[Federal Register Volume 83, Number 179 (Friday, September 14, 2018)]
[Rules and Regulations]
[Pages 46642-46659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19988]


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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: Final rule.

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SUMMARY: PBGC is issuing a final rule amending its regulation on 
Mergers and Transfers Between Multiemployer Plans to implement 
procedures and information requirements for a request for a facilitated 
merger. This final rule also reorganizes and updates provisions in the 
existing regulation.

DATES: This rule is effective October 15, 2018.

FOR FURTHER INFORMATION CONTACT: Theresa B. Anderson 
([email protected]), Deputy Assistant General Counsel, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW, Washington DC 20005-4026; 202-326-4400, ext. 6353. (TTY 
users may call the Federal relay service toll-free at 800-877-8339 and 
ask to be connected to 202-326-4400, extension 6353.)

SUPPLEMENTARY INFORMATION: 

Executive Summary

Purpose of the Regulatory Action

    This final rule 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) and to update PBGC's existing regulatory 
requirements applicable to mergers and transfers between multiemployer 
plans. On June 6, 2016, PBGC published a proposed rule to amend its 
regulation on Mergers and Transfers Between Multiemployer Plans (81 FR 
36229). In this final rule, PBGC adopts its proposed changes 
implementing MPRA, with some modifications in response to public 
comments, and some of its proposed changes updating and reorganizing 
the existing regulation. To allow more consideration of the concerns 
raised by the public comments, PBGC is not adopting its proposed 
changes to provisions of the existing regulation related to plan 
solvency.
    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.

Major Provisions of the Regulatory Action

    This final rule makes one major and numerous minor changes to 
PBGC's regulation on Mergers and Transfers

[[Page 46643]]

Between Multiemployer Plans. The major change is the addition of 
procedures and information requirements for a voluntary request for a 
facilitated merger to implement MPRA's changes to section 4231 of 
ERISA. This final rule also reorganizes and updates existing provisions 
of PBGC's regulation. The changes to part 4231 and the related public 
comments are discussed below.

Background

In General

    The Pension Benefit Guaranty Corporation (PBGC) is a Federal 
corporation created under title IV of Employee Retirement Income 
Security Act of 1974 (ERISA) to guarantee the payment of pension 
benefits under private-sector defined benefit pension plans.
    PBGC administers two insurance programs--one for single-employer 
pension plans, and one for multiemployer pension plans. This final rule 
applies only to the multiemployer program.
    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 and may request a compliance determination from 
PBGC.
    Under section 4261 of ERISA, PBGC provides financial assistance 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 generally 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.

Multiemployer Pension Reform Act of 2014

    MPRA was enacted in December 2014 and contains several statutory 
reforms to assist financially troubled multiemployer plans and to 
improve the financial condition of PBGC's multiemployer insurance 
program. Sections 121 and 122 of MPRA provide that PBGC may assist 
financially troubled multiemployer plans under certain conditions.\1\ 
This rule is necessitated by section 121 of MPRA.
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    \1\ Section 122 of MPRA amended section 4233 of ERISA to provide 
a new statutory framework for partitions. 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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    Section 121 of MPRA authorizes PBGC to facilitate multiemployer 
plan mergers. Facilitation includes various forms of technical 
assistance as well as financial assistance (within the meaning of 
section 4261) if certain statutory conditions are met. 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 Advocate \2\--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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    \2\ 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 believes 
that role should evolve based on experience in implementing this 
rule.
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    As added by 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.
    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. Under 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). 
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.
     Long-term loss and plan solvency. Under 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. Under section 4231(e)(2)(C), PBGC must 
certify to Congress that its ability to meet existing financial 
assistance obligations to other plans will not be impaired by the 
financial assistance.
     Source of funding. Under section 4231(e)(2)(D), financial 
assistance must be paid exclusively from the PBGC fund for basic 
benefits guaranteed for multiemployer plans.
    In addition, 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

[[Page 46644]]

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.

RFI and Proposed Rule

    On February 18, 2015, PBGC published in the Federal Register (80 FR 
8712) a request for information (RFI) to solicit information on issues 
PBGC should consider for a proposed rule; PBGC received 20 comments in 
response to the RFI.\3\ 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.
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    \3\ The RFI and comments are accessible at http://www.pbgc.gov/prac/pg/other/guidance/multiemployer-notices.html.
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    On June 6, 2016, PBGC published (81 FR 36229) a proposed rule to 
amend PBGC's regulation on Mergers and Transfers Between Multiemployer 
Plans (29 CFR part 4231) to implement MPRA's changes to section 4231 of 
ERISA.\4\ PBGC also proposed to reorganize and update provisions of the 
existing regulation to reflect other changes in law.
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    \4\ The proposed rule and comments are accessible at https://www.pbgc.gov/prac/pg/other/guidance/pending-proposed-rules.
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    PBGC provided a 60-day comment period for the proposed rule and 
received 10 comments from: Employers contributing to multiemployer 
plans; a union; and associations representing multiemployer plans, 
pension practitioners, and employers contributing to multiemployer 
plans. With some modifications in response to public comments it 
received, PBGC adopts in this final rule its proposed changes 
implementing MPRA. PBGC also adopts some of its proposed changes 
updating and reorganizing the existing regulation. To allow more 
consideration of public comments, PBGC is not adopting its proposed 
changes to provisions of the existing regulation related to plan 
solvency. The comments, PBGC's responses to the comments, and the 
changes adopted in this final rule are discussed below.

Overview

    This final rule makes one major and numerous minor changes to 
PBGC's regulation on Mergers and Transfers Between Multiemployer Plans. 
The major change is the addition of procedures and information 
requirements for a voluntary request for a facilitated merger under 
section 4231(e) of ERISA, added by MPRA. This final rule also 
reorganizes and updates existing provisions of PBGC's regulation. The 
changes and the related public comments are discussed below.
    Under this final rule, like the proposed, part 4231 provides 
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 has received financial assistance. This final rule reorganizes 
part 4231 by dividing it into subparts. Subpart A contains the general 
merger and transfer rules. Subpart B provides guidance on procedures 
and information requirements for facilitated mergers, including those 
involving financial assistance.
    Section 4231 of ERISA and part 4231 do not address the requirements 
of title I of ERISA (other than section 406(a) and (b)(2), in the event 
of a compliance determination). In most instances, implementation of 
the mergers and transfers addressed in this final 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, which are enforced by 
the Department of Labor (DOL), 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).

