 
experience it gains implementing this proposed rule. While the proposed 
rule does not impose any additional limitations on the amount of 
financial assistance available for financial assistance mergers, 
sections 4231(e)(2) and 4233 of ERISA require PBGC to certify that its 
ability to meet existing financial obligations to other plans will not 
be impaired by the transaction. Furthermore, because the funds 
available for financial assistance to insolvent plans under 4261, 
financial assistance mergers under 4231(e)(2), and partitions under 
section 4233, are derived from the same source--the revolving fund for 
basic benefits guaranteed under section 4022A (the multiemployer 
revolving fund)--it is anticipated that the amount of financial 
assistance available to a critical and declining status plan for a 
financial assistance merger generally will not exceed the amount 
available to that plan for a partition (and could be less). Given 
complexities and uncertainties such as these, the proposed rule 
includes a provision that would allow a plan sponsor to engage in 
informal discussions with PBGC before filing a formal request for a 
facilitated merger.
    With respect to the eligibility requirements for a facilitated 
merger, a few commenters noted that unlike the statutory conditions for 
a partition under section 4233 of ERISA, which require, among other 
things, a finding that the plan sponsor has taken all reasonable 
measures to avoid insolvency, including maximum benefit suspensions, 
there is no explicit requirement in section 4231(e) to suspend 
benefits. Given the absence of such a requirement, these commenters 
urged PBGC not to impose one by regulation. Expressing a similar view, 
another commenter suggested that PBGC guidance under section 4231(e) 
should not result in the automatic imposition of the same requirements, 
such as benefit suspensions or a certain type of projection, because 
although each requirement might be appropriate in some cases, it might 
not be appropriate in all cases.
    PBGC agrees with the commenters and consistent with the express 
terms of the statute, this proposed rule would neither require nor 
preclude a plan sponsor's application for both benefit suspensions 
under section 305(e)(9)(G) and a facilitated merger under section 
4231(e). PBGC recognizes, however, that although benefit suspensions 
are not required under section 4231(e), some plans may need both 
benefit suspensions and a financial assistance merger to become or 
remain solvent. For example, the plan sponsors of two critical and 
declining status plans that propose a financial assistance merger may 
need to consider benefit suspensions if the amount of financial 
assistance available from PBGC is less

[[Page 36232]]

than the amount necessary for the merged plan to become or remain 
solvent.
    Before considering an integrated transaction involving benefit 
suspensions and a facilitated merger, however, plan sponsors must 
carefully consider how the various requirements under sections 
305(e)(9) and 4231 would apply to such a transaction. For example, a 
critical and declining status plan could merge into a large, well-
funded multiemployer plan. In such a case, to the extent any of the 
benefits previously provided by the critical and declining status plan 
had been subject to suspension under section 305(e)(9) or become 
subject to suspension at the same time that the merger occurs, the plan 
sponsor of the merged plan would become responsible for making the 
annual determinations necessary for continued benefit suspensions under 
section 305(e)(9) and the regulations thereunder. Under section 
305(e)(9)(C)(ii) of ERISA and the regulations thereunder, benefits may 
continue to be suspended for a plan year only if the plan sponsor 
determines, in a written record to be maintained throughout the period 
of the benefit suspension, that although all reasonable measures to 
avoid insolvency have been and continue to be taken, the plan is still 
projected to become insolvent unless benefits are suspended. Absent 
these determinations, restoration of the suspended benefits would be 
required.
    Finally, one commenter expressed concern that a narrow 
interpretation of section 4231(e)(2)(B)(ii) would effectively preclude 
a small, critical and declining status plan from receiving financial 
assistance to merge into a large, financially healthy multiemployer 
plan. That section provides, in relevant part, that PBGC must 
reasonably expect that financial assistance is necessary for the merged 
plan to become or remain solvent.
    As explained more fully below in the section-by-section discussion, 
PBGC does not interpret section 4231(e)(2)(B)(ii) to preclude a small, 
critical and declining status plan from receiving financial assistance 
to merge into a large, financially healthy multiemployer plan because 
such an interpretation would be inconsistent with the statute as a 
whole. Section 4231(e)(2), for example, authorizes PBGC to provide 
financial assistance to facilitate a merger it determines is necessary 
to enable one or more (but not necessarily all) of the plans involved 
to avoid or postpone insolvency.
    Similarly, section 4231(e)(2)(A) requires only that one or more 
(but not necessarily all) of the plans involved in the merger be in 
critical and declining status. Given that MPRA neither imposes a 
requirement that all multiemployer plans involved in a financial 
assistance merger be in critical and declining status, nor requires a 
finding that the merger is necessary to enable all of the plans 
involved to avoid or postpone insolvency, PBGC does not interpret 
section 4231(e)(2)(B)(ii) to impose any additional eligibility 
conditions beyond those expressly provided in the statute.
    A more detailed discussion of the proposed rule and the RFI 
comments follows.

Proposed Regulatory Changes

Overview

    The proposed rule would amend part 4231 of PBGC's regulations to 
implement MPRA's changes to section 4231 of ERISA. The proposed rule 
also would reorganize and update the existing regulation to reflect 
other changes in law.
    Under the proposed rule, part 4231 would provide guidance on: (1) 
The process for submitting a notice of merger or transfer, and a 
request for a compliance determination or facilitated merger; (2) the 
information required in such notices and requests; (3) the notification 
process for PBGC decisions on requests for facilitated mergers; and (4) 
the scope of PBGC's jurisdiction over a merged plan that received 
financial assistance. The proposed rule also would reorganize part 4231 
by dividing it into subparts. Subpart A would contain the general 
merger and transfer rules. Subpart B would provide guidance on 
procedures and information requirements for facilitated mergers, 
including those involving financial assistance.
    In most instances, implementation of the mergers and transfers 
addressed in this proposed rule, including facilitated mergers, will 
involve conduct that is also subject to the fiduciary responsibility 
standards of part 4 of subtitle B of title I of ERISA. Among other 
things, these standards require that a fiduciary with respect to a plan 
act prudently, solely in the interest of the participants and 
beneficiaries, and for the exclusive purpose of providing benefits to 
participants and their beneficiaries and defraying reasonable expenses 
of administering the plan. The fact that a merger or transfer, 
including a facilitated merger, may satisfy title IV of ERISA and the 
regulations thereunder is not determinative of whether it satisfies the 
requirements of part 4 of subtitle B of title I of ERISA (other than 
section 406(a) and (b)(2), in the event of a compliance determination).
    Finally, the proposed rule would be applicable to mergers and 
transfers for which a notice, and, if applicable, request for a 
facilitated merger are filed with PBGC on or after the effective date 
of the final rule. If a plan sponsor chooses to submit an application 
for a facilitated merger before the issuance of a final rule, then the 
plan sponsor may need to revise or supplement its request to take into 
account the requirements under the final rule.

Section-by-Section Discussion

Subpart A--General Provisions
    Section 4231.1 of the proposed rule describes the purpose and scope 
of part 4231, which is to prescribe notice requirements for mergers and 
transfers of assets or liabilities among multiemployer plans and to 
interpret other requirements under section 4231 of ERISA.
    Section 4231.2 of the proposed rule would amend the current 
regulation by adding new definitions, and by moving existing 
definitions defined elsewhere in the current regulation to Sec.  
4231.2. For example, the proposed rule would move the existing 
definition of ``effective date'' from Sec.  4231.8(a) to Sec.  4231.2.
    Under the proposed rule, the term ``facilitated merger'' would mean 
a merger of two or more multiemployer plans facilitated by PBGC under 
section 4231(e) of ERISA, including a merger that is facilitated with 
financial assistance under section 4231(e)(2).
    The term ``financial assistance'' would mean financial assistance 
under section 4261, which may be in the form of one or more payments.
    The term ``financial assistance merger'' would mean a facilitated 
merger for which PBGC provides financial assistance under section 
4231(e)(2).
    Consistent with the definition of ``merged plan'' in Sec.  4211.2, 
the term ``merged plan'' would mean a plan that is the result of the 
merger of two or more multiemployer plans.
    The proposed rule also would amend the existing definition of 
``significantly affected plan'' in Sec.  4231.2 to include a plan in 
endangered or critical status, as defined in section 305(b) of 
ERISA,\5\ that engages in a transfer (other than a de minimis 
transfer). When the regulation was originally published, only plans 
transferring 15% or more of their assets, or receiving a transfer of 
unfunded

[[Page 36233]]

accrued benefits equaling 15% or more of their assets were treated as 
significantly affected plans.
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    \5\ ``Endangered'' and ``critical'' status are plan categories 
established by the Pension Protection Act of 2006, Public Law 109-
280 (120 Stat. 780 (2006) (PPA)).
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    In PBGC's view, endangered and critical status plans generally 
present a greater risk of insolvency, and when these plans engage in 
non-de minimis transfers their risk of insolvency may increase. 
Consistent with this view, the proposed rule would expand the 
definition of ``significantly affected plan'' to include endangered and 
critical status plans engaging in non-de minimis transfers. Although 
the proposed rule would apply the stricter plan solvency test under 
Sec.  4231.6(b) to non-de minimis transfers involving endangered and 
critical status plans, that test would only apply to transfers 
involving such plans (not mergers).

