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

Federal Register / Vol. 61, No. 231 / Friday, November 29, 1996 / The
                            Regulatory Plan

[[Page 62186]]

PENSION BENEFIT GUARANTY CORPORATION (PBGC)
Statement of Regulatory and Deregulatory Priorities
PBGC Insurance Programs
The Pension Benefit Guaranty Corporation administers two insurance 
programs under title IV of the Employee Retirement Income Security Act 
of 1974: a single-employer plan termination insurance program and a 
multiemployer plan insolvency insurance program. PBGC protects the 
pensions of nearly 42 million working men and women in about 55,000 
private defined benefit plans, including about 2,000 multiemployer 
plans.
Under the single-employer program, PBGC pays guaranteed, and certain 
other, pension benefits to participants and beneficiaries if their plan 
terminates with insufficient assets (distress and involuntary 
terminations). At the end of fiscal year 1995, PBGC was trustee of 
about 2,000 plans, and paid $763 million in benefits to more than 
182,000 people during 1995. Another 210,000 people will receive 
benefits when they retire in the future.
Most terminating defined benefit plans terminate with sufficient assets 
to pay all benefits. PBGC has administrative responsibility for these 
terminations (standard terminations), but its role is limited to seeing 
that proper procedures are followed and participants and beneficiaries 
receive their plan benefits.
The multiemployer program (which covers about 8.7 million workers and 
retirees in about 2,000 insured plans) is funded and administered 
separately from the single-employer program and differs in several 
significant ways. The multiemployer program covers only collectively 
bargained plans involving more than one unrelated employer. PBGC 
provides financial assistance (in the form of a repayable loan) to the 
plan if the plan is unable to pay benefits at the guaranteed level. 
Guaranteed benefits are generally less than a participant's full 
benefit under the plan (and less than the single-employer guaranteed 
benefit). PBGC financial assistance occurs infrequently.
PBGC receives no funds from general tax revenues. Operations are 
financed by insurance premiums, investment income, assets from pension 
plans trusteed by PBGC, and recoveries from the companies formerly 
responsible for the trusteed plans.
To carry out these functions, PBGC must issue regulations interpreting 
such matters as the termination process, establishment of procedures 
for the payment of premiums, and assessment and collection of employer 
liability.
Objectives and Priorities
PBGC regulatory objectives and priorities are developed in the context 
of the statutory purposes of title IV: (1) to encourage voluntary 
private pension plans, (2) to provide for the timely and uninterrupted 
payment of pension benefits to participants and beneficiaries, and (3) 
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)).
PBGC implements its statutory purposes by developing regulations 
designed (1) to assure the security of the pension benefits of workers, 
retirees, and beneficiaries, (2) to improve services to participants, 
(3) to ensure that the statutory provisions designed to minimize losses 
for participants in the event of plan termination are effectively 
implemented, (4) to facilitate the collection of monies owed to plans 
and to the PBGC, while keeping the related costs as low as possible, 
and (5) to simplify the termination process.
Legislative Initiatives
On December 8, 1994, the Retirement Protection Act of 1994 was enacted. 
The Retirement Protection Act (1) accelerates the funding of 
underfunded single-employer pension plans, (2) phases out the cap on 
the variable rate portion of the premium paid to PBGC by underfunded 
single-employer plans, (3) provides PBGC with better tools to prevent 
employers from escaping their plan funding obligations through 
corporate transactions, (4) requires better information to participants 
in underfunded plans on plan funding status and PBGC guarantees, and 
(5) helps assure that workers do not lose pensions because they have 
lost contact with a terminating pension plan covered by PBGC.
In May 1996, the President submitted the Retirement Savings and 
Security Act to Congress. The RSAA would have expanded coverage, 
increased portability and worker protection, and simplified pension 
law. The proposal included a doubling of the guarantees in the 
multiemployer insurance program to address inflation since 1980, and 
expansion of PBGC's missing participant program to include terminating 
defined contribution plans and non-PBGC covered defined benefit plans. 
The Small Business Job Creation Act of 1996, signed by the President on 
August 20, 1996, included many of these provisions. It did not include 
the doubling of the multiemployer guarantee or the expansion of the 
missing participant program. These changes remain legislative 
objectives.
Regulatory and Deregulatory Initiatives
To implement the new requirements of the Retirement Protection Act, 
PBGC issued regulations:
 Requiring plan administrators of underfunded plans to annually 
            notify participants and beneficiaries about the plan's 
            funding status and the limits on PBGC's guarantee of 
            benefits (final rule, June 30, 1995).
 Creating a clearinghouse in PBGC to locate and pay benefits to 
            missing participants in terminating fully funded pension 
            plans (final rule, December 1, 1995).
 Requiring certain corporate groups with large underfunded 
            pension plans to provide annually to PBGC financial and 
            actuarial information (final rule, December 20, 1995).
 Requiring plans administrators and sponsors to report to PBGC 
            certain ``reportable events'' that may jeopardize workers' 
            pensions and the pension insurance system (proposed rule, 
            July 23, 1996). This rule was developed using a negotiated 
            rulemaking process for the first time.
These regulations seek to facilitate compliance. Regulations on 
participant notice and corporate reporting allow use of information 
prepared for other purposes. The reportable events regulation waives 
reporting in many cases to minimize the number of plans affected and 
uses existing information for reporting thresholds. Both the reportable 
events and participant notice regulations include optional notice 
forms. The missing participants regulation ties reporting to forms and 
deadlines already provided for under the termination regulations.
In July 1996, PBGC reduced the volume of its regulations by 20 percent. 
It reorganized and renumbered all of its regulations to make them more 
accessible, and ``reinvented'' a number of its regulations to eliminate 
unnecessary rules and simplify those that are needed. The regulations 
are now keyed to the numbering system of the statutory sections they 
implement. PBGC is continuing to review its regulations to look for 
further simplification opportunities.
The PBGC's regulatory plan for October 1, 1996, to September 30, 1997,

[[Page 62187]]

consists of two significant regulatory actions.
_______________________________________________________________________
PBGC

                              -----------

                          PROPOSED RULE STAGE

                              -----------

142. 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 4022 subpart C


Legal Deadline:


None


Abstract:


In the Pension Protection Act, Congress created a scheme by which to 
channel employer liability recoveries to plan participants and 
beneficiaries (amended ERISA section 4022(c)). Under 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.