Discussion of Comments

Plan Solvency Demonstrations

    Most comments to PBGC's proposed rule addressed PBGC's proposed 
changes to provisions in its existing regulation--in particular, 
changes to the safe harbor solvency tests and to which plans must 
satisfy the more rigorous test for ``significantly affected plans.'' 
PBGC's regulation provides ``plan solvency'' tests under Sec.  4231.6 
that operate as regulatory safe harbors under section 4231(b)(3) of 
ERISA. Section 4231(b)(3) of ERISA 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. PBGC's experience 
suggests that its proposed changes to the ``plan solvency'' tests would 
result in a more reliable demonstration that benefits are not 
reasonably expected to be subject to suspension under section 4245 of 
ERISA because of insolvency.
    For a plan that is not a significantly affected plan, Sec.  
4231.6(a) provides two alternative ``plan solvency'' tests. PBGC 
proposed to change the test in Sec.  4231.6(a)(1) by increasing the 
multiple by which plan assets after the transaction must equal or 
exceed benefit payments for the plan year before the transaction from 
``five times the benefit payments'' to ``ten times the benefit 
payments.'' PBGC also proposed to change the test in Sec.  4231.6(a)(2) 
by increasing the number of years after the transaction for which 
assets, contributions, and investment earnings must cover expenses and 
benefit payments from ``five plan years'' to ``ten plan years.'' \5\
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    \5\ PBGC also proposed to transpose Sec.  4231.6(a)(1) and (2).
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    PBGC proposed similar changes to the ``plan solvency'' test in 
Sec.  4231.6(b) for significantly affected plans. PBGC proposed to 
change the requirement in Sec.  4231.6(b)(1) that contributions satisfy 
the minimum funding requirement for the first ``five plan years'' after 
the transaction to the first ``ten plan years.'' PBGC also proposed to 
change the requirement in Sec.  4231.6(b)(2) that assets cover the 
total benefit payments for the first ``five plan years'' after the 
transaction to ``ten plan years.'' Finally, PBGC proposed to change the 
amortization period in Sec.  4231.6(b)(4)(i) from 25 to 15 years to 
reflect the amortization period generally applicable to changes in 
funding of multiemployer plans under PPA.\6\
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    \6\ See section 304(b) of ERISA.
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    PBGC also proposed to change which plans would be subject to the 
more rigorous test for significantly affected plans. PBGC proposed to 
amend the definition of ``significantly affected plan'' in Sec.  4231.2 
to include a plan in endangered or critical status, as defined

[[Page 46645]]

in section 305(b) of ERISA,\7\ that engages in a transfer (other than a 
de minimis transfer). 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.
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    \7\ ``Endangered'' and ``critical'' are plan categories 
established by the Pension Protection Act of 2006, Public Law 109-
280 (120 Stat. 780 (2006) (PPA)).
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    Eight commenters responded to PBGC's proposed changes to the ``plan 
solvency'' tests and to the definition of a ``significantly affected 
plan.'' The commenters stated, in part, that PBGC's proposed changes to 
the ``plan solvency'' tests would make mergers and transfers more 
difficult or prohibit them, would substantially expand burden for plan 
sponsors, and would restrict options for plans. For example, commenters 
stated that two critical and declining status plans engaging in a 
merger, resulting in a merged plan projected to become insolvent in 
more than five but less than 10 years, would likely satisfy the 
applicable ``plan solvency'' test in Sec.  4231.6(a) of the existing 
regulation but not the proposed regulation. In addition, commenters 
stated that a critical status plan engaging in a transfer would be 
unlikely to satisfy PBGC's proposed changes to the ``plan solvency'' 
test for a significantly affected plan--specifically, the requirement 
in Sec.  4231.6(b)(1) that contributions satisfy the minimum funding 
requirement for 10 plan years after the transaction.
    These commenters also considered PBGC's proposed change to the 
definition of a ``significantly affected plan'' unduly restrictive. 
Some commenters agreed with PBGC's assessment of the heightened risk of 
insolvency associated with transfers by endangered and critical status 
plans. But commenters suggested that PBGC could address this risk 
directly by requiring that the transaction postpone the date when the 
plan is projected to become insolvent.
    In addition, these commenters stated that PBGC's proposed change to 
the definition of a ``significantly affected plan'' would prohibit 
transfers permitted under PBGC's existing regulation, even if the 
transfers would be beneficial for the plans and their participants. For 
example, a critical and declining status plan engaging in a non-de 
minimis transfer of accrued benefits and less than 15% of its assets 
would not be a significantly affected plan under PBGC's existing 
regulation and would likely satisfy the applicable ``plan solvency'' 
test in Sec.  4231.6(a). But under PBGC's proposed changes, a critical 
and declining status plan that engages in a non-de minimis transfer 
would be a significantly affected plan and would not satisfy the 
applicable ``plan solvency'' test in Sec.  4231.6(b). According to 
commenters, such a transfer from a critical and declining status plan 
could postpone the date the plan is projected to become insolvent and 
would effectively eliminate the risk of loss associated with the 
transferred benefits.
    Moreover, four commenters stated that PBGC should otherwise update 
the solvency test for significantly affected plans. According to one 
commenter, the solvency test in Sec.  4231.6(b) of the existing 
regulation is very difficult to demonstrate for most significantly 
affected plans. These commenters agreed that the requirement in Sec.  
4231.6(b)(3)--that contributions cover benefit payments in the first 
plan year after the transaction--could not be demonstrated for most 
mature plans, including plans that are well funded and projected to 
remain solvent indefinitely.
    Four commenters also requested guidance on how an enrolled actuary 
may ``otherwise demonstrate'' solvency. PBGC's existing regulation 
provides that an enrolled actuary may ``otherwise demonstrate'' 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. This 
option is an alternative to the applicable ``plan solvency'' test under 
Sec.  4231.6. Three of these commenters requested this guidance even if 
PBGC doesn't adopt its proposed changes. PBGC is considering these 
comments and whether to propose guidance on how an enrolled actuary may 
``otherwise demonstrate'' solvency.
    Seven commenters advocated for PBGC to change its existing 
regulation to provide a means for plans facing insolvency to satisfy 
the solvency requirement under section 4231(b)(3) of ERISA. According 
to commenters, PBGC could exercise its regulatory authority under 
section 4231(a) of ERISA to allow these plans to engage in transactions 
that may be beneficial. For example, as two commenters stated, a 
critical and declining status plan that cannot show that it will avoid 
insolvency with benefit suspensions under section 305(e)(9) of ERISA 
may be able to make that showing after it engages in a transfer (or the 
transfer might lessen the amount of benefit suspensions needed to avoid 
insolvency). A critical and declining status plan (which, among other 
criteria, is projected to become insolvent) may not, however, satisfy 
the solvency requirement under section 4231(b)(3) of ERISA and PBGC's 
regulation for a transfer. Even so, as one commenter stated, most plans 
can satisfy the solvency test in PBGC's regulation for plans that are 
not significantly affected--that assets equal or exceed five times the 
benefit payments--including many plans that are projected to be 
insolvent several years in the future.
    PBGC continues to consider these comments to its proposed changes 
and to provisions of the existing regulation interpreting the solvency 
requirement under section 4231(b)(3) of ERISA. To allow more 
consideration of the concerns raised by the public comments, PBGC will 
not adopt its proposed changes to the ``plan solvency'' tests under 
Sec.  4231.6 and to the definition of a ``significantly affected plan'' 
under Sec.  4231.2. PBGC may eventually re-propose changes to 
provisions in the existing regulation interpreting the solvency 
requirement under section 4231(b)(3) of ERISA in consideration of these 
comments.
    In addition, PBGC proposed to amend Sec.  4231.3 to provide that 
plan sponsors may engage in informal consultations with PBGC to discuss 
proposed mergers and transfers. Two commenters supported this change. 
One of the commenters stated that having access to PBGC for informal 
consultation will be extremely helpful and may result in a more 
efficient process. Thus, PBGC is adopting its proposed voluntary option 
for assistance in this final rule.

