[Federal Register Volume 62, Number 50 (Friday, March 14, 1997)]
[Proposed Rules]
[Pages 12508-12520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6500]
[[Page 12507]]
_______________________________________________________________________
Part III
Pension Benefit Guaranty Corporation
_______________________________________________________________________
29 CFR Parts 4001 et al.
Termination of Single Employer Plans; Proposed Rule
Assessment of Penalties for Failure to Provide Required Information;
Policy Statement
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 /
Proposed Rules
[[Page 12508]]
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 4001, 4006, 4041, 4050
RIN 1212-AA82
Termination of Single Employer Plans
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Proposed rule.
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SUMMARY: In order to extend deadlines and otherwise to simplify the
standard termination process, the Pension Benefit Guaranty Corporation
is proposing amendments to its termination regulation. The amendments
also require that plan administrators provide participants and
beneficiaries with information on state guaranty association coverage.
DATES: Comments must be received on or before May 13, 1997.
ADDRESSES: Comments may be mailed to the Office of the General Counsel,
Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC
20005-4026, or delivered to Suite 340 at the above address. Comments
also may be sent by Internet e-mail to reg.comments@pbgc.gov. Comments
will be available for public inspection at the PBGC's Communications
and Public Affairs Department, Suite 240.
FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General
Counsel, or Catherine B. Klion, Attorney, Office of the General
Counsel, PBGC, 1200 K Street NW., Washington, DC 20005-4026, 202-326-
4024 (202-326-4179 for TTY and TDD).
SUPPLEMENTARY INFORMATION:
Background
A single-employer plan covered by the PBGC's insurance program may
be voluntarily terminated only in a standard or distress termination.
The rules governing voluntary terminations are in section 4041 of the
Employee Retirement Income Security Act of 1974 and part 4041 of the
PBGC's regulations.
Once the decision is made to terminate a plan in a standard
termination, the plan administrator must meet specific statutory and
regulatory requirements. These requirements have caused difficulty for
some plan administrators and participants. For example, a plan
administrator who misses a deadline must restart the termination
process, resulting in additional cost for the plan administrator and
delayed distributions for participants.
The PBGC proposes to amend its regulations in order to extend
certain deadlines and otherwise to simplify the termination process.
The proposal was developed after conducting focus groups with plan
practitioners and takes into account participant concerns and the
PBGC's experience.
The amendment lessens the likelihood of errors, thereby reducing
burdens on plan administrators and expediting distributions to
participants. The amendment also implements a General Accounting Office
recommendation that plan administrators provide information on state
guaranty association coverage to participants, and makes a limited
number of conforming changes to the distress termination and premium
regulations, along with some conforming and simplifying changes to the
missing participants regulations.
The major changes in the amendment are discussed below.
Standard Termination Process
Notice of intent to terminate: The amendment expands the notice to
include information on state guaranty association coverage. The
amendment also clarifies the language in the notice on freezing of
benefit accruals to better coordinate with section 204(h) of ERISA. The
PBGC's standard termination forms and instructions package will include
a model notice of intent to terminate, along with state guaranty
association coverage information.
Notice of plan benefits: The amendment simplifies and clarifies the
information requirements.
Standard termination notice: The amendment extends the deadline for
filing the standard termination notice with the PBGC from 120 days to
180 days after the proposed termination date. Upon review of the
standard termination notice, the PBGC may require the submission of
additional information relevant to the termination proceeding (e.g.,
where there is a question whether the plan is sufficient for all
benefit liabilities). Such information will normally be due within 30
days after the date of the PBGC's request. The PBGC may shorten the
time period where it determines that the interests of the PBGC or
participants may be prejudiced by a delay in receipt of the
information.
Close-out of plan: The amendment extends the close-out period for
plan administrators that timely apply for an IRS determination letter
from 60 to 120 days after receipt of a favorable letter, and eliminates
the requirement that plan administrators notify the PBGC of the need
for the extension.
In the case of benefits that must be provided in annuity form, the
distribution must be made by purchasing irrevocable commitments from an
insurer. In order to have a valid standard termination under Title IV
of ERISA, the plan administrator must select the insurer in accordance
with the fiduciary standards of Title I of ERISA (see Department of
Labor Interpretive Bulletin 95-1, 60 FR 12328 (March 6, 1995)). The
PBGC intends, as part of its standard termination audit program, to
audit insurer selections for compliance with these standards and to
take appropriate corrective action.
