[The Regulatory Plan and Unified Agenda of Federal Regulations]
[Pension Benefit Guaranty Corporation Regulatory Plan]
[From the U.S. Government Printing Office, www.gpo.gov]


PENSION BENEFIT GUARANTY CORPORATION (PBGC)

Statement of Regulatory Priorities
PBGC Insurance Programs
The Pension Benefit Guaranty Corporation (PBGC) administers two 
insurance programs under title IV of the Employee Retirement Income 
Security Act of 1974, as amended (ERISA): a single-employer plan 
termination insurance program and a multiemployer plan insolvency 
insurance program.
Under the single-employer insurance program, the PBGC has two primary 
roles. First, when a plan with insufficient assets to pay guaranteed 
benefits terminates, PBGC pays participants and beneficiaries their 
guaranteed benefits and any unfunded nonguaranteed benefits that are 
payable based on recoveries from employers. Second, PBGC is responsible 
for providing plan sponsors and plan administrators with guidance in 
complying with title IV's termination rules and procedures and for 
administering the plan termination process (a process that all 
terminating single-employer plans covered by title IV must go through). 
To finance itself, the PBGC is also responsible for collecting premiums 
paid by covered pension plans and employer liability amounts arising 
from the termination of plans without sufficient assets to pay all plan 
benefits.
In order to carry out these functions, the PBGC must issue regulations 
interpreting a number of complicated statutory provisions. The areas 
covered include implementation of the termination process, 
establishment of procedures for the payment of premiums, and assessment 
and collection of employer liability.
Under the Multiemployer Insurance Program, as revised by the 
Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), PBGC has a 
more limited role than under the Single-Employer Program. The primary 
purpose of MPPAA was to strengthen and foster the continuation of 
multiemployer pension plans by ensuring that employers could not avoid 
their obligation to share in the funding of plan benefits by 
withdrawing from participation in a multiemployer plan. To this end, 
MPPAA imposed withdrawal liability on an employer for either a partial 
or complete withdrawal from a plan. An employer's withdrawal liability 
is generally based on its allocable share of the plan's unfunded vested 
benefits. This liability is calculated, assessed, and collected by the 
multiemployer plan. Disputes arising from the assessment of liability 
are to be resolved first through arbitration and then, if necessary, 
through the courts.
PBGC's insurance function under MPPAA is limited to the provision of 
financial assistance (in the form of a repayable loan) to a plan that 
does not have sufficient assets to pay benefits currently due at the 
guaranteed level. Under MPPAA, guaranteed benefits are generally less 
than a participant's full benefit under the plan, Plan insolvency 
necessitating PBGC financial assistance occurs infrequently.
The multiemployer regulations fall into several general categories: (a) 
rules relieving potential administrative burdens imposed by the statute 
on multiemployer plans; (b) rules waiving or reducing employer 
withdrawal liability in certain limited circumstances; and (c) rules 
authorizing multiemployer plans to adopt their own rules in lieu of 
following certain of the statutory rules.
Regulatory Objectives and Priorities
PBGC regulatory objectives and priorities are developed in the context 
of the statutory purposes of title IV of ERISA: (a) to encourage the 
continuation and maintenance of voluntary private pension plans, (b) to 
provide for the timely and uninterrupted payment of pension benefits to 
participants and beneficiaries, and (c) to maintain the premiums that 
support the insurance programs at the lowest possible levels consistent 
with carrying out the PBGC's statutory obligations (ERISA section 
4002(a)).
In the context of its regulatory program, the PBGC implements its 
statutory purposes by developing regulations that are designed (a) to 
assure the security of the pension benefits of workers, retirees, and 
beneficiaries, (b) to improve services to participants through more 
responsive benefit payment policies and accelerated determinations of 
final benefits, (c) to ensure that the several statutory provisions 
designed to minimize losses for participants in the event of plan 
termination are fully and effectively implemented and enforced, (d) to 
facilitate the collection of monies owed to plans and to the PBGC, 
while keeping the related costs as low as possible and (e) to simplify 
the termination process for plans as much as possible.
Legislative Initiatives
In order to assure that the PBGC can accomplish its statutory purposes, 
the Secretary of Labor established an interagency task force in March 
1993. The task force, which was made up of representatives of PBGC; the 
Departments of Labor, the Treasury, and Commerce; the Office of 
Management and Budget; and the National Economic Council, took a 
comprehensive look at PBGC insurance. Based on the recommendations of 
the task force, the Administration sent to the Congress the Retirement 
Protection Act of 1993 (H.R. 3396, introduced October 28, 1993, and S. 
1780, introduced November 23, 1993). On December 8, 1994, the 
Retirement Protection Act of 1994 was enacted.
The Retirement Protection Act (a) accelerates the funding of 
underfunded single-employer pension plans, (b) phases out the cap on 
the variable rate portion of the premium paid to PBGC by underfunded 
single-employer plans, (c) provides PBGC better tools to prevent 
employers from escaping their plan funding obligations through 
corporate transactions, (d) provides better information to participants 
in underfunded plans on plan funding status and PBGC guarantees, and 
(e) helps assure that workers do not lose pensions because they have 
lost contact with a terminating pension plan covered by PBGC.
Pursuant to the President's Executive Order 12866 of September 30, 
1993, ``Regulatory Planning and Review,'' and the ``Regulatory Reform 
Initiative'' contained in the President's memoranda of March 4, 1995, 
and April 21, 1995, the PBGC has reviewed all of its regulations and 
identified regulatory provisions that can be simplified or eliminated. 
The PBGC will be amending its regulations to make these changes. The 
PBGC will also renumber its regulations to follow the statutory 
numbering scheme, which will make the regulations much easier to use. 
In addition to these regulatory changes, the PBGC is working with the 
Department of Labor and the Internal Revenue Service to simplify the 
Annual Report (Form 5500) filing requirements for pension plans, as 
part of the President's June 1995 initiative, ``Simplifying Pensions.''
The PBGC's regulatory plan for October 1, 1995, to September 30, 1996, 
consists of one significant regulatory action.
_______________________________________________________________________
PBGC