Facilitated Mergers

    PBGC proposed new rules to implement the facilitated merger 
provisions added by MPRA. Two commenters requested examples of the 
types of facilitation, other than financial assistance, that PBGC might 
approve for a facilitated merger. Section 4231(e)(1) of ERISA provides 
examples of facilitation that PBGC may provide if it makes a 
determination, in consultation with the Participant and Plan Sponsor 
Advocate, about the interests of the participants and beneficiaries. 
One example of facilitation is ``communication with stakeholders.'' In 
that regard, PBGC could, for example, participate in meetings or a town 
hall to discuss or answer questions about a potential merger with 
stakeholders.
    The other comments to the facilitated merger provisions in PBGC's 
proposed rule addressed mergers facilitated with financial assistance 
(financial assistance mergers). In the preamble of the proposed rule, 
PBGC discussed the amount of financial assistance it generally expects 
to be available for

[[Page 46646]]

financial assistance mergers. PBGC stated that, while it imposes no 
additional limitations on the amount of financial assistance available, 
MPRA requires PBGC to certify that its ability to meet existing 
financial obligations to other plans will not be impaired by the 
financial assistance provided for a merger or partition.\8\ In 
addition, PBGC stated that it anticipates 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). This is 
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). Finally, although PBGC will 
decide the structure of financial assistance on a case-by-case basis, 
PBGC stated that it expects that in most cases the financial assistance 
it provides in a facilitated merger will be in the form of periodic 
payments.
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    \8\ See sections 4231(e)(2)(C) and 4233(b)(4) of ERISA. PBGC may 
approve a partition of an eligible multiemployer plan under section 
4233 of ERISA to provide for a transfer of liabilities from an 
original plan to a successor plan that is created by a partition 
order. PBGC provides financial assistance to pay for the guaranteed 
benefits under the successor plan.
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    One commenter requested a more complete discussion of PBGC's 
rationale for linking the amount of financial assistance available to a 
critical and declining status plan for a financial assistance merger to 
the amount available to that plan for a partition. The commenter noted 
that the financial assistance available to a plan for a partition 
``relates only to a portion of the plan's liabilities.'' The commenter 
suggested that it would be more appropriate to limit financial 
assistance to an amount generally less than the present value of the 
amount of future financial assistance to the critical and declining 
status plan.
    This comment overlooks a statutory condition on PBGC's provision of 
financial assistance for a merger. While MPRA requires PBGC to 
reasonably expect that the financial assistance provided for a merger 
will reduce PBGC's expected long-term loss with respect to the plans 
involved,\9\ MPRA also requires that the financial assistance provided 
for a merger not impair PBGC's ability to meet existing financial 
obligations to other plans.
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    \9\ Section 4231(e)(2)(B)(i) of ERISA.
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    Since publication of the proposed rule, PBGC has provided its 
interpretation of the statutory condition that the financial assistance 
provided for a merger will not impair PBGC's ability to meet existing 
financial obligations to other plans.\10\ Looking at the statute as a 
whole, PBGC interprets this condition to require that the financial 
assistance provided for a merger not materially advance the date when 
PBGC's multiemployer insurance fund is projected to become insolvent. 
This interpretation is based on PBGC's current understanding of the 
universe of potentially eligible multiemployer plans, and the financial 
condition of the multiemployer insurance program, which can change over 
time.
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    \10\ See ``Partition FAQs for Practitioners,'' accessible at 
https://www.pbgc.gov/prac/pg/mpra/partition-faqs-for-practitioners#impairment.
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    Although application of the non-impairment condition may result in 
limiting financial assistance for a merger to the amount available for 
a partition, there may be situations where it does not. Therefore, PBGC 
will rely on the non-impairment test described above. PBGC's analysis 
of the non-impairment condition is highly fact-specific. PBGC 
encourages plans to engage in informal consultation with PBGC to help 
determine how much financial assistance would be permitted by the 
statute.
    Under Sec. Sec.  4231.12 through 4231.16, PBGC proposed information 
requirements for a request for a facilitated merger. PBGC requires the 
information proposed so that it could determine whether the statutory 
conditions are satisfied. One commenter stated that a plan would incur 
considerable cost to provide the information PBGC requires for a 
financial assistance merger ``solely for purposes of showing PBGC that 
the financial assistance is no more than the cost of a hypothetical 
partition.'' Financial assistance mergers, unlike partitions, seek 
assistance to continue to pay plan benefits. Accordingly, the commenter 
suggested that plans shouldn't have to provide the same substantiation 
as with partition, unless the request is coupled with a request to the 
Department of the Treasury (Treasury) for approval of benefit 
suspensions.
    In consideration of this comment, PBGC will not adopt its proposed 
information requirements about the maximum benefit suspensions 
permissible under section 305(e)(9) of ERISA, which are required for 
partition. Thus, PBGC will not adopt its proposed requirement under 
Sec.  4231.15 that each critical and declining status plan provide a 
projection of benefit disbursements reflecting maximum benefit 
suspensions. Also, PBGC will not adopt its proposed requirement under 
Sec.  4231.16 to include with participant census data the monthly 
benefit reduced by the maximum benefit suspension. If the amount of 
financial assistance requested for a merger is at the margins of 
satisfying the statutory condition that PBGC's ability to meet existing 
financial obligations to other plans will not be impaired, PBGC may 
request this information to help the critical and declining status 
plan(s) determine whether a partition is more likely to satisfy this 
statutory condition.
    Under Sec.  4231.15, PBGC proposed guidance on the required 
demonstration that financial assistance is necessary for the merged 
plan to become or remain solvent. One commenter stated that requiring a 
merged plan to project solvency for a minimum of 20-30 years for a 
financial assistance merger is inconsistent with MPRA's purpose. The 
commenter suggested that the demonstration should be that the plans 
will postpone insolvency with the financial assistance merger. While 
PBGC may exercise its discretion to approve a financial assistance 
merger that it determines necessary to allow one or more of the plans 
to avoid or postpone insolvency,\11\ section 4231(e)(2)(B)(ii) of ERISA 
requires that PBGC reasonably expect that the financial assistance is 
necessary for the merged plan to become or remain solvent. PBGC 
interprets the requirement that the merged plan become or remain 
solvent to mean that solvency must be demonstrated for the merged plan 
over a period, not that insolvency is postponed.
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    \11\ See section 4231(e)(2) of ERISA.
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    PBGC proposed differentiated solvency demonstrations based on the 
financial health of the merged plan, allowing flexibility for healthier 
merged plans. Under Sec.  4231.15, the type of projection required 
depends on whether the merged plan would be in critical status under 
section 305(b) of ERISA immediately after 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 be in critical status under 
section 305(b)(2) of ERISA immediately after the merger without 
financial assistance, then the merged plan would be in critical status 
for purposes of the projections. Alternatively, if the actuary