Post-distribution certification: The amendment provides that the
PBGC will not assess a penalty if the post-distribution certification,
which ERISA requires be filed within 30 days after the final
distribution, is filed within 90 days after the distribution deadline.
As discussed elsewhere in today's Federal Register, the PBGC is
implementing this penalty policy immediately.
Extension of deadlines: The PBGC may in its discretion grant case-
by-case extensions in narrow circumstances. The PBGC will grant an
extension where it finds compelling reasons why it is not
administratively feasible for the plan administrator (or other persons
acting on behalf of the plan administrator) to take the action until
the later date and the delay is brief. The PBGC will consider the
length of the delay and whether ordinary business care and prudence in
attempting to meet the deadline is exercised.
PBGC discretion not to nullify: The amendment also incorporates
section 778(a) of the Retirement Protection Act of 1994, which gives
the PBGC discretion not to nullify defective standard terminations in
certain circumstances if it determines that nullification ``would be
inconsistent with the interests of participants and beneficiaries.''
Distress Termination Process
A plan that is sufficient for at least guaranteed benefits closes
out under procedures that parallel those used in a standard
termination. The amendment makes conforming changes to the distress
termination procedures, primarily with respect to the rules that apply
after the PBGC issues a distribution notice authorizing a plan to close
out in the private sector. The time limits governing the initial
processing of a distress termination are not changed. The PBGC may
address other distress termination issues in a separate rulemaking.
[[Page 12509]]
General Provisions
Filing rules: The amendment changes the date of filing a notice
with the PBGC from the date of receipt to the date of mailing with the
United States Postal Service (as evidenced by a postmark) or deposit
with a commercial delivery service (provided the notice is received by
the PBGC within two regular business days). The amendment also allows
electronic filing with the PBGC and, in certain circumstances,
electronic issuance to third parties.
Maintenance of plan records. The amendment clarifies that, while
the plan administrator and each contributing sponsor of a terminating
plan are subject to the requirement to maintain records used to compute
benefits, if any one of them complies with that requirement, the others
need not comply.
Post-termination amendments: The amendment provides that, except to
the extent necessary to meet a qualification requirement under section
401 of the Code, a plan amendment adopted or effective after a plan's
termination date is disregarded with respect to a participant or
beneficiary to the extent the amendment (1) decreases the amount or
value of the participant's or beneficiary's benefits (e.g., by adopting
less favorable assumptions for calculating a lump sum distribution or
by eliminating an ancillary benefit such as a Social Security
supplement under section 204(b)(1)(G) of ERISA), or (2) eliminates or
restricts an optional form of benefit for the participant or
beneficiary.
Missing Participants: The amendment provides that the diligent
search procedures for a missing participant whose designated benefit is
paid to the PBGC also apply for a missing participant for whom the plan
administrator purchases an annuity. The amendment requires plan
administrators who purchase an annuity for a missing participant to
provide the PBGC with the amount of the participant's normal retirement
benefit (to the extent that information is known). This information
will facilitate the PBGC's ability to respond to participant inquiries
and to target its search efforts.
The amendment eliminates detailed rules that apply in the unusual
circumstance of an individual located or discovered to be missing late
in the distribution process. The PBGC can more effectively deal with
such situations by granting discretionary extensions as appropriate on
a case-by-case basis in order to ensure that adequate time is
available.
The amendment also provides penalty relief for the late filing of
certain information about missing participants comparable to that
provided for late post-distribution certifications.
Effective Date
While the changes will generally apply to new terminations
initiated on or after the effective date of the final rule, the PBGC
intends to allow plan administrators to apply certain portions of the
final rule to terminations in process.
Paperwork Reduction Act
The information requirements contained in this proposed rule have
been submitted to the Office of Management and Budget for review under
the Paperwork Reduction Act of 1995, with a request for a three-year
approval. As part of this request, the PBGC has made clarifying and
other changes (related to the proposed rule) to its implementing forms
and instructions under its regulations on termination of single-
employer plans and missing participants. Copies of the PBGC's request
may be obtained free of charge by writing to the PBGC Communications
and Public Affairs Department, suite 240, 1200 K Street, NW.,
Washington, DC 20005, or by visiting that office between the hours of 9
a.m. and 4 p.m.