Requirements for Mergers and Transfers

    Section 4231.3 of the proposed rule provides guidance on the 
requirements for mergers and transfers. As under the current 
regulation, Sec.  4231.3(a) of the proposed rule sets forth the 
statutory criteria under section 4231(b) of ERISA. The proposed rule 
also would amend the current regulation to clearly provide that plan 
sponsors may engage in informal consultations with PBGC to discuss 
proposed mergers and transfers. As noted above in the discussion of the 
RFI comments, informal consultation is particularly important in the 
context of a proposed financial assistance merger because PBGC's 
ability to provide financial assistance will depend on, among other 
things, its ability to meet existing financial assistance obligations 
to other plans.
    Section 4231.4 of the current regulation is unchanged under the 
proposed rule. That section provides guidance on the requirement under 
section 4231(b)(2) of ERISA that no participant's or beneficiary's 
accrued benefit may be lower immediately after the effective date of a 
merger or transfer than the benefit immediately before that date.
    Section 4231.5 of the current regulation provides guidance on the 
actuarial valuation requirement under section 4231(b)(4) of ERISA. For 
a plan that is not a significantly affected plan, it provides that the 
actuarial valuation requirement under section 4231(b)(4) is satisfied 
if an actuarial valuation has been performed for the plan based on the 
plan's assets and liabilities as of a date not more than three years 
before the date on which the notice of the merger or transfer is filed. 
When the regulation was originally published, section 302(c)(9) of 
ERISA required plans to have an actuarial valuation performed every 
three years, and PBGC adopted that timeframe for non-significantly 
affected plans.
    Because multiemployer plans are now required under section 
304(c)(7) of ERISA \6\ to perform actuarial valuations not less 
frequently than once every year, the proposed rule would amend Sec.  
4231.5 to require that each plan involved in a merger or transfer have 
an actuarial valuation performed for the plan year preceding the 
proposed effective date of the merger or transfer. The proposed rule 
further provides that if the valuation is not complete as of the date 
the plan sponsors file the notice of merger or transfer, the plan 
sponsors may provide the most recent actuarial valuation performed for 
the plans with the notice, and the required valuations when complete.
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    \6\ Sections 302 and 304 of ERISA were repealed and replaced by 
PPA. Section 304 of ERISA, as amended by PPA, sets forth the minimum 
funding standards for multiemployer plans.
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    Section 4231.6 of the current regulation provides guidance on 
``plan solvency'' tests that operate as regulatory safe harbors under 
section 4231(b)(3) of ERISA. Section 4231(b)(3) prohibits a merger or 
transfer unless ``the benefits of participants and beneficiaries are 
not reasonably expected to be subject to suspension under section 
4245.'' Section 4245, in turn, provides that an insolvent plan must 
suspend benefits that are above the level guaranteed by PBGC to the 
extent the plan has insufficient assets to pay such benefits.
    For a plan that is not a significantly affected plan, Sec.  
4231.6(a) of the current regulation provides that the plan solvency 
requirement under section 4231(b)(3) of ERISA and Sec.  4231.3(a)(3)(i) 
is satisfied if one of the following tests are met:
    (1) The expected fair market value of plan assets immediately after 
the merger or transfer equals or exceeds five times the benefit 
payments for the last plan year ending before the proposed effective 
date of the merger or transfer, or
    (2) In each of the first five plan years beginning on or after the 
proposed effective date of the merger or transfer, expected plan assets 
plus expected contributions and investment earnings equal or exceed 
expected expenses and benefit payments for the plan year.
    The proposed rule would amend and reorder these tests in the 
following manner. First, under Sec.  4231.6(a)(1) of the proposed rule, 
a plan will satisfy the plan solvency requirement if in each of the 
first ten plan years beginning on or after the proposed effective date 
of the merger or transfer, the plan's expected fair market value of 
assets plus expected contributions and investment earnings equal or 
exceed expected expenses and benefit payments for the plan year.
    Alternatively, under Sec.  4231.6(a)(2) of the proposed rule, a 
plan will satisfy the plan solvency requirement if the plan's expected 
fair market value of assets immediately after the merger or transfer 
equals or exceeds ten times the benefit payments for the last plan year 
ending before the proposed effective date of the merger or transfer.
    Accordingly, in addition to reordering Sec.  4231.6(a)(1) and (2), 
the proposed rule would change the period of years in Sec.  
4231.6(a)(2) of the current regulation from ``five plan years'' to 
``ten plan years,'' and the multiple in Sec.  4231.6(a)(1) from ``five 
times the benefit payments'' to ``ten times the benefit payments.'' 
Based on PBGC's experience under the multiemployer program since the 
regulation was first published, PBGC believes that the proposed changes 
will provide a better demonstration that benefits are not reasonably 
expected to be subject to suspension under section 4245 of ERISA as a 
result of insolvency. At the same time, PBGC recognizes that the 
majority of multiemployer plan mergers will broaden the contribution 
base and stabilize the plans involved. Therefore, as is the case under 
the current regulation for a plan that cannot satisfy the solvency 
tests under Sec.  4231.6(a), the proposed rule would continue to allow 
an enrolled actuary to ``otherwise demonstrate'' that benefits under 
the plan are not reasonably expected to be subject to suspension under 
section 4245 of ERISA as a result of insolvency.
    Section 4231.6(b) of the current regulation sets forth a more 
rigorous solvency test for significantly affected plans. The proposed 
rule would amend Sec.  4231.6(b)(2) by changing the requirement that 
assets cover benefit payments for the first ``five'' years after the 
proposed effective date to ``ten'' years. In addition, the proposed 
rule would amend Sec.  4231.6(b)(4)(i) by changing the amortization 
period from 25 to 15 years to reflect the amortization period generally 
applicable to changes in funding of multiemployer plans under PPA.\7\ 
Finally, the proposed rule would amend Sec.  4231.6(c)(1) by requiring 
withdrawal liability payments to be listed separately from 
contributions.
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    \7\ See section 304(b) of ERISA.
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    Section 4231.7 of the current regulation sets forth special rules 
for de minimis mergers and transfers. That section would remain 
unchanged under the proposed rule.

[[Page 36234]]