[[Page 46647]]

anticipates that the merged plan would not satisfy the criteria for 
critical status under section 305(b)(2) 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).
    PBGC proposed that the plan's enrolled actuary may use any 
reasonable estimation method for determining the expected funded status 
of the merged plan. The preamble of the proposed rule also suggested 
that 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 requested 
comments on this issue. Two commenters responded in favor of each 
approach. One commenter suggested that PBGC should take care to allow 
the enrolled actuary to make reasonable adjustments to the data and 
projections from the most recent status certifications if the above 
alternative is included in the final regulations. PBGC agrees with 
these comments. Because the use of status certifications for the 
preceding year is intended to provide a simpler and cost-effective 
alternative, PBGC will allow, but not require, reasonable adjustments 
to be made. Thus, Sec.  4231.15 of this final rule adopts the option, 
supported by commenters, for the enrolled actuary to base the 
determination 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 (reasonable adjustments are permitted but not required).
    To encourage the merger of critical and declining status plans into 
financially stable plans, PBGC proposed a solvency demonstration based 
on the circumstances and challenges specific to the merged plan. For a 
merged plan that would not be in critical status and for which solvency 
could be demonstrated for 20 years without taking financial assistance 
into account (or with less than the full amount taken into account), 
PBGC proposed a demonstration that financial assistance is necessary to 
mitigate the adverse effects of the merger on the merged plan's ability 
to remain solvent. In the preamble of the proposed rule, PBGC provided 
as examples that 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 requested comments on this issue.
    One commenter stated that, ``the solvency measure should be that 
the merger does not increase the risk of insolvency for the merged 
plan.'' If the merger would have no effect on the merged plan's ability 
to remain solvent, financial assistance would not be necessary for the 
merged plan to become or remain solvent as required by the statute.
    Two commenters were concerned that a financially stable plan for 
which solvency is projected after the merger (without taking financial 
assistance into account) would not be able to show adverse effects of 
the merger on the merged plan's ability to remain solvent. One of these 
commenters provided the example of a financially stable plan that would 
have a lower funded percentage after the merger but for which solvency 
would still be projected. The commenter stated that the financially 
stable plan would likely not agree to that merger without financial 
assistance, because the merger would increase the plan's risk of 
insolvency if there were adverse plan experience in the future. The 
commenters suggested that the demonstration focus on the merger's 
impact on metrics such as the financially stable plan's ability to 
satisfy funding requirements or its funded percentage. The commenters 
also suggested permitting consideration of unfavorable future 
experience. One of these commenters suggested that PBGC provide that 
the demonstration may be based on stress testing over a long-term 
period (which could consider unfavorable future experience).
    To demonstrate that financial assistance is necessary for the 
merged plan to become or remain solvent, the enrolled actuary must show 
that the merger has adverse effects on the merged plan's ability to 
remain solvent. If no adverse effect on solvency can be demonstrated, 
financial assistance is not necessary. In response to the above 
comments, PBGC will allow this demonstration to consider unfavorable 
future experience. Thus, PBGC will add in this final rule that the 
demonstration that financial assistance is necessary to mitigate the 
adverse effects of the merger on the merged plan's ability to remain 
solvent may be based on stress testing over a long-term period (and may 
reflect reasonable future adverse experience), using a reasonable 
method in accordance with generally accepted actuarial standards.
    For example, one possible demonstration that financial assistance 
is necessary to mitigate the adverse effects of the merger on the 
merged plan's ability to remain solvent could be based on a projection 
of the merged plan's insolvency within 30 years using an investment 
return assumption no less than one-half of a standard deviation less 
than the best estimate assumption, and using a current set of capital 
market assumptions from a recognized investment consultant and the 
plans' current asset allocation.
    This demonstration may also be based on stochastic modeling. For 
example, while not a threshold, a possible demonstration may be based 
on stochastic modeling showing that the merged plan's probability of 
insolvency within 30 years of the merger exceeds 65% without the 
requested financial assistance.

Interaction Between Benefit Suspension and Merger

    Plans in critical and declining status may suspend benefits under 
section 305(e)(9) of ERISA under certain conditions. Treasury has 
interpretative jurisdiction over the subject matter in section 305. In 
the preamble of the proposed rule, PBGC suggested that plan sponsors 
must carefully consider how the various requirements under sections 
305(e)(9) and 4231 would apply.
    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 concurrently with the merger, 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 implementing regulations. Under section 
305(e)(9)(C)(ii) of ERISA, 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.\12\ PBGC suggested that,

[[Page 46648]]

absent these determinations, restoration of the suspended benefits 
would be required.
---------------------------------------------------------------------------

    \12\ The required projection under Treasury's regulation is that 
``[t]he plan would not be projected to avoid insolvency . . . if no 
suspension of benefits were applied under the plan.'' 26 CFR 
1.432(e)(9)-1(c)(4)(i)(B).
---------------------------------------------------------------------------

    Four commenters stated that it is contrary to MPRA's remedial 
intent to restore suspended benefits following a merger if the merged 
plan could not demonstrate that continued suspensions are required to 
avoid insolvency. The commenters urged PBGC to work with Treasury to 
issue guidance so that the statute is not interpreted to require 
restoration under these circumstances. In addition, the commenters 
stated that critical and declining status plans that suspend benefits 
would be significantly more likely to attract merger partners, who may 
view benefit suspensions as a necessary condition to merger. Commenters 
suggested that, for purposes of the annual determination required for 
suspensions, Treasury could permit a separate accounting of assets and 
liabilities attributable to the ``plan'' that suspended benefits before 
the merger. The suspended benefits would be restored only if the annual 
determination couldn't be made for this notional plan. These comments 
are beyond the scope of this final rule and should be addressed to 
Treasury, which has jurisdiction over section 305 of ERISA.
    One of these commenters stated that section 4231(b)(2) of ERISA 
isn't implicated if the benefit suspensions under section 305(e)(9) of 
ERISA occur before a merger. Section 4231(b)(2) of ERISA requires that 
no accrued benefit is lower immediately after a merger or transfer than 
the benefit immediately before the transaction. This requirement would, 
however, prohibit a merger or transfer that is contemporaneous with 
benefit suspensions. To allow this transaction, PBGC adds in this final 
rule under Sec.  4231.4 that it may waive this requirement to the 
extent the accrued benefit is suspended under section 305(e)(9) of 
ERISA contemporaneously with a merger or transfer.

Section-by-Section Discussion

Subpart A--General Provisions

Section 4231.1
    Section 4231.1 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. In this final rule, PBGC 
adopts the minor changes it proposed to Sec.  4231.1.\13\
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    \13\ PBGC proposed to remove the reference in Sec.  4231.1(a) of 
the existing regulation to the OMB control number 1212-0022 under 
which information collection in part 4231 has been approved. PBGC 
also proposed to reorganize Sec.  4231.1 and to refer in paragraph 
(b) of this section to the additional requirements and procedures in 
subpart B of part 4231 for a request for a facilitated merger.
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Section 4231.2
    Section 4231.2 defines terms for purposes of part 4231. In this 
final rule, like the proposed, PBGC amends the existing regulation by 
adding new definitions, and by moving existing definitions elsewhere in 
the regulation to Sec.  4231.2. For example, this final rule moves the 
existing definition of ``effective date'' from Sec.  4231.8(a) to Sec.  
4231.2.\14\ In response to comments and pending further consideration, 
PBGC will not adopt its proposed change to the existing definition of a 
``significantly affected plan'' (see above, ``Discussion of 
Comments'').
---------------------------------------------------------------------------

    \14\ This final rule, like the proposed, also changes Sec.  
4231.2 of the existing regulation to add the following to the terms 
defined in Sec.  4001.2 of PBGC's regulations: Annuity, guaranteed 
benefit, normal retirement age, and plan sponsor. In addition, this 
final rule, like the proposed, adds in Sec.  4231.2 definitions for 
the following terms: Advocate, critical and declining status, 
critical status, facilitated merger, financial assistance, financial 
assistance merger, insolvent, and merged plan. Furthermore, this 
final rule, like the proposed, adds in Sec.  4231.2 the terms ``de 
minimis merger,'' and ``de minimis transfer'' and refers to their 
existing definitions in Sec.  4231.7(b) and (c), respectively. 
Finally, this final rule, like the proposed, moves the definition of 
``certified change of collective bargaining representative'' from 
Sec.  4231.2 of the existing regulation to Sec.  4231.3(c).
---------------------------------------------------------------------------