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                          PROPOSED RULE STAGE

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143. CALCULATION AND PAYMENT OF UNFUNDED NONGUARANTEED BENEFITS
Priority:


Other Significant


Legal Authority:


 29 USC 1302(b)(3); 29 USC 1322(c)


CFR Citation:


 29 CFR 2623; 29 CFR 2627


Legal Deadline:


None


Abstract:


The Pension Protection Act of 1987 repealed ERISA sections 4049 and 
4062(c). Those provisions established new employer liability to plan 
participants and beneficiaries in the event of a distress termination 
or involuntary termination by the PBGC of a plan without sufficient 
assets to pay all benefit commitments; the section 4049 trust was the 
vehicle for collecting and distributing these liability amounts. This 
system proved flawed in several respects.
In the Pension Protection Act, Congress created a new scheme by which 
to channel employer liability recoveries to plan participants and 
beneficiaries (amended ERISA section 4022(c)). Under new section 
4022(c), participants no longer have a direct claim for employer 
liability. Instead, the PBGC's claim covers both its shortfall 
(unfunded guaranteed benefits) and participants' losses (unfunded 
nonguaranteed benefits (UNBs)). In turn, the PBGC is to pay a portion 
of its employer liability recovery to pay UNBs to participants and 
beneficiaries.
Section 4022(c) contains several ambiguities and also leaves to the 
PBGC the development of specific rules and procedures to make this 
system work. Thus, a regulation is needed to implement these statutory 
provisions.


Statement of Need:


Section 4022(c) contains several ambiguities and also leaves to the 
PBGC the development of specific rules and procedures necessary to make 
this system work. Thus, a new regulation is needed to implement these 
statutory provisions.


Summary of the Legal Basis:


The PBGC has the authority to issue rules and regulations necessary to 
carry out the purposes of title IV of ERISA.


Alternatives:


The statute provides that the amounts of UNBs that the PBGC will pay 
under terminated plans be based upon the amounts that the PBGC recovers 
on its statutory claims for employer liability against the sponsors of 
those plans and the other trades or businesses under common control 
with the plan sponsors. However, the statute does not prescribe when 
the PBGC is to perform its valuation of its recovery with respect to a 
plan. There are two competing objectives: (1) prompt payment to 
participants of their UNBs and (2) precise calculation of benefit 
entitlements. The PBGC could promote prompt payment at the expense of 
precision of calculation by valuing recoveries whenever the PBGC is 
otherwise ready to calculate benefits under a plan. On the other hand, 
the PBGC could promote precision of calculation at the expense of 
prompt payment by deferring valuation until the collection process is 
finished, even if that means delaying benefit calculations.


Anticipated Costs and Benefits:


Because of the complexities involved, it may take a long time for the 
PBGC to determine what its recovery will be. In addition, it may be 
difficult to value a recovery in cases where the PBGC receives assets 
other than cash or readily marketable securities. Thus, the accuracy of 
the PBGC's computation of the amounts payable to participants would be 
enhanced by waiting longer to make that computation. However, long 
delays are not generally in the best interest of plan participants. The 
regulation will attempt to balance adequacy of precision in benefit 
determinations, avoidance of increased administrative costs, and timely 
payment of benefits.


Risks:


Not applicable.


Timetable:
_______________________________________________________________________
Action                                 DFR Cite

_______________________________________________________________________
NPRM                                                           04/00/96
NPRM Comment Period End                                        06/00/96
Small Entities Affected:


None


Government Levels Affected:


None


Agency Contact:
Peter H. Gould
Senior Counsel
Pension Benefit Guaranty Corporation
Office of the General Counsel
1200 K St. NW.
Washington, DC 20005-4026
Phone: 202 326-4116
RIN: 1212-AA54
BILLING CODE 7708-01-F