    Section 4231.8 of the current regulation sets forth requirements 
for notices of mergers and transfers, and requests for compliance 
determinations under section 4231(c). In general, a notice of a merger 
or transfer must be filed not less than 120 days, or not less than 45 
days in the case of a merger for which a compliance determination is 
not requested, before the effective date of a merger or transfer. 
Section 4231.8(f) permits PBGC to waive the timing of the notice 
requirements under certain circumstances.
    In the case of a facilitated merger, the proposed rule would amend 
Sec.  4231.8(a) to require that notice of a proposed facilitated merger 
be filed not less than 270 days before the proposed effective date of a 
facilitated merger. As noted above in the discussion of Sec.  4231.2, 
the proposed rule would also move the definition of ``effective date'' 
from Sec.  4231.8(a)(1) to Sec.  4231.2. Finally, the proposed rule 
would move the information requirements contained in Sec.  4231.8(e) to 
a new Sec.  4231.9.
    Section 4231.9 of the proposed rule would generally retain the 
existing information requirements in Sec.  4231.8(e) with minor 
modifications. For example, the de minimis exception contained in Sec.  
4231.8(e)(6) would not apply to a request for a financial assistance 
merger.
    Section 4231.10 of the proposed rule (Sec.  4231.9 of the existing 
regulation) describes the additional information required for a request 
for a compliance determination. The proposed rule would amend this 
section to make clear that a request for a compliance determination 
must be filed contemporaneously with a notice of merger or transfer. In 
addition, the proposed rule would delete the ``place of filing'' 
provision in Sec.  4231.9(1) as that information is now contained in 
Sec.  4231.8(e), and would delete certain information requirements as 
those requirements are now contained in Sec.  4231.9(e).
    Section 4231.11 of the proposed rule (Sec.  4231.10 of the existing 
regulation) describes the requirements for actuarial calculations and 
assumptions. The proposed rule would conform the regulation to section 
304(c)(3) of ERISA, would specify that calculations must be performed 
by an enrolled actuary, and would expand the bases upon which PBGC may 
require updated calculations.
Subpart B--Additional Rules for Facilitated Mergers
    Section 4231.12 of the proposed rule provides general guidance on a 
request for a facilitated merger. A request for a facilitated merger, 
including a financial assistance merger, must satisfy the requirements 
of section 4231(b) of ERISA and subpart A of the regulation, in 
addition to section 4231(e) of ERISA and subpart B. The procedures set 
forth in the proposed rule would represent the exclusive means by which 
PBGC will approve a request for a facilitated merger, including a 
financial assistance merger. Any financial assistance provided by PBGC 
will be limited by section 4261 of ERISA and with respect to the 
guaranteed benefits of the plans involved in the merger that are in 
critical and declining status. In addition, as noted above, because the 
funds available for financial assistance mergers under section 4231(e), 
partitions under section 4233, and financial assistance to insolvent 
plans under 4261, are derived from the same source--the revolving fund 
for basic benefits guaranteed under section 4022A (the multiemployer 
revolving fund)--it is anticipated that the amount of financial 
assistance available to a critical and declining status plan for a 
financial assistance merger generally will not exceed the amount 
available to that plan for a partition (and could be less). Finally, 
while PBGC expects that in most cases the financial assistance it 
provides in a facilitated merger will be in the form of periodic 
payments, PBGC agrees with the RFI comment advocating flexibility in 
the structure of financial assistance (e.g., lump sum or periodic 
payments), and consistent with past practice will decide the structure 
of financial assistance on a case-by-case basis.
    Section 4231.12 of the proposed rule would also provide guidance on 
the information required for a request for a facilitated merger. It 
states that a request must include the information required under 
Sec. Sec.  4231.9 (notice of merger or transfer) and 4231.10 (request 
for compliance determination), as well as a detailed narrative 
description with supporting documentation demonstrating that the 
proposed merger is in the interests of participants and beneficiaries 
of at least one of the plans, and is not reasonably expected to be 
adverse to the overall interests of the participants and beneficiaries 
of any of the plans. The narrative description and supporting 
documentation should reflect, among other things, any material 
efficiencies expected as a result of the merger and the basis for those 
expectations.
    In addition, a request for a financial assistance merger must 
contain the information described in Sec.  4231.13 (plan information), 
Sec.  4231.14 (financial assistance merger information), Sec.  4231.15 
(actuarial and financial information), and Sec.  4231.16 (participant 
census data). The proposed rule provides that PBGC may require 
additional information to determine whether the requirements of section 
4231(e) of ERISA are met or to enable it to facilitate the merger. 
Finally, Sec.  4231.12 of the proposed rule would impose an affirmative 
obligation on the plan sponsors to promptly notify PBGC in writing if 
the plan sponsor(s) discovers that any material fact or representation 
contained in or relating to the request for a facilitated merger, or in 
any supporting documents, is no longer accurate, or has been omitted.

Information Requirements for Financial Assistance Merger

    Section 4231.13 of the proposed rule would provide guidance on the 
various categories of plan-related information required for a request 
for a financial assistance merger, such as trust agreements, formal 
plan documents, summary plan descriptions, summaries of material 
modifications, and rehabilitation or funding improvement plans. PBGC 
expects that most, if not all, of the information required under this 
section should be readily available and accessible by plan sponsors.
    Section 4231.14 of the proposed rule sets forth information 
requirements relating to the proposed structure of a financial 
assistance merger. The information required includes a detailed 
description of the financial assistance merger, including any larger 
integrated transaction of which the proposed merger is a part 
(including, but not limited to, an application for suspension of 
benefits under section 305(e)(9)(G) of ERISA), and the estimated total 
amount of financial assistance the plan sponsors request for each year. 
It would also require a narrative description of the events that led to 
the sponsors' decision to request a financial assistance merger, and 
the significant risks and assumptions relating to the proposed 
financial assistance merger and the projections provided.
    Section 4231.15 of the proposed rule would identify the actuarial 
and financial information required for a request for a financial 
assistance merger. The first two information requirements relate to 
plan actuarial reports and actuarial certifications, which should 
ordinarily be within the possession of the plan sponsors or plan 
actuaries. Sections 4231.15(c)-(f) of the regulation would require the 
submission of certain actuarial and financial information specific to 
the proposed financial assistance merger, which are necessary for PBGC 
to evaluate the solvency requirements under section 4231(e)(2) of 
ERISA.

[[Page 36235]]

    Under Sec.  4231.15 of the proposed rule, each critical and 
declining plan must demonstrate that its projected date of insolvency 
without the merger is sooner than the projected date of insolvency of 
the merged plan. The plan(s) may take the proposed financial assistance 
into account in this demonstration.
    Section 4231.15 of the proposed rule would also provide guidance on 
the required demonstration that financial assistance is necessary for 
the merged plan to become or remain solvent. Under the proposed rule, 
the type of projection required will depend on whether the merged plan 
would be in critical status under section 305(b) of ERISA immediately 
following the merger (without taking the proposed financial assistance 
into account), as reasonably determined by the actuary. For example, if 
a critical and declining status plan merges into an endangered status 
plan, and the actuary anticipates that the merged plan would not meet 
minimum funding requirements for the coming year without financial 
assistance, then the merged plan would be in critical status for 
purposes of the projections. Alternatively, if the actuary anticipates 
that the merged plan would not be described in section 305(b)(2)(A)-(D) 
of ERISA immediately after the merger, then the merged plan would not 
be in critical status for purposes of the projections (even if the 
merged plan could elect to be in critical status).
    Under the proposed rule, the plan's enrolled actuary may use any 
reasonable estimation for determining the expected funded status of the 
merged plan. Under an optional approach, the funded status of the 
merged plan could be determined based on the combined data and 
projections underlying the status certifications of each of the plans 
for the plan year immediately preceding the merger (including any 
selected updates in the data based on the experience of the plans in 
the immediately preceding plan year). PBGC requests comments on this 
issue, including methods to determine whether the merged plan would be 
in critical status.
    Under Sec.  4231.15(f)(1) of the proposed rule, if the merged plan 
would be in critical status under section 305(b) of ERISA (without 
taking the proposed financial assistance into account), the plans must 
demonstrate that financial assistance is necessary for the merged plan 
to ``avoid insolvency'' under section 305(e)(9)(D)(iv) of ERISA and the 
regulations thereunder (excluding stochastic projections). This more 
rigorous solvency standard is consistent with the ``emergence'' test 
under section 305(e)(4)(B) of ERISA, which requires a plan in critical 
status to show that is not projected to become insolvent for any of the 
30 succeeding plan years.
    If the merged plan would not be in critical status under section 
305(b) of ERISA (without taking the proposed financial assistance into 
account), Sec.  4231.15(f)(2) of the proposed rule provides that the 
plans must demonstrate that the merged plan is not projected to become 
insolvent during the 20 years beginning after the proposed effective 
date of the merger with the proposed financial assistance. If such a 
demonstration can be satisfied without taking the proposed financial 
assistance into account, or if the amount of financial assistance 
requested exceeds the amount that satisfies this demonstration, the 
plan sponsors must demonstrate that financial assistance is necessary 
to mitigate the adverse effects of the merger on the merged plan's 
ability to remain solvent.
    In summary, under the proposed rule, critical status plans would be 
subject to a different solvency standard than non-critical status 
plans. This is consistent with the RFI comments that suggested 
determining solvency on a case-by-case basis, and maintains flexibility 
in the solvency demonstration for a merged plan that would not be in 
critical status. To encourage the merger of critical and declining 
status plans into financially stable plans, the proposed rule provides 
for a solvency demonstration based on the circumstances and challenges 
specific to the merged plan (for example, the merger might have an 
impact on the plan's funding requirements, increase the ratio of 
inactive to active participants, or decrease the funded percentage of 
the healthy plan in a manner that can be demonstrated to adversely 
affect the merged plan's ability to remain solvent long-term). PBGC 
requests comments on this issue, including alternative approaches or 
methods to demonstrate plan solvency.
    Section 4231.16 of the proposed rule would identify the types of 
participant census data to include with a request for a financial 
assistance merger.