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 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 in most cases on the PBGC's recoveries 
on its statutory claims for employer liability with respect to plans 
that terminate during a prescribed time period. However, the statute 
does not prescribe when the PBGC is to determine its recovery 
experience during the applicable historical period. An earlier 
determination would mean that fewer recoveries would be included in the 
historical average. While the historical average could be updated when 
more recoveries can be included, this would result in differing 
payments depending on when the PBGC makes benefit determinations for a 
plan subject to the historical average. A later determination would 
ensure more complete data for inclusion in the historical average, but 
may delay benefit determinations.


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 address these concerns in developing rules governing 
the calculation of the historical average.


Risks:


Not applicable.


Timetable:
_______________________________________________________________________
Action                                 DFR Cite

_______________________________________________________________________
NPRM                                                           03/00/97
NPRM Comment Period End                                        05/00/97
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
TDD: 202 326-4179
RIN: 1212-AA54
_______________________________________________________________________
PBGC

                              -----------

                            FINAL RULE STAGE

                              -----------

143. REPORTABLE EVENTS REQUIREMENTS
Priority:


Other Significant


Reinventing Government:


This rulemaking is part of the Reinventing Government effort. It will 
revise text in the CFR to reduce burden or duplication, or streamline 
requirements.


Legal Authority:


 29 USC 1302(b); 29 USC 1343


CFR Citation:


 29 CFR 4043


Legal Deadline:


None


Abstract:


Section 4043 of ERISA requires reporting to the PBGC of certain events 
that may indicate a need for the PBGC to take action to protect pension 
plan participants and the plan termination insurance program. The 
Retirement Protection Act of 1994 amended the reportable event 
requirements in ERISA section 4043 by: (1) applying to contributing 
sponsors (as well as plan administrators) the requirement to notify the 
PBGC of a reportable event within 30 days after a person knows or has 
reason to know of its occurrence; (2) specifying four additional types 
of events for which notice is required (except as waived by the PBGC); 
and (3) requiring that, under limited circumstances, a contributing 
sponsor must notify the PBGC in advance of the occurrence of an event 
specified in the RPA or prescribed by PBGC regulations.
The PBGC issued a proposed regulation to implement these statutory 
changes. The regulation contains extensive waivers and reporting 
extensions. In developing the proposed regulation, the PBGC for the 
first time used a negotiated rulemaking committee.


Statement of Need:


RPA significantly amended the reportable events requirements in ERISA 
section 4043. A new regulation is needed to implement these statutory 
provisions, as well as to reduce and simplify reporting requirements 
where possible.

[[Page 62188]]

Summary of the Legal Basis:


The PBGC has the authority under ERISA section 4043 to prescribe 
regulations waiving any statutory reportable events requirements and 
requiring the reporting of any event not specified in the statute that 
may be indicative of a need to terminate a plan.


Alternatives:


In developing the consensus on which the proposed regulation is based, 
the negotiated rulemaking committee attempted to strike a balance 
between the interest of plan administrators, contributing sponsors, and 
the PBGC in avoiding undue reporting and report processing, and the 
interest of the PBGC and plan participants in ensuring PBGC's timely 
receipt of sufficient information to enable it to take action when 
necessary to protect benefits and the termination insurance program.


Anticipated Costs and Benefits:


The benefits of the proposed regulation result from the PBGC's 
receiving timely notice of events that indicate plan or contributing 
sponsor financial problems. The PBGC will use the information to 
determine what, if any, action it needs to take to ensure the continued 
payment of benefits to plan participants and their beneficiaries or to 
prevent unreasonable increases in its losses.
The costs of the proposed regulation are the costs to plan 
administrators and contributing sponsors of providing the information 
and to the PBGC of reviewing the information. The regulation reduces 
the burden by providing many reporting waivers and extensions. In 
addition, the regulation provides for the use of optional reportable 
events forms calling for reduced initial information submissions.


Risks:


Not applicable.


Timetable:
_______________________________________________________________________
Action                                 DFR Cite

_______________________________________________________________________
Notice of Intent60 FR 41033d Rulemaking)                       08/11/95
Notice of Intent Comment/ Application Period End               09/15/95
Notice of First 60 FR 49531gotiated Rulemaking)                09/26/95
Notice of Establ60 FR 52135Negotiated Rulemaking Advisory Commi10/05/95
Notice of Meetin60 FR 54619ted Rulemaking)                     10/25/95
Notice of Meetin61 FR 13117ed Rulemaking)                      03/26/96
NPRM            61 FR 38409                                    07/24/96
NPRM Comment Period End                                        09/23/96
Final Rule                                                     11/00/96
Small Entities Affected:


None


Government Levels Affected:


None


Agency Contact:
James L. Beller
Attorney
Office of the General Counsel
Pension Benefit Guaranty Corporation
1200 K Street NW.
Washington, DC 20005-4026
Phone: 202 326-4024
TDD: 202 326-4179
RIN: 1212-AA80
BILLING CODE 7708-01-F