Section 4231.3
    Section 4231.3 provides guidance on the statutory requirements for 
mergers and transfers. PBGC proposed to clearly provide that plan 
sponsors may engage in informal consultations with PBGC to discuss 
proposed mergers and transfers. Two commenters supported this change. 
PBGC agrees with those comments. Thus, PBGC is adopting its proposed 
voluntary option for assistance in this final rule.\15\
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    \15\ This final rule also incorporates by reference in Sec.  
4231.3(a)(1) the waiver to the preservation of accrued benefits 
added under a new Sec.  4231.4(b) in the event of a contemporaneous 
suspension of benefits under section 305(e)(9) of ERISA. In 
addition, this final rule, like the proposed, moves the definition 
of ``certified change of collective bargaining representative'' from 
Sec.  4231.2 of the existing regulation to Sec.  4231.3(c). Finally, 
this final rule, like the proposed, changes Sec.  4231.3 to conform 
references to other sections of part 4231 to the reorganization of 
this final rule.
---------------------------------------------------------------------------

Section 4231.4
    PBGC did not propose any changes to Sec.  4231.4 of the existing 
regulation. 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.
    In this final rule, PBGC maintains this existing guidance without 
change in a new paragraph (a). To allow a merger or transfer that is 
coupled with benefit suspensions under section 305(e)(9) of ERISA, PBGC 
provides in a new paragraph (b) that it may waive the requirement under 
section 4231(b)(2) of ERISA to the extent the participant's or 
beneficiary's accrued benefit is suspended under section 305(e)(9) of 
ERISA contemporaneously with a merger or transfer (see above, 
``Discussion of Comments''). Section 4231.4(b) also provides that, if 
PBGC grants this waiver, the plan provision described under Sec.  
4231.4(a) may exclude accrued benefits only to the extent those 
benefits are suspended under section 305(e)(9) of ERISA 
contemporaneously with the merger or transfer.
Section 4231.5
    Section 4231.5 provides guidance on the actuarial valuation 
requirement under section 4231(b)(4) of ERISA. Under Sec.  4231.5(a) of 
the existing regulation, a plan that is not a significantly affected 
plan (or that is a significantly affected plan only because the 
transaction involves a plan terminated by mass withdrawal under section 
4041A(a)(2) of ERISA) satisfies this requirement 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. Under Sec.  
4231.5(b) of the existing regulation, a significantly affected plan 
(other than a plan that is a significantly affected plan only because 
the transaction involves a plan terminated by mass withdrawal) must 
have an actuarial valuation performed for the plan year preceding the 
proposed effective date of the merger or transfer.
    Multiemployer plans are now generally required to perform actuarial 
valuations not less frequently than once every year.\16\ Thus, PBGC 
proposed to amend Sec.  4231.5 to require, as section 4231(b)(4) of 
ERISA states, 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. PBGC also proposed to provide 
that if

[[Page 46649]]

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. PBGC received no comments on 
these proposed changes and adopts them in this final rule.\17\
---------------------------------------------------------------------------

    \16\ See section 304(c)(7) of ERISA.
    \17\ This final rule, like the proposed, also reorganizes Sec.  
4231.5 of the existing regulation by removing its division into 
paragraphs (a) and (b).
---------------------------------------------------------------------------

Section 4231.6
    Section 4231.6 provides guidance on ``plan solvency'' tests that 
operate as safe harbors under section 4231(b)(3) of ERISA. PBGC 
proposed changes to the tests in Sec.  4231.6(a) and (b) (see above, 
``Discussion of Comments''). Pending further consideration, PBGC is not 
adopting in this final rule the major changes it proposed to the tests 
in Sec.  4231.6(a) and (b) (see above, ``Discussion of Comments''). In 
this final rule, PBGC is adopting the minor changes it proposed to the 
tests in Sec.  4231.6(a) and (b); PBGC received no comments about these 
minor changes.\18\
---------------------------------------------------------------------------

    \18\ For example, PBGC proposed to update a statutory reference 
in Sec.  4231.6(b)(1) of the existing regulation.
---------------------------------------------------------------------------

    Section 4231.6(c) provides rules for determinations about the 
requirements set forth under Sec.  4231.6. PBGC proposed to amend Sec.  
4231.6(c)(1) by requiring withdrawal liability payments to be listed 
separately from contributions. PBGC received no comments on its 
proposed change to Sec.  4231.6(c)(1) and adopts this change in this 
final rule.
Section 4231.7
    PBGC did not propose any changes to Sec.  4231.7 of the existing 
regulation. That section continues to set forth special rules for de 
minimis mergers and transfers.
Section 4231.8
    Section 4231.8 provides guidance on the requirement under section 
4231(b)(1) of ERISA that the plan sponsor notify PBGC of a merger or 
transfer, and on requests for compliance determinations under section 
4231(c). In general, a notice of a merger or transfer must be filed 
well in advance of the transaction's effective date (or not less than 
45 days in advance in the case of a merger for which a compliance 
determination is not requested). Section 4231.8(f) permits PBGC to 
waive the timing of the notice requirements under certain 
circumstances.
    In the case of a facilitated merger, PBGC proposed to 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. PBGC received no comments on its proposed changes 
to Sec.  4231.8 and adopts them in this final rule.\19\
---------------------------------------------------------------------------

    \19\ PBGC also proposed to clarify that a request for a 
compliance determination or facilitated merger must be filed within 
the timing specified in Sec.  4231.8(a) for a notice. In addition, 
PBGC proposed to clarify that a request for a compliance 
determination or facilitated merger, like a notice, is not 
considered filed until all the required information is submitted. 
PBGC also proposed to clarify that the waiver provided in Sec.  
4231.8(f) of the existing regulation relates to the timing 
requirements in Sec.  4231.8(a). Furthermore, PBGC proposed to move 
the definition of ``effective date'' from Sec.  4231.8(a)(1) of the 
existing regulation to Sec.  4231.2, and to move the information 
requirements contained in Sec.  4231.8(e) of the existing regulation 
to Sec.  4231.9. Finally, PBGC proposed to reorganize Sec.  4231.8 
of the existing regulation, to conform references to other sections 
of part 4231 to the reorganization of this final rule, and to add 
that the guidance on who must file is applicable to a request for a 
facilitated merger.
---------------------------------------------------------------------------

Section 4231.9
    Section 4231.9 of this final rule, like the proposed, generally 
retains the information requirements under Sec.  4231.8(e) of the 
existing regulation, with minor modifications. For example, the de 
minimis exception under Sec.  4231.8(e)(6) of the existing regulation 
does not apply to a request for a financial assistance merger. PBGC 
received no comments on its proposed changes to Sec.  4231.9 and adopts 
them in this final rule.\20\
---------------------------------------------------------------------------

    \20\ PBGC also proposed to add that the statement required in 
Sec.  4231.8(e)(5)(i) of the existing regulation about the plan's 
satisfaction of the applicable solvency test must include the 
supporting data, calculations, assumptions, and methods.
---------------------------------------------------------------------------

Section 4231.10
    Section 4231.10 of this final rule, like the proposed, describes 
the additional information required for a request for a compliance 
determination.\21\ In addition to some minor changes, PBGC proposed to 
amend this section to make clear that a request for a compliance 
determination must be filed contemporaneously with a notice of merger 
or transfer.\22\ PBGC received no comments on its proposed changes to 
Sec.  4231.10 and adopts them in this final rule.
---------------------------------------------------------------------------