Decision on Request for Facilitated Merger

    Section 4231.17 of the proposed rule would describe the manner in 
which PBGC will notify a plan sponsor of PBGC's decision on a request 
for a facilitated merger. PBGC will approve or deny a request for a 
facilitated merger in writing and in accordance with the standards set 
forth in section 4231(e) of ERISA.\8\ If PBGC denies a request, PBGC's 
written decision will state the reason(s) for the denial. If PBGC 
approves a request for a financial assistance merger, PBGC will provide 
a financial assistance agreement detailing the total amount and terms 
of the financial assistance as soon as practicable thereafter. The 
decision to approve or deny a request for facilitated merger under 
section 4231(e) of ERISA is within PBGC's discretion, and would be a 
final agency action not subject to PBGC's rules for reconsideration or 
administrative appeal.
---------------------------------------------------------------------------

    \8\ As noted above, section 4231(e)(1) of ERISA requires a 
determination by PBGC in consultation with the Participant and Plan 
Sponsor Advocate to approve a facilitated merger. Section 4231(e)(2) 
of ERISA sets forth four additional statutory conditions that must 
be satisfied before PBGC may approve a request for a financial 
assistance merger. PBGC will review each request for a facilitated 
merger, including a financial assistance merger, on a case-by-case 
basis in accordance with the statutory criteria in section 4231(e) 
of ERISA.
---------------------------------------------------------------------------

Jurisdiction Over Financial Assistance Merger

    Section 4231.18 of the proposed rule would describe PBGC's 
jurisdiction over the merged plan resulting from a financial assistance 
merger. PBGC has determined that maintaining oversight is necessary to 
ensure compliance with financial assistance agreements, and proper 
stewardship of PBGC financial assistance. This is also consistent with 
one of the RFI comments. Based on the foregoing, Sec.  4231.18(a) would 
provide that PBGC will continue to have jurisdiction over the merged 
plan resulting from a financial assistance merger to carry out the 
purposes, terms, and conditions of the financial assistance merger, 
sections 4231 and 4261 of ERISA, and the regulations thereunder. 
Section 4231.18(b) would state that PBGC may, upon notice to the plan 
sponsor, make changes to the financial assistance agreement(s) in 
response to changed circumstances consistent with sections 4231 and 
4261 of ERISA and the regulations thereunder.

Request for Comments

    In addition to the specific requests for comments identified above, 
PBGC encourages all interested parties to submit their comments, 
suggestions, and views concerning the provisions of this proposed rule. 
In particular, PBGC is interested in any area in which additional 
guidance may be needed.

Applicability

    The amendments to part 4231 would be applicable to mergers and 
transfers for which a notice, and, if applicable,

[[Page 36236]]

request are filed with PBGC on or after the effective date of the final 
rule.

Compliance With Rulemaking Guidelines

Executive Orders 12866 ``Regulatory Planning and Review'' and 13563 
``Improving Regulation and Regulatory Review''

    Having determined that this rulemaking is a ``significant 
regulatory action'' under Executive Order 12866, the Office of 
Management and Budget has reviewed this proposed rule under Executive 
Order 12866.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. Executive Orders 12866 and 13563 require a comprehensive 
regulatory impact analysis be performed for any economically 
significant regulatory action, defined as an action that would result 
in an annual effect of $100 million or more on the national economy or 
which would have other substantial impacts.
    Pursuant to section 1(b)(1) of Executive Order 12866 (as amended by 
Executive Order 13422), PBGC has determined that regulatory action is 
required in this area. Principally, this regulatory action is necessary 
to implement the requirements for a request for a facilitated merger 
under section 4231 of ERISA, as amended by MPRA.
    In accordance with OMB Circular A-4, PBGC also has examined the 
economic and policy implications of this proposed rule and has 
concluded that the action's benefits justify its costs. Plan sponsors 
requesting a facilitated merger should have readily accessible the 
information needed for a request under this proposed rule. Most of the 
information requirements pertain to a request for facilitation of a 
merger with financial assistance. These requirements are largely the 
same as the information requirements in the interim final rule that 
PBGC published in the Federal Register on June 19, 2015 (80 FR 35220) 
about partition of a multiemployer plan. Public comments to that 
interim final rule stated that its information requirements were not 
overly burdensome.\9\ In addition, if the plan sponsors' request for 
facilitation of a merger with financial assistance is approved, the 
merged plan benefits by receiving enough financial assistance to remain 
solvent. The benefits to participants equal or exceed the costs to 
PBGC. Further, under section 4231(e)(2) of ERISA, PBGC cannot provide 
financial assistance to facilitate a merger unless its expected long-
term loss with respect to the plans is reduced, and PBGC's ability to 
satisfy existing financial assistance obligations to other plans is not 
impaired.\10\
---------------------------------------------------------------------------

    \9\ The partition rule and comments are accessible at http://www.pbgc.gov/prac/pg/other/guidance/final-rules.html. PBGC published 
the final rule in the Federal Register on December 23, 2015 (80 FR 
79687).
    \10\ See sections 4231(e)(2)(B)(i) and 4231(e)(2)(C) of ERISA.
---------------------------------------------------------------------------

    Under Section 3(f)(1) of Executive Order 12866, a regulatory action 
is economically significant if ``it is likely to result in a rule that 
may * * * [h]ave an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities.'' OMB has determined that this proposed rule does not 
cross the $100 million threshold for economic significance and is not 
otherwise economically significant.
    Based on a review of the requirements plans and PBGC must comply 
with for both partitions and financial assistance mergers, particularly 
the requirement that PBGC not impair its ability to help other troubled 
plans, PBGC expects that fewer than 20 plans would be approved for 
either partition or financial assistance merger over the next three 
years (about six plans per year), and that the total financial 
assistance PBGC would provide under both provisions would be less than 
$60 million per year.

Regulatory Flexibility Act

    The Regulatory Flexibility Act imposes certain requirements with 
respect to rules that are subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act and 
that are likely to have a significant economic impact on a substantial 
number of small entities. Unless an agency determines that a rule is 
not likely to have a significant economic impact on a substantial 
number of small entities, section 603 of the Regulatory Flexibility Act 
requires that the agency present an initial regulatory flexibility 
analysis at the time of the publication of the proposed rule 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.
    For purposes of the Regulatory Flexibility Act requirements with 
respect to the proposed amendments to the Annual Financial and 
Actuarial Information Reporting regulation, PBGC considers a small 
entity to be a plan with fewer than 100 participants. This is 
substantially the same criterion PBGC uses in other regulations \11\ 
and is consistent with certain requirements in title I of ERISA \12\ 
and the Internal Revenue Code (Code),\13\ as well as the definition of 
a small entity that the Department of Labor (DOL) has used for purposes 
of the Regulatory Flexibility Act.\14\
---------------------------------------------------------------------------

    \11\ See, e.g., special rules for small plans under part 4007 
(Payment of Premiums).
    \12\ See, e.g., section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \13\ See, e.g., section 430(g)(2)(B) of the Code, which permits 
plans with 100 or fewer participants to use valuation dates other 
than the first day of the plan year.
    \14\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
---------------------------------------------------------------------------

    Further, while some large employers may have small plans, in 
general most small plans are maintained by small employers. Thus, PBGC 
believes that assessing the impact of the proposed rule on small plans 
is an appropriate substitute for evaluating the effect on small 
entities. The definition of small entity considered appropriate for 
this purpose differs, however, from a definition of small business 
based on size standards promulgated by the Small Business 
Administration (13 CFR 121.201) pursuant to the Small Business Act. 
PBGC therefore requests comments on the appropriateness of the size 
standard used in evaluating the impact on small entities of the 
proposed amendments to part 4231.
    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act that the amendments in this proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
In 2014, multiemployer plans with fewer than 250 participants made up 
just 11% of the total 1,425 multiemployer plans. Accordingly, as 
provided in section 605 of the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.), sections 603 and 604 do not apply.

Paperwork Reduction Act

    PBGC is submitting the information collection requirements under 
this

[[Page 36237]]

proposed rule to the Office of Management and Budget under the 
Paperwork Reduction Act. An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number.
    The collection of information in part 4231 is approved under 
control number 1212-0022 (expires July 31, 2017). PBGC estimates that 
there will be 28 respondents each year and that the total annual burden 
of the collection of information will be about 63.125 hours and 
$169,995. For purposes of estimating the total annual burden numbers 
for the collection of information in part 4231, PBGC assumed that it 
will receive a total of six requests for facilitation of a merger with 
financial assistance, with a per respondent annual burden of 10 hours 
and $26,250.
    Comments on the information requirements under this proposed rule 
should be mailed to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for Pension 
Benefit Guaranty Corporation, via electronic mail at 
[email protected] or by fax to (202) 395-6974. Comments may be 
submitted through August 5, 2016. Comments may address (among other 
things)--
     Whether the collection of information is needed for the 
proper performance of PBGC's functions and will have practical utility;
     The accuracy of PBGC's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
     Enhancement of the quality, utility, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.

List of Subjects in 29 CFR Part 4231

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, PBGC proposes to amend 29 
CFR chapter XL by revising part 4231 to read as follows:

PART 4231--MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS

Subpart A--General Provisions
Sec.
4231.1 Purpose and scope.
4231.2 Definitions.
4231.3 Requirements for mergers and transfers.
4231.4 Preservation of accrued benefits.
4231.5 Valuation requirement.
4231.6 Plan solvency tests.
4231.7 De minimis mergers and transfers.
4231.8 Filing requirements; timing and method of filing.
4231.9 Notice of merger or transfer.
4231.10 Request for compliance determination.
4231.11 Actuarial calculations and assumptions.
Subpart B--Additional Rules for Facilitated Mergers
4231.12 Request for facilitated merger.
4231.13 Plan information for financial assistance merger.
4231.14 Description of financial assistance merger.
4231.15 Actuarial and financial information for financial assistance 
merger.
4231.16 Participant census data for financial assistance merger.
4231.17 PBGC action on a request for facilitated merger.
4231.18 Jurisdiction over financial assistance merger.

    Authority: 29 U.S.C. 1302(b)(3)

PART 4231--MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS

Subpart A--General Provisions


Sec.  4231.1  Purpose and scope.

    (a) General--(1) Purpose. The purpose of this part is to prescribe 
notice requirements under section 4231 of ERISA for mergers and 
transfers of assets or liabilities among multiemployer pension plans. 
This part also interprets the other requirements of section 4231 of 
ERISA and prescribes special rules for de minimis mergers and 
transfers.
    (2) Scope. This part applies to mergers and transfers among 
multiemployer plans where all of the plans immediately before and 
immediately after the transaction are multiemployer plans covered by 
title IV of ERISA.
    (b) Additional requirements. Subpart B of this part sets forth the 
additional requirements for and procedures specific to a request for a 
facilitated merger.


Sec.  4231.2  Definitions.

    The following terms are defined in Sec.  4001.2 of this chapter: 
annuity, Code, EIN, ERISA, fair market value, guaranteed benefit, IRS, 
multiemployer plan, normal retirement age, PBGC, plan, plan sponsor, 
plan year, and PN. In addition, the following terms are defined for 
purposes of this part:
    Actuarial valuation means a valuation of assets and liabilities 
performed by an enrolled actuary using the actuarial assumptions used 
for purposes of determining the charges and credits to the funding 
standard account under section 304 of ERISA and section 431 of the 
Code.
    Advocate means the Participant and Plan Sponsor Advocate under 
section 4004 of ERISA.
    Critical and declining status has the same meaning as the term has 
under section 305(b)(6) of ERISA and section 432(b)(6) of the Code.
    Critical status has the same meaning as the term has under section 
305(b)(2) of ERISA and section 432(b)(2) of the Code, and includes 
``critical and declining status'' as defined in section 305(b)(6) of 
ERISA and section 432(b)(6) of the Code.
    De minimis merger is defined in Sec.  4231.7(b).
    De minimis transfer is defined in Sec.  4231.7(c).
    Effective date means, with respect to a merger or transfer, the 
earlier of--
    (1) The date on which one plan assumes liability for benefits 
accrued under another plan involved in the transaction; or
    (2) The date on which one plan transfers assets to another plan 
involved in the transaction.
    Endangered status has the same meaning as the term has under 
section 305(b)(1) of ERISA and section 432(b)(1) of the Code, and 
includes ``seriously endangered status'' as described in section 
305(b)(1) of ERISA and section 432(b)(1) of the Code.
    Facilitated merger means a merger of two or more multiemployer 
plans facilitated by PBGC under section 4231(e) of ERISA, including a 
merger that is facilitated with financial assistance under section 
4231(e)(2) of ERISA.
    Fair market value of assets has the same meaning as the term has 
for minimum funding purposes under section 304 of ERISA and section 431 
of the Code.
    Financial assistance means periodic or lump sum financial 
assistance payments from PBGC under section 4261 of ERISA.
    Financial assistance merger means a merger facilitated by PBGC for 
which PBGC provides financial assistance (within the meaning of section 
4261 of ERISA) under section 4231(e)(2) of ERISA.

[[Page 36238]]

    Insolvent has the same meaning as insolvent under section 4245(b) 
of ERISA.
    Merged plan means a plan that is the result of the merger of two or 
more multiemployer plans.
    Merger means the combining of two or more plans into a single plan. 
For example, a consolidation of two plans into a new plan is a merger.
    Significantly affected plan means a plan that--
    (1) Transfers assets that equal or exceed 15 percent of its assets 
before the transfer,
    (2) Receives a transfer of unfunded accrued benefits that equal or 
exceed 15 percent of its assets before the transfer,
    (3) Is created by a spinoff from another plan,
    (4) Engages in a merger or transfer (other than a de minimis merger 
or transfer) either--
    (i) After such plan has terminated by mass withdrawal under section 
4041A(a)(2) of ERISA, or
    (ii) With another plan that has so terminated, or
    (5) Is in either endangered status or critical status, and engages 
in a transfer (other than a de minimis transfer).
    Transfer and transfer of assets or liabilities mean a diminution of 
assets or liabilities with respect to one plan and the acquisition of 
these assets or the assumption of these liabilities by another plan or 
plans (including a plan that did not exist prior to the transfer). 
However, the shifting of assets or liabilities pursuant to a written 
reciprocity agreement between two multiemployer plans in which one plan 
assumes liabilities of another plan is not a transfer of assets or 
liabilities. In addition, the shifting of assets between several 
funding media used for a single plan (such as between trusts, between 
annuity contracts, or between trusts and annuity contracts) is not a 
transfer of assets or liabilities.
    Unfunded accrued benefits means the excess of the present value of 
a plan's accrued benefits over the plan's fair market value of assets, 
determined on the basis of the actuarial valuation required under Sec.  
4231.5.


Sec.  4231.3  Requirements for mergers and transfers.

    (a) General requirements. A plan sponsor may not cause a 
multiemployer plan to merge with one or more multiemployer plans or 
transfer assets or liabilities to or from another multiemployer plan 
unless the merger or transfer satisfies all of the following 
requirements:
    (1) No participant's or beneficiary's accrued benefit is lower 
immediately after the effective date of the merger or transfer than the 
benefit immediately before that date.
    (2) Actuarial valuations of the plans that existed before the 
merger or transfer have been performed in accordance with Sec.  4231.5.
    (3) For each plan that exists after the transaction, an enrolled 
actuary--
    (i) Determines that the plan meets the applicable plan solvency 
requirement set forth in Sec.  4231.6; or
    (ii) Otherwise demonstrates that benefits under the plan are not 
reasonably expected to be subject to suspension under section 4245 of 
ERISA.
    (4) The plan sponsor notifies PBGC of the merger or transfer in 
accordance with Sec. Sec.  4231.8 and 4231.9.
    (b) Compliance determination. If a plan sponsor requests a 
determination that a merger or transfer that may otherwise be 
prohibited by section 406(a) or (b)(2) of ERISA satisfies the 
requirements of section 4231 of ERISA, the plan sponsor must submit the 
information described in Sec.  4231.10 in addition to the information 
required by Sec.  4231.9. PBGC may request additional information if 
necessary to determine whether a merger or transfer complies with the 
requirements of section 4231 and subpart A of this part. Plan sponsors 
are not required to request a compliance determination. Under section 
4231(c) of ERISA, if PBGC determines that the merger or transfer 
complies with section 4231 of ERISA and subpart A of this part, the 
merger or transfer will not constitute a violation of the prohibited 
transaction provisions of section 406(a) and (b)(2) of ERISA.
    (c) Certified change in bargaining representative. Transfers of 
assets and liabilities pursuant to a change of collective bargaining 
representative certified under the Labor-Management Relations Act of 
1947 or the Railway Labor Act, as amended, are governed by section 4235 
of ERISA. Plan sponsors involved in such transfers are not required to 
comply with subpart A of this part. However, under section 4235(f)(1) 
of ERISA, the plan sponsors of the plans involved in the transfer may 
agree to a transfer that complies with sections 4231 and 4234 of ERISA. 
Plan sponsors that elect to comply with sections 4231 and 4234 of ERISA 
must comply with the rules in subpart A of this part.
    (d) Informal consultation. Nothing in this part precludes a plan 
sponsor from contacting PBGC on an informal basis to discuss a 
potential merger or transfer.


Sec.  4231.4  Preservation of accrued benefits.

    Section 4231(b)(2) of ERISA and Sec.  4231.3(a)(1) require that no 
participant's or beneficiary's accrued benefit may be lower immediately 
after the effective date of the merger or transfer than the benefit 
immediately before the merger or transfer. A plan that assumes an 
obligation to pay benefits for a group of participants satisfies this 
requirement only if the plan contains a provision preserving all 
accrued benefits. The determination of what is an accrued benefit must 
be made in accordance with section 411 of the Code and the regulations 
thereunder.


Sec.  4231.5  Valuation requirement.