    \21\ PBGC proposed to move these requirements from Sec.  4231.9 
of the existing regulation, except certain information requirements.
    \22\ PBGC also proposed to delete the ``place of filing'' 
provision under Sec.  4231.9(a)(1) of the existing regulation. 
Section 4231.8(e) of this final rule, like the proposed, provides 
guidance about where to file. In addition, PBGC proposed to delete 
certain information requirements under Sec.  4231.9(b) of the 
existing regulation because those requirements are contained in 
Sec.  4231.9(e) of this final rule. Finally, PBGC proposed to 
conform references to other sections of part 4231 to the 
reorganization of this final rule.
---------------------------------------------------------------------------

Section 4231.11
    Section 4231.11 of this final rule, like the proposed, describes 
the requirements for actuarial calculations and assumptions.\23\ PBGC 
proposed to conform these requirements to section 304(c)(3) of ERISA, 
to specify that calculations must be performed by an enrolled actuary, 
and to expand the bases upon which PBGC may require updated 
calculations. PBGC received no comments on its proposed changes under 
Sec.  4231.11 and adopts them in this final rule.
---------------------------------------------------------------------------

    \23\ PBGC proposed to move these requirements from Sec.  4231.10 
of the existing regulation.
---------------------------------------------------------------------------

Subpart B--Additional Rules for Facilitated Mergers

Section 4231.12
    Section 4231.12 of this final rule, like the proposed, 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 the general 
provisions of subpart A of the regulation, in addition to section 
4231(e) of ERISA and the additional rules for facilitated mergers of 
subpart B. The procedures set forth in this final rule 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 based on the guaranteed benefits of the plans involved in the 
merger that are in critical and declining status.
    Section 4231.12 of this final rule, like the proposed, states that 
a request must include the information required for a notice of merger 
or transfer (Sec.  4231.9) and request for compliance determination 
(Sec.  4231.10), 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 information about the plans (Sec.  4231.13), information about 
the proposed financial assistance merger (Sec.  4231.14), actuarial and 
financial information

[[Page 46650]]

(Sec.  4231.15), and participant census data (Sec.  4231.16). This 
final rule, like the proposed, 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. As 
with the proposed, this final rule also imposes an affirmative 
obligation on plan sponsors to promptly notify PBGC in writing if a 
plan sponsor 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.
    PBGC received no comments on its proposed Sec.  4231.12 and adopts 
it in this final rule.
Section 4231.13
    Section 4231.13 of this final rule, like the proposed, provides 
guidance on the various categories of plan-related information required 
for a request for a financial assistance merger, such as trust 
agreements, 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. PBGC received no comments on its proposed Sec.  4231.13 and 
adopts it in this final rule.
Section 4231.14
    Section 4231.14 of this final rule, like the proposed, 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 also requires 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. PBGC received no 
comments on its proposed Sec.  4231.14 and adopts it in this final 
rule.
Section 4231.15
    Section 4231.15 of this final rule, like the proposed, identifies 
the actuarial and financial information required for a request for a 
financial assistance merger. Section 4231.15(a) and (b) of this final 
rule, like the proposed, relate to plan actuarial reports and actuarial 
certifications, which should ordinarily be within the possession of the 
plan sponsors or plan actuaries. Section 4231.15(c)-(e) of this final 
rule, like the proposed, requires 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. PBGC adopts its 
proposed Sec.  4231.15 in this final rule with the modifications 
discussed below, which respond to comments it received (see above, 
``Discussion of Comments'').
    Section 4231.15 of this final rule, like the proposed, provides 
that each critical and declining status 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 this final rule, like the proposed, also 
provides guidance on the required demonstration that financial 
assistance is necessary for the merged plan to become or remain 
solvent. The type of projection required depends 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. This 
final rule adds the option, supported by commenters, for the enrolled 
actuary to base the determination of whether the merged plan would be 
in critical status 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 (reasonable adjustments are permitted but not required) (see 
above, ``Discussion of Comments''). This final rule also clarifies that 
the statement of whether the merged plan would be in critical status 
must be certified by an enrolled actuary.
    Under Sec.  4231.15 of this final rule, like the proposed, 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 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 it 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), under Sec.  4231.15 of this final rule, like the proposed, 
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. In 
this final rule, like the proposed, if this 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 response to comments, PBGC adds in this final rule that the 
demonstration that financial assistance is necessary to mitigate the 
adverse effects of the merger on the merged plan's ability to remain 
solvent may be based on stress testing over a long-term period (and may 
reflect reasonable future adverse experience), using a reasonable 
method in accordance with generally accepted actuarial standards (see 
above, ``Discussion of Comments'').
    In response to a comment, PBGC will not adopt in this final rule 
its proposed requirement that each critical and declining status plan 
provide a projection of benefit disbursements reflecting maximum 
benefit suspensions (see above, ``Discussion of Comments'').
    Finally, to provide a cost-effective alternative, PBGC adds the 
option to estimate benefit disbursements to satisfy the requirement 
that each critical and declining status plan provide a projection of 
benefit disbursements reflecting reduced benefit disbursements at the 
PBGC-guarantee level. This final rule also clarifies that the 
projection of benefit disbursements must include the supporting data, 
calculations, assumptions, and, if applicable, a description of 
estimates used.
Section 4231.16
    Under Sec.  4231.16, PBGC proposed that a request for a financial 
assistance merger include certain types of participant census data. In 
response to a comment, PBGC will not adopt in this final rule its 
proposed requirement that this participant census data include the

[[Page 46651]]

monthly benefit reduced by the maximum benefit suspension permissible 
under section 305(e)(9) of ERISA (see above, ``Discussion of 
Comments''). Otherwise, in this final rule, PBGC adopts its proposed 
Sec.  4231.16 with the clarification that the projections for which the 
census data must be provided include the projection in Sec.  
4231.15(d).
Section 4231.17
    Section 4231.17 of this final rule, like the proposed, describes 
how PBGC will notify a plan sponsor(s) 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.\24\ 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 after notifying the 
plan sponsor(s) in writing of its approval. The decision to approve or 
deny a request for facilitated merger under section 4231(e) of ERISA is 
within PBGC's discretion and constitutes a final agency action not 
subject to PBGC's rules for reconsideration or administrative appeal. 
PBGC received no comments on its proposed Sec.  4231.17 and adopts it 
in this final rule.
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

Section 4231.18
    Section 4231.18 of this final rule, like the proposed, describes 
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. Based on the 
foregoing, Sec.  4231.18(a) provides 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) states 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. PBGC 
received no comments on its proposed Sec.  4231.18 and adopts it in 
this final rule.