    The actuarial valuation requirement under section 4231(b)(4) of 
ERISA and Sec.  4231.3(a)(2) is satisfied if an actuarial valuation has 
been performed for the plan based on the plan's assets and liabilities 
as of a date not earlier than the first day of the last plan year 
ending before the proposed effective date of the transaction. If the 
actuarial valuation required under this section is not complete when 
the notice of merger or transfer is filed, the plan sponsor may provide 
the most recent actuarial valuation for the plan with the notice, and 
the actuarial valuation required under this section when complete. For 
a significantly affected plan involved in a transfer, other than a plan 
that is a significantly affected plan only because the transfer 
involves a plan that has terminated by mass withdrawal under section 
4041A(a)(2) of ERISA, the valuation must separately identify assets, 
contributions, and liabilities being transferred and must be based on 
the actuarial assumptions and methods that are expected to be used for 
the plan for the first plan year beginning after the transfer.


Sec.  4231.6  Plan solvency tests.

    (a) General. For a plan that is not a significantly affected plan, 
the plan solvency requirement of section 4231(b)(3) of ERISA and Sec.  
4231.3(a)(3)(i) is satisfied if--
    (1) In each of the first ten plan years beginning on or after the 
proposed effective date of the merger or transfer, the plan's expected 
fair market value of assets plus expected contributions and investment 
earnings equal or exceed expected expenses and benefit payments for the 
plan year; or
    (2) The plan's expected fair market value of assets immediately 
after the merger or transfer equals or exceeds ten times the benefit 
payments for the last plan year ending before the proposed effective 
date of the merger or transfer.

[[Page 36239]]

    (b) Significantly affected plans. The plan solvency requirement of 
section 4231(b)(3) of ERISA and Sec.  4231.3(a)(3)(i) is satisfied for 
a significantly affected plan if all of the following requirements are 
met:
    (1) Expected contributions equal or exceed the estimated amount 
necessary to satisfy the minimum funding requirement of section 431 of 
the Code for the ten plan years beginning on or after the proposed 
effective date of the transaction.
    (2) The plan's expected fair market value of assets immediately 
after the transaction equal or exceed the total amount of expected 
benefit payments for the first ten plan years beginning on or after the 
proposed effective date of the transaction.
    (3) Expected contributions for the first plan year beginning on or 
after the proposed effective date of the transaction equal or exceed 
expected benefit payments for that plan year.
    (4) Expected contributions for the amortization period equal or 
exceed unfunded accrued benefits plus expected normal costs. The 
actuary may select as the amortization period either--
    (i) The first 15 plan years beginning on or after the proposed 
effective date of the transaction, or
    (ii) The amortization period for the resulting base when the 
combined charge base and the combined credit base are offset under 
section 431(b)(5) of the Code.
    (c) Rules for determinations. In determining whether a transaction 
satisfies the plan solvency requirements set forth in this section, the 
following rules apply:
    (1) Expected contributions after a merger or transfer must be 
determined by assuming that contributions for each plan year will equal 
contributions for the last full plan year ending before the date on 
which the notice of merger or transfer is filed with PBGC. If expected 
contributions include withdrawal liability payments, such payments must 
be shown separately. If the withdrawal liability payments are not the 
assessed amounts, or are not in accordance with the schedule of 
payments, or include future assessments, include the basis for such 
differences, with supporting data, calculations, assumptions, and 
methods. In addition, contributions must be adjusted to reflect--
    (i) The merger or transfer;
    (ii) Any change in the rate of employer contributions that has been 
negotiated (whether or not in effect); and
    (iii) Any trend of changing contribution base units over the 
preceding five plan years or other period of time that can be 
demonstrated to be more appropriate.
    (2) Expected normal costs must be determined under the funding 
method and assumptions expected to be used by the plan actuary for 
purposes of determining the minimum funding requirement under section 
431 of the Code. If the plan uses an aggregate funding method, normal 
costs must be determined under the entry age normal method.
    (3) Expected benefit payments must be determined by assuming that 
current benefits remain in effect and that all scheduled increases in 
benefits occur.
    (4) The plan's expected fair market value of assets immediately 
after the merger or transfer must be based on the most recent data 
available immediately before the date on which the notice is filed.
    (5) Expected investment earnings must be determined using the same 
interest assumption to be used for determining the minimum funding 
requirement under section 431 of the Code.
    (6) Expected expenses must be determined using expenses in the last 
plan year ending before the notice is filed, adjusted to reflect any 
anticipated changes.
    (7) Expected plan assets for a plan year must be determined by 
adjusting the most current data on the plan's fair market value of 
assets to reflect expected contributions, investment earnings, benefit 
payments and expenses for each plan year between the date of the most 
current data and the beginning of the plan year for which expected 
assets are being determined.


Sec.  4231.7  De minimis mergers and transfers.

    (a) Special plan solvency rule. The determination of whether a de 
minimis merger or transfer satisfies the plan solvency requirement in 
Sec.  4231.6(a) may be made without regard to any other de minimis 
mergers or transfers that have occurred since the most recent actuarial 
valuation.
    (b) De minimis merger defined. A merger is de minimis if the 
present value of accrued benefits (whether or not vested) of one plan 
is less than 3 percent of the other plan's fair market value of assets.
    (c) De minimis transfer defined. A transfer of assets or 
liabilities is de minimis if--
    (1) The fair market value of assets transferred, if any, is less 
than 3 percent of the fair market value of assets of all of the 
transferor plan's assets;
    (2) The present value of the accrued benefits transferred (whether 
or not vested) is less than 3 percent of the fair market value of 
assets of all of the transferee plan's assets; and
    (3) The transferee plan is not a plan that has terminated under 
section 4041A(a)(2) of ERISA.
    (d) Value of assets and benefits. For purposes of paragraphs (b) 
and (c) of this section, the value of plan assets and accrued benefits 
may be determined as of any date prior to the proposed effective date 
of the transaction, but not earlier than the date of the most recent 
actuarial valuation.
    (e) Aggregation required. In determining whether a merger or 
transfer is de minimis, the assets and accrued benefits transferred in 
previous de minimis mergers and transfers within the same plan year 
must be aggregated as described in paragraphs (e)(1) and (2) of this 
section. For the purposes of those paragraphs, the value of plan assets 
may be determined as of the date during the plan year on which the 
total value of the plan's assets is the highest.
    (1) A merger is not de minimis if the total present value of 
accrued benefits merged into a plan, when aggregated with all prior de 
minimis mergers of and transfers to that plan effective within the same 
plan year, equals or exceeds 3 percent of the value of the plan's 
assets.
    (2) A transfer is not de minimis if, when aggregated with all 
previous de minimis mergers and transfers effective within the same 
plan year--
    (i) The value of all assets transferred from a plan equals or 
exceeds 3 percent of the value of the plan's assets; or
    (ii) The present value of all accrued benefits transferred to a 
plan equals or exceeds 3 percent of the plan's assets.


Sec.  4231.8  Filing requirements; timing and method of filing.

    (a) When to file. Except as provided in paragraph (g) of this 
section, a notice of a proposed merger or transfer, and, if applicable, 
a request for a compliance determination or facilitated merger (which 
may be filed separately or combined), must be filed not less than the 
following number of days before the proposed effective date of the 
transaction--
    (1) 270 days in the case of a facilitated merger under Sec.  
4231.12;
    (2) 120 days in the case of a merger (other than a facilitated 
merger) for which a compliance determination under Sec.  4231.10 is 
requested, or a transfer; or
    (3) 45 days in the case of a merger for which a compliance 
determination under Sec.  4231.10 is not requested.
    (b) Method of filing. PBGC applies the rules in subpart A of part 
4000 of this

[[Page 36240]]

chapter to determine permissible methods of filing with PBGC under this 
part.
    (c) Computation of time. PBGC applies the rules in subpart D of 
part 4000 of this chapter to compute any time period for filing under 
this part.
    (d) Who must file. The plan sponsors of all plans involved in a 
merger or transfer, or the duly authorized representative(s) acting on 
behalf of the plan sponsors, must jointly file the notice required by 
subpart A of this part, and, if applicable, a request for a facilitated 
merger under Sec.  4231.12.
    (e) Where to file. See Sec.  4000.4 of this chapter for information 
on where to file.
    (f) Date of filing. PBGC applies the rules in subpart C of part 
4000 of this chapter to determine the date a submission under this part 
was filed with PBGC. For purposes of paragraph (a) of this section, the 
notice, and, if applicable, a request for a compliance determination or 
facilitated merger, is not considered filed until all of the 
information required under this part has been submitted.
    (g) Waiver of timing of notice. PBGC may waive the timing 
requirements of paragraph (a) of this section and section 4231(b)(1) of 
ERISA if--
    (1) A plan sponsor demonstrates to the satisfaction of PBGC that 
failure to complete the merger or transfer in less than the applicable 
notice period set forth in paragraph (a) of this section will cause 
harm to participants or beneficiaries of the plans involved in the 
transaction;
    (2) PBGC determines that the transaction complies with the 
requirements of section 4231 of ERISA; or
    (3) PBGC completes its review of the transaction.


Sec.  4231.9  Notice of merger or transfer.

    Each notice of proposed merger or transfer required under section 
4231(b)(1) of ERISA and this subpart must contain the following 
information:
    (a) For each plan involved in the merger or transfer--
    (1) The name of the plan;
    (2) The name, address and telephone number of the plan sponsor and 
of the plan sponsor's duly authorized representative, if any; and
    (3) The plan sponsor's EIN and the plan's PN and, if different, the 
EIN or PN last filed with PBGC. If no EIN or PN has been assigned, the 
notice must so indicate.
    (b) Whether the transaction being reported is a merger or transfer, 
whether it involves any plan that has terminated under section 
4041A(a)(2) of ERISA, whether any significantly affected plan is 
involved in the transaction (and, if so, identifying each such plan), 
and whether it is a de minimis transaction as defined in Sec.  4231.7 
(and, if so, including an enrolled actuary's certification to that 
effect).
    (c) The proposed effective date of the transaction.
    (d) A copy of each plan provision stating that no participant's or 
beneficiary's accrued benefit will be lower immediately after the 
effective date of the merger or transfer than the benefit immediately 
before that date.
    (e) For each plan that exists after the transaction, one of the 
following statements, certified by an enrolled actuary:
    (1) A statement that the plan satisfies the applicable plan 
solvency test set forth in Sec.  4231.6, indicating which is the 
applicable test, and including the supporting data, calculations, 
assumptions, and methods.
    (2) A statement of the basis on which the actuary has determined 
under Sec.  4231.3(a)(3)(ii) that benefits under the plan are not 
reasonably expected to be subject to suspension under section 4245 of 
ERISA, including the supporting data, calculations, assumptions, and 
methods.
    (f) For each plan that exists before a transaction (unless the 
transaction is de minimis and does not involve a request for financial 
assistance, or any plan that has terminated under section 4041A(a)(2) 
of ERISA), a copy of the most recent actuarial valuation report that 
satisfies the requirements of Sec.  4231.5.
    (g) For each significantly affected plan that exists after the 
transaction, the following information used in making the plan solvency 
determination under Sec.  4231.6(b):
    (1) The present value of the accrued benefits and plan's fair 
market value of assets under the valuation required by Sec.  4231.5, 
allocable to the plan after the transaction.
    (2) The fair market value of assets in the plan after the 
transaction (determined in accordance with Sec.  4231.6(c)(4)).
    (3) The expected benefit payments for the plan in the first plan 
year beginning on or after the proposed effective date of the 
transaction (determined in accordance with Sec.  4231.6(c)(3)).
    (4) The contribution rates in effect for the plan for the first 
plan year beginning on or after the proposed effective date of the 
transaction.
    (5) The expected contributions for the plan in the first plan year 
beginning on or after the proposed effective date of the transaction 
(determined in accordance with Sec.  4231.6(c)(1)).


Sec.  4231.10  Request for compliance determination.

    (a) General. The plan sponsor(s) of one or more plans involved in a 
merger or transfer, or the duly authorized representative(s) acting on 
behalf of the plan sponsor(s), may file a request for a determination 
that the transaction complies with the requirements of section 4231 of 
ERISA. If the plan sponsor(s) requests a compliance determination, the 
request must be filed with the notice of merger or transfer under Sec.  
4231.3(a)(4), and must contain the information described in paragraph 
(c) of this section, as applicable.
    (b) Single request permitted for all de minimis transactions. A 
plan sponsor may submit a single request for a compliance determination 
covering all de minimis mergers or transfers that occur between one 
plan valuation and the next. However, the plan sponsor must still 
notify PBGC of each de minimis merger or transfer separately, in 
accordance with Sec. Sec.  4231.8 and 4231.9. The single request for a 
compliance determination may be filed concurrently with any one of the 
notices of a de minimis merger or transfer.
    (c) Contents of request. A request for a compliance determination 
concerning a merger or transfer that is not de minimis must contain--
    (1) A copy of the merger or transfer agreement; and
    (2) For each significantly affected plan, other than a plan that is 
a significantly affected plan only because the merger or transfer 
involves a plan that has terminated by mass withdrawal under section 
4041A(a)(2) of ERISA, copies of all actuarial valuations performed 
within the 5 years preceding the date of filing the notice required 
under Sec.  4231.3(a)(4).


Sec.  4231.11  Actuarial calculations and assumptions.

    (a) Most recent valuation. All calculations required by this part 
must be based on the most recent actuarial valuation as of the date of 
filing the notice, updated to show any material changes.
    (b) Assumptions. All calculations required by this part must be 
performed by an enrolled actuary based on methods and assumptions each 
of which is reasonable (taking into account the experience of the plan 
and reasonable expectations), and which, in combination, offer the 
actuary's best estimate of anticipated experience under the plan.
    (c) Updated calculations. PBGC may require updated calculations and 
representations based on the actual effective date of a merger or 
transfer if

[[Page 36241]]

that date is more than one year after the notice is filed, based on 
revised actuarial assumptions, or based on other good cause.

Subpart B--Additional Rules for Facilitated Mergers


Sec.  4231.12  Request for facilitated merger.

    (a) General. (1) The plan sponsors of the plans involved in a 
proposed merger may request that PBGC facilitate the merger. 
Facilitation may include training, technical assistance, mediation, 
communication with stakeholders, and support with related requests to 
other government agencies. Facilitation may also include financial 
assistance to the merged plan. PBGC has discretion under section 
4231(e) of ERISA to take such actions as it deems appropriate to 
facilitate the merger of two or more multiemployer plans if it 
determines, after consultation with the Advocate, that the proposed 
merger is in the interests of the participants and beneficiaries of at 
least one of the plans, and is not reasonably expected to be adverse to 
the overall interests of the participants and beneficiaries of any of 
the plans involved in the proposed merger. For a facilitated merger, 
including a financial assistance merger, the requirements of section 
4231(b) of ERISA and subpart A of this part must be satisfied in 
addition to the requirements of section 4231(e) of ERISA and this 
subpart. The procedures set forth in this subpart represent the 
exclusive means by which PBGC will approve a request for a facilitated 
merger under section 4231(e) of ERISA.
    (2) Financial assistance. Subject to the requirements in section 
4231(e) of ERISA and this subpart, in the case of a request for a 
financial assistance merger, PBGC may in its discretion provide 
financial assistance (within the meaning of section 4261 of ERISA). 
Such financial assistance will be with respect to the guaranteed 
benefits payable under the critical and declining status plan(s) 
involved in the facilitated merger.
    (b) Information requirements. (1) A request for a facilitated 
merger, including a request for a financial assistance merger, must be 
filed with the notice of merger under Sec.  4231.3(a)(4), and must 
contain the information described in Sec.  4231.10, and a detailed 
narrative description with supporting documentation demonstrating that 
the proposed merger is in the interests of participants and 
beneficiaries of at least one of the plans, and is not reasonably 
expected to be adverse to the overall interests of the participants and 
beneficiaries of any of the plans. If a financial assistance merger is 
requested, the narrative description and supporting documentation may 
consider the effect of financial assistance in making these 
demonstrations.
    (2) If a financial assistance merger is requested, the request must 
contain the information required in Sec. Sec.  4231.13 through 4231.16 
in addition to the information required in paragraph (b)(1) of this 
section.
    (3) Additional information. PBGC may require the plan sponsors to 
submit additional information to determine whether the requirements of 
section 4231(e) of ERISA are met or to enable it to facilitate the 
merger.
    (c) Duty to amend and supplement. During any time in which a 
request for a facilitated merger, including a request for a financial 
assistance merger, is pending final action by PBGC, the plan sponsors 
must promptly notify PBGC in writing of any material fact or 
representation contained in or relating to the request, or in any 
supporting documents, that is no longer accurate or was omitted.


Sec.  4231.13  Plan information for financial assistance merger.

    A request for a financial assistance merger must include the 
following information for each plan involved in the merger:
    (a) The most recent trust agreement, including all amendments 
adopted since the last restatement.
    (b) The most recent plan document, including all amendments adopted 
since the last restatement.
    (c) The most recent summary plan description (SPD), and all 
summaries of material modification issued since the most recent SPD.
    (d) If applicable, the most recent rehabilitation plan (or funding 
improvement plan), including all subsequent amendments and updates, and 
the percentage of total contributions received under each schedule of 
the rehabilitation plan (or funding improvement plan) for the most 
recent plan year available.
    (e) A copy of the plan's most recent IRS determination letter.
    (f) A copy of the plan's most recent Form 5500 (Annual Report Form) 
and all schedules and attachments (including the audited financial 
statement).
    (g) A current listing of employers who have an obligation to 
contribute to the plan, and the approximate number of participants for 
whom each employer is currently making contributions.
    (h) A schedule of withdrawal liability payments collected in each 
of the most recent five plan years.
    (i) If applicable, a copy of the plan sponsor's application for 
suspension of benefits under section 305(e)(9)(G) of ERISA (including 
all attachments and exhibits).