Cost-Benefit Analysis

In general

    Because this rulemaking relates to transfer payments, it is not 
subject to the requirements of Executive Order 13771. PBGC further 
notes that it results in no more than de minimis net costs. The rule 
has been determined to be ``significant'' under Executive Order 12866. 
Accordingly, the Office of Management and Budget (OMB) has reviewed 
this final rule under E.O. 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, and 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 to 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 that would 
have other substantial impacts. It has been determined that this final 
rule is not economically significant. Thus, a comprehensive regulatory 
impact analysis is not required. But PBGC has examined the economic and 
policy implications of this rule and has concluded that the net effect 
of the action is to reduce costs in relation to benefits.
    This final rule will enable plans to request a facilitated merger, 
including a request for financial assistance. Given the limits on 
PBGC's financial assistance for mergers and partitions imposed by the 
requirement that such assistance not impair PBGC's existing financial 
assistance obligations,\25\ PBGC expects that fewer than 20 plans would 
be approved for either financial assistance merger or partition over 
the next three years (about six plans per year), and that the total 
financial assistance PBGC would provide under both provisions for basic 
benefits guaranteed for multiemployer plans would be less than $60 
million per year.
---------------------------------------------------------------------------

    \25\ See sections 4231(e)(2)(C) and 4233(b)(4) of ERISA. 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 involved will be reduced, and its ability 
to meet existing financial obligations to other plans will not be 
impaired by the financial assistance.
---------------------------------------------------------------------------

    Even with the limits on PBGC's resources for multiemployer plans, 
which are financed by insurance premiums, facilitated mergers under 
this final rule will help plans preserve retirement benefits for 
America's workers and retirees. In addition to receiving enough 
financial assistance to remain solvent, merged plans may gain 
efficiencies from lower administration and investment expenses. As a 
result, benefits in the merged plan would be more secure.
    This final rule has new information requirements pertaining to 
financial assistance mergers, but the benefits of these facilitated 
mergers greatly outweigh the costs of the new filing requirements. PBGC 
estimates that the transfer impacts of this final rule will be about 
$65.19 million, and the net costs of the final rule will be about 
$184,500, as shown in the following table and as explained in more 
detail below.

----------------------------------------------------------------------------------------------------------------
       Annual transfer amounts            Before final rule         After final rule           Net transfer
----------------------------------------------------------------------------------------------------------------
PBGC financial assistance............  $0.....................  $60 million............  $60 million.
Benefits preserved above PBGC-         $0, assumes plan         $4.68 million..........  $4.68 million.
 guarantee.                             insolvent.
Reduced basic plan administrative      ($60,000)..............  ($30,000)..............  $30,000.
 expenses.
Reduced investment management fees...  ($300,000).............  ($150,000).............  $150,000.
Reduced valuation and actuarial fees.  ($300,000).............  ($150,000).............  $150,000.
Reduced plan audit and Form 5500       ($360,000).............  ($180,000).............  $180,000.
 expenses.
Total transfer amounts...............  ($1.02 million)........  $64.17 million.........  $65.19 million.
----------------------------------------------------------------------------------------------------------------

[[Page 46652]]

 
         Annual cost amounts              Before final rule         After final rule             Net cost
----------------------------------------------------------------------------------------------------------------
Filing requirements..................  \26\ $43,550...........  $228,050...............  $184,500.
----------------------------------------------------------------------------------------------------------------

    The ``net'' column shows the effect of this final rule (the 
``after'' column minus the ``before'' column). The estimated net 
transfer amounts and net costs of this final rule are based on 
financial assistance mergers. The benefits preserved, reduced expenses, 
and costs are explained in more detail below.
---------------------------------------------------------------------------

    \26\ The collection of information under part 4231, before this 
final rule, is approved by OMB under control number 1212-0022.
---------------------------------------------------------------------------

    In addition to preserving benefits and enabling administrative 
efficiencies, this final rule may provide qualitative benefits. First, 
the merged plan may be able to have additional investment 
diversification opportunities because of its larger pool of assets. 
Second, the employer contribution base generally expands and may be 
more diverse and, thus, less at risk to localized problems.

Benefits Preserved

    This final rule preserves participants' benefits that would be 
reduced if the plan did not merge and became insolvent. When a 
multiemployer plan becomes insolvent, PBGC guarantees benefits up to 
the legal limit of $12,870 per year for an individual with 30 years of 
service. A PBGC study shows that, 54 percent of the time, participants 
facing a benefit reduction, in plans that have terminated and that are 
expected to become insolvent, are projected to lose 10 percent or more 
of their benefits.\27\ In 2010, the average monthly benefit received by 
retirees in all multiemployer plans was $922.\28\ PBGC estimates 
$1,200/participant per year in benefits preserved based on an estimate 
of $100/participant per month--10 percent of the $922 average monthly 
benefit (rounded). PBGC further estimates that about 50 percent of 
participants \29\ in the merged plans, or about 650 participants \30\ 
per plan, will have their benefits preserved for an estimated total of 
$4,680,000 per year ($1,200 x 650 participants x 6 plans).
---------------------------------------------------------------------------

    \27\ See ``PBGC's Multiemployer Guarantee'' (March 2015) at 7, 
Figure 6, accessible at https://www.pbgc.gov/documents/2015-ME-Guarantee-Study-Final.pdf. This PBGC study of its guarantee for 
multiemployer plans covered current plans, plans that are insolvent 
and receiving financial assistance, and plans that have terminated 
and which PBGC believes are likely to require future financial 
assistance (future plans).
    \28\ See ``Multiemployer Pension Plans: Report to Congress 
Required by the Pension Protection Act of 2006'' (Jan. 22, 2013) at 
10, accessible at https://www.pbgc.gov/documents/pbgc-report-multiemployer-pension-plans.pdf. The average monthly benefit is 
determined by dividing benefits paid under all plans by the number 
of retired participants under all plans. The average is somewhat 
inflated because benefits paid during the year include lump sum 
payments (mostly de minimis lump sums of $5,000 or less). The 
average monthly benefit received in 2010 is higher in transportation 
industry plans ($1,324), where an annual benefit can reach $30,000 
or more for a participant with 30 years of service, and in 
construction industry plans ($1,279); it is lower in retail trade 
and service industry plans ($620).
    \29\ See ``PBGC's Multiemployer Guarantee'' (March 2015) at 7, 
Figure 5, accessible at https://www.pbgc.gov/documents/2015-ME-Guarantee-Study-Final.pdf. Figure 5 shows that 49 percent of 
participants in future plans receive their full benefit, and 51 
percent of participants in future plans face a benefit reduction.
    \30\ PBGC estimates that the average plan has 1,300 
participants, based on PBGC's experience and participant data from 
plans that merged in 2014.
---------------------------------------------------------------------------

Reduced Administrative and Investment Expenses

    Merged plans may gain administrative and investment efficiencies, 
preserving assets to pay plan benefits. While expenses vary depending 
on plan size, PBGC estimates the following expenses would be reduced 
for each financial assistance merger:

 Basic administrative expenses (estimated $5,000)
 Investment management fees and expenses (estimated $25,000-
$35,000)
 One plan valuation instead of two (estimated $10,500-$35,000)
 One plan audit and Form 5500 filing instead of two (estimated 
$15,000-$40,000)

Filing Requirements

    Plan sponsors are required under section 4231(b)(1) of ERISA to 
file with PBGC notices of proposed merger or transfer. As discussed in 
this final rule, plan sponsors requesting financial assistance mergers 
must prepare and file additional information, including the compilation 
of merger information, plan information, actuarial and financial 
information, and participant census data information. As discussed 
further in the Paperwork Reduction Act section (see below), the cost to 
prepare the notices to PBGC, excluding financial assistance mergers, is 
$43,550. PBGC assumes that it will receive a total of six requests for 
financial assistance mergers, with a cost of $184,500.