Sec.  4231.14  Description of financial assistance merger.

    A request for a financial assistance merger must include the 
following information about the proposed financial assistance merger:
    (a) A detailed description of the proposed financial assistance 
merger, including any larger integrated transaction of which the merger 
is a part (including, but not limited to, an application for suspension 
of benefits under section 305(e)(9)(G) of ERISA).
    (b) A narrative description of the events that led to the plan 
sponsors' decision to submit a request for a financial assistance 
merger.
    (c) A narrative description of significant risks and assumptions 
relating to the proposed financial assistance merger and the 
projections provided in support of the request.
    (d) A detailed description of the estimated total amount of 
financial assistance the plan sponsors request for each year, including 
the supporting data, calculations, assumptions, and a description of 
the methodology used to determine the estimated amounts.


Sec.  4231.15  Actuarial and financial information for financial 
assistance merger.

    A request for a financial assistance merger must include the 
following actuarial and financial information for the plans involved in 
the merger:
    (a) A copy of the actuarial valuation performed for each of the two 
plan years before the most recent actuarial valuation filed in 
accordance with Sec.  4231.5.
    (b) If applicable, a copy of the plan actuary's most recent annual 
actuarial certification under section 305(b)(3) of ERISA, including a 
detailed description of the assumptions used in the certification, and 
the basis under which they were determined. The description must 
include information about the assumptions used for the projection of 
future contributions, withdrawal liability payments, and investment 
returns, and any other assumption that may have a material effect on 
projections.
    (c) A detailed statement certified by an enrolled actuary that the 
merger is necessary for one or more of the plans involved to avoid or 
postpone insolvency, including the basis for the conclusion, supporting 
data, calculations, assumptions, and a description of the methodology. 
This

[[Page 36242]]

statement must demonstrate for each critical and declining status plan 
involved in the merger that the date the plan projects to become 
insolvent (without reflecting the merger) is earlier than the date the 
merged plan projects to become insolvent (the merged plan may reflect 
the proposed financial assistance). Include as an exhibit annual cash 
flow projections for each critical and declining status plan involved 
in the merger through the date the plan projects to become insolvent 
(using an open group valuation and without reflecting the merger). 
Annual cash flow projections must reflect the following information:
    (1) Fair market value of assets as of the beginning of the year.
    (2) Contributions and withdrawal liability payments.
    (3) Benefit payments organized by participant type (e.g., active, 
retiree, terminated vested).
    (4) Administrative expenses.
    (5) Fair market value of assets as of the end of the year.
    (d) For each critical and declining status plan involved in the 
merger, a long-term projection (at least 50 to 90 years) of benefit 
disbursements by participant type (e.g., active, retiree, terminated 
vested) (without reflecting the merger) reflecting reduced benefit 
disbursements at the PBGC-guarantee level beginning with the proposed 
effective date of the merger (using a closed group valuation and no 
accruals after the proposed effective date of the merger).
    (e) For each critical and declining status plan involved in the 
merger, a long-term projection (at least 50 to 90 years) of benefit 
disbursements by participant type (e.g., active, retiree, terminated 
vested) (without reflecting the merger) reflecting maximum benefit 
suspensions that would be permissible under section 305(e)(9) of ERISA 
beginning with the proposed effective date of the merger (using an open 
group valuation).
    (f) A detailed statement certified by an enrolled actuary that 
financial assistance is necessary for the merged plan to become or 
remain solvent, including the basis for the conclusion, supporting 
data, calculations, assumptions, and a description of the methodology. 
Include as an exhibit annual cash flow projections for the merged plan 
with the proposed financial assistance (based on the actuarial 
assumptions and methods that will be used under the merged plan). 
Annual cash flow projections must reflect the information listed in 
paragraphs (c)(1) through (5) of this section. In addition, include as 
an exhibit a statement of whether the merged plan would be in critical 
status for purposes of paragraph (f)(1) or (2) of this section, 
including the basis for the conclusion.
    (1) If the merged plan would be in critical status immediately 
following the merger without the proposed financial assistance (as 
reasonably determined by the enrolled actuary), the enrolled actuary's 
certified statement must demonstrate that the merged plan will avoid 
insolvency under section 305(e)(9)(D)(iv) of ERISA and the regulations 
thereunder (excluding stochastic projections) with the proposed 
financial assistance.
    (2) If the merged plan would not be in critical status immediately 
following the merger without the proposed financial assistance (as 
reasonably determined by the enrolled actuary), the enrolled actuary's 
certified statement must demonstrate that the merged plan is not 
projected to become insolvent during the 20 plan years beginning after 
the proposed effective date of the merger with the proposed financial 
assistance (using the methodologies set forth under section 
305(b)(3)(B)(iv) of ERISA and the regulations thereunder). If such a 
demonstration is possible without the proposed financial assistance, or 
if the amount of financial assistance requested exceeds the amount 
needed to satisfy this demonstration, the enrolled actuary's certified 
statement must demonstrate that financial assistance is necessary to 
mitigate the adverse effects of the merger on the merged plan's ability 
to remain solvent.
    (g) If applicable, a copy of the plan actuary's certification under 
section 305(e)(9)(C)(i) of ERISA.
    (h) The rules in Sec.  4231.6(c) apply to the solvency projections 
described in Sec.  4231.15(c) and (f), unless section 305(e)(9)(D)(iv) 
of ERISA and the regulations thereunder apply and specify otherwise.


Sec.  4231.16  Participant census data for financial assistance merger.

    A request for a financial assistance merger must include a copy of 
the census data used for the projections described in Sec.  4231.15(c) 
and (f), including:
    (a) Participant type (retiree, beneficiary, disabled, terminated 
vested, active, alternate payee).
    (b) Gender.
    (c) Date of birth.
    (d) Credited service for guarantee calculation (i.e., number of 
years of participation).
    (e) Vested accrued monthly benefit.
    (f) Monthly benefit guaranteed by PBGC.
    (g) Monthly benefit reduced by the maximum benefit suspension 
permissible under section 305(e)(9) of ERISA.
    (h) Benefit commencement date (for participants in pay status and 
others for which the reported benefit will not be payable at normal 
retirement age).
    (i) For each participant in pay status--
    (1) Form of payment, and
    (2) Data relevant to the form of payment, including:
    (i) For a joint-and-survivor benefit, the beneficiary's benefit 
amount and the beneficiary's date of birth;
    (ii) For a Social Security level income benefit, the date of any 
change in the benefit amount, and the benefit amount after such change;
    (iii) For a 5-year certain or 10-year certain benefit (or similar 
benefit), the relevant defined period; or
    (iv) For a form of payment not otherwise described in this section, 
the data necessary for the valuation of the form of payment.
    (j) If an actuarial increase for postponed retirement applies, or 
if the form of annuity is a Social Security level income option, the 
monthly vested benefit payable at normal retirement age in normal form 
of annuity.


Sec.  4231.17  PBGC action on a request for facilitated merger.

    (a) General. PBGC may approve or deny a request for a facilitated 
merger, including a request for a financial assistance merger, at its 
discretion if the requirements of section 4231 of ERISA are satisfied. 
PBGC will notify the plan sponsor(s) in writing of its decision on a 
request. If PBGC denies the request, PBGC's written decision will state 
the reason(s) for the denial. If PBGC approves a request for a 
financial assistance merger, PBGC will provide a financial assistance 
agreement detailing the total amount and terms of the financial 
assistance as soon as practicable thereafter.
    (b) Final agency action. PBGC's decision to approve or deny a 
request for a facilitated merger, including a request for a financial 
assistance merger, is a final agency action for purposes of judicial 
review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).


Sec.  4231.18  Jurisdiction over financial assistance merger.

    (a) General. PBGC will retain jurisdiction over the merged plan 
resulting from a financial assistance merger to carry out the purposes, 
terms, and conditions of the financial

[[Page 36243]]

assistance merger, the financial assistance agreement, sections 4231 
and 4261 of ERISA, and the regulations thereunder.
    (b) Financial assistance agreement. PBGC may, upon providing notice 
to the plan sponsor, make changes to the financial assistance agreement 
in response to changed circumstances consistent with sections 4231 and 
4261 of ERISA and the regulations thereunder.

    Issued in Washington, DC, this 25th day of May, 2016.
W. Thomas Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2016-13083 Filed 6-2-16; 11:15 am]
 BILLING CODE 7709-02-P