Regulatory Flexibility Act

    The Regulatory Flexibility Act \31\ 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 final 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 a final regulatory flexibility 
analysis at the time of the publication of the final 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.
---------------------------------------------------------------------------

    \31\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

Small Entities

    For purposes of the Regulatory Flexibility Act requirements with 
respect to this final rule, 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 \32\ and is consistent with 
certain requirements in title I of ERISA \33\ and the Internal Revenue 
Code (Code),\34\ as well as the definition of a small entity that DOL 
has used for purposes of the Regulatory Flexibility Act.\35\
---------------------------------------------------------------------------

    \32\ See, e.g., special rules for small plans under part 4007 
(Payment of Premiums).
    \33\ 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.
    \34\ See, e.g., section 430(g)(2)(B) of the Code, which permits 
single-employer plans with 100 or fewer participants to use 
valuation dates other than the first day of the plan year.
    \35\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
---------------------------------------------------------------------------

    Thus, PBGC believes that assessing the impact of this final 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 \36\ under the Small Business Act. PBGC requested

[[Page 46653]]

comments on the appropriateness of the size standard used in evaluating 
the impact of its proposed rule on small entities. PBGC received no 
comments on this point.
---------------------------------------------------------------------------

    \36\ See, 13 CFR 121.201.
---------------------------------------------------------------------------

Certification

    Based on its definition of small entity, PBGC certifies under 
section 605(b) of the Regulatory Flexibility Act that the amendments in 
this rule will not have a significant economic impact on a substantial 
number of small entities. Based on data for the most recent premium 
filings, PBGC estimates that only 38 plans of the approximately 1,400 
plans covered by PBGC's multiemployer program are small plans. 
Furthermore, plans may, but are not required to, merge or request 
financial assistance to merge. As discussed above, plans that merge 
will obtain economic benefits from reduced expenses and preserved plan 
benefits. A facilitated merger can improve the plans' ability to remain 
solvent and to continue paying participants' benefits. Merger may be 
particularly useful for small plans due to economies of scale. 
Accordingly, as provided in section 605 of the Regulatory Flexibility 
Act, sections 603 and 604 do not apply.

Paperwork Reduction Act

    PBGC is submitting the information collection requirements under 
part 4231 to OMB for review and approval under the Paperwork Reduction 
Act. The collection of information under part 4231 is currently 
approved under OMB control number 1212-0022 (expires September 30, 
2020). 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.
    Multiemployer plans requesting a merger or transfer are required to 
file a notice with PBGC with required information under part 4231. PBGC 
needs the information submitted by plans to provide a basis for 
determining whether a merger or transfer satisfies statutory 
requirements. Plans may also request a compliance determination by 
providing additional information to enable PBGC to make an explicit 
finding that the merger or transfer requirements have been satisfied.
    PBGC's current approval for the collection of information under 
part 4231 is for an estimated 14 transactions each year for which plan 
sponsors submit notices and requests for a compliance determination. 
Changes in this final rule that affect mergers and transfers that are 
not subject to the new requirements for facilitated mergers are not 
expected to have an impact on the burden of the information collection. 
The current approved annual burden for the collection of information is 
10 hours in-house and $42,800 for work done by outside contractors, 
including attorneys and actuaries.
    Most of the information filing requirements under part 4231 are for 
financial assistance mergers. PBGC estimates that under this final rule 
there will be six requests for a financial assistance merger. The 
estimated annual burden is 60 hours in-house (10 hours per application) 
with an estimated dollar equivalent of $4,500, based on an assumed 
blended hourly rate of $75 for administrative, clerical, and 
supervisory time. The estimated annual cost burden is $180,000 ($30,000 
per application) for work done by outside contractors, including 
attorneys and actuaries. This estimate is based on 450 contracted hours 
(six applications x 75 hours) and assumes an average hourly rate of 
$400.
    The total annual burden for the collection of information under 
part 4231 to prepare the notices and comply with the additional 
requirements for financial assistance mergers is 70 hours and $222,800, 
as shown in the following table:

----------------------------------------------------------------------------------------------------------------
                                                                                 Hour burden--
                         Respondents                            Hour burden     equivalent cost     Cost burden
                                                                  (hours)
----------------------------------------------------------------------------------------------------------------
Current approved respondents: 14............................              10              $750           $42,800
Facilitated mergers: 6......................................              60             4,500           180,000
                                                             ---------------------------------------------------
    Totals: 20 respondents..................................              70             5,250           222,800
----------------------------------------------------------------------------------------------------------------

List of Subjects in 29 CFR Part 4231

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


0
For the reasons stated in the preamble, PBGC is amending 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

[[Page 46654]]

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.
    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.
    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, or
    (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.
    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 (except as provided under Sec.  
4231.4(b)).
    (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. A plan sponsor may contact PBGC on an 
informal basis to discuss a potential merger or transfer.


Sec.  4231.4  Preservation of accrued benefits.

    (a) General. 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

[[Page 46655]]

the effective date of the merger or transfer than the benefit 
immediately before the merger or transfer. Except as provided in 
paragraph (b) of this section, 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.
    (b) Waiver. PBGC may waive the requirement of paragraph (a) of this 
section, Sec.  4231.3(a)(1), and section 4231(b)(2) of ERISA to the 
extent the accrued benefit is suspended under section 305(e)(9) of 
ERISA contemporaneously with the merger or transfer. If waived, the 
plan provision described under paragraph (a) of this section may 
exclude accrued benefits only to the extent those benefits are 
suspended under section 305(e)(9) of ERISA contemporaneously with the 
merger or transfer.


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) The plan's expected fair market value of 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, the plan's expected 
fair market value of assets as of the beginning of the plan year plus 
expected contributions and investment earnings equal or exceed expected 
expenses and benefit payments for the plan year.
    (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 five 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 equals or exceeds the total amount of expected 
benefit payments for the first five 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 the unfunded accrued benefits plus expected normal costs for the 
period. The enrolled actuary may select as the amortization period 
either--
    (i) The first 25 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 an aggregate funding method is used for the plan, 
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

[[Page 46656]]

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 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) Except as provided under Sec.  4231.4(b), 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 either 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)).

[[Page 46657]]

    (3) The expected benefit payments for the plan for 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 for 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 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) 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

[[Page 46658]]

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.  4231.9(f).
    (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 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 (which may be estimated) 
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). Include the supporting data, calculations, 
assumptions, and, if applicable, a description of estimates used for 
this projection.
    (e) 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 certified by an enrolled actuary of whether the 
merged plan would be in critical status for purposes of paragraph 
(e)(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 or as set forth in this 
paragraph), 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. The 
enrolled actuary may determine whether the merged plan would be in 
critical status 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 (reasonable adjustments are permitted but not required).
    (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 or as set forth in 
paragraph (e)(1) of this section), 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. The demonstration that financial assistance is necessary to 
mitigate the adverse effects of the merger on the merged

[[Page 46659]]

plan's ability to remain solvent may be based on stress testing over a 
long-term period (and may reflect reasonable future adverse 
experience), using a reasonable method in accordance with generally 
accepted actuarial standards.
    (f) If applicable, a copy of the plan actuary's certification under 
section 305(e)(9)(C)(i) of ERISA.
    (g) The rules in Sec.  4231.6(c) apply to the solvency projections 
described in paragraphs (c) and (e) of this section, 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) 
through (e), 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) Benefit commencement date (for participants in pay status and 
others for which the reported benefit will not be payable at normal 
retirement age).
    (h) 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.
    (i) If an actuarial increase for postponed retirement applies, or 
if the form of annuity is a Social Security level income benefit, 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 after notifying the plan sponsor(s) 
in writing of its approval.
    (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 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.

William Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2018-19988 Filed 9-13-18; 8:45 am]
 BILLING CODE 7709-02-P