The PBGC needs the information required to be submitted to ensure
that a voluntary termination is completed in accordance with statutory
and regulatory requirements and to facilitate the payment of benefits
to missing participants. Participants need the information required to
be disclosed so that they will be informed about the status of the
proposed termination of their plan and about their benefits upon
termination.
Much of the work associated with terminating a plan is performed
for purposes other than meeting the collection of information
requirements in the PBGC's termination and missing participants
regulations. The PBGC estimates that 3,640 plan administrators will be
subject to these requirements each year, and that the total annual
burden of complying with these requirements is 4,983 hours and
$3,139,560.
Comments on the paperwork provisions under this proposed rule
should be mailed to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Attention: Desk Officer for the
Pension Benefit Guaranty Corporation, Washington, DC 20503. Comments
may address (among other things)--
Whether the proposed collection of information is needed
for the proper performance of the PBGC's functions and will have
practical utility;
The accuracy of the PBGC's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
Enhancement of the quality, utility, and clarity of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
The PBGC already allows electronic submission of participant and
beneficiary data in a distress termination and has been actively
considering whether to allow other information to be provided
electronically. In certain circumstances, this proposed rule allows
electronic filing with the PBGC and electronic issuance of notices to
third parties. The PBGC welcomes comments on electronic filing and
issuance requirements, particularly on how to ensure that notices
issued electronically to third parties are actually received by the
persons entitled to receive them.
The PBGC also invites comments on whether, given the PBGC's limited
role in standard terminations, the burden of the standard termination
filing process could be further reduced.
Compliance With Rulemaking Guidelines
The PBGC has determined that this action is not a ``significant
regulatory action'' under the criteria set forth in Executive Order
12866.
The PBGC certifies under section 605(b) of the Regulatory
Flexibility Act that this rule will not have a significant economic
impact on a substantial number of small entities. While this rule
simplifies procedures and extends deadlines, the actions required to
terminate a plan are essentially unchanged. Accordingly, sections 603
and 604 of the Regulatory Flexibility Act do not apply.
List of Subjects
29 CFR Part 4001
Pension insurance, Pensions, Reporting and recordkeeping
requirements.
[[Page 12510]]
29 CFR Part 4006
Penalties, Pension insurance, Pensions, Reporting and recordkeeping
requirements.
29 CFR Part 4041
Pension insurance, Pensions, Reporting and recordkeeping
requirements.
29 CFR Part 4050
Pensions, Reporting and recordkeeping requirements.
For the reasons set forth above, the PBGC proposes to amend parts
4001, 4006, 4041, and 4050 of 29 CFR chapter LX as follows.
PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS
1. The authority citation for Part 4041 continues to read as
follows:
Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.
Secs. 4041.46 and 4041.48 [Removed]
2. Section 4041.46 is removed.
Sec. 4041.47 and Secs. 4041.41 Through 4041.45 [Redesignated as
Secs. 4041.49 and 4041.43 through 4041.47]
3. Sec. 4041.47 is redesignated as Sec. 4041.49; and Secs. 4041.41
through 4041.45 are redesignated as Secs. 4041.43 through 4041.47.
Sec. 4041.3 [Amended and Redesignated as Sec. 4041.41]
4. In Sec. 4041.3, the section heading is amended by removing the
words ``a standard termination or''; paragraphs (a) and (b) are
removed; paragraphs (c) through (g) are redesignated as paragraphs (a)
through (e); and as so amended, Sec. 4041.3 is redesignated as
Sec. 4041.41. (Redesignated Sec. 4041.41 is the first section under
Subpart C.)
Sec. 4041.4 [Amended and Redesignated]
5. In 4041.4, paragraphs (b), (d) and (e) are removed; paragraphs
(c) and (f) through (h) are redesignated as paragraphs (b) through (e);
and as so amended, Sec. 4041.4 is redesignated as Sec. 4041.42.
Subparts A and B [Amended]
6. Subparts A and B of Part 4041 are revised to read as follows:
PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS
Subpart A--General Provisions
Sec.
4041.1 Purpose and scope.
4041.2 Definitions.
4041.3 Computation of time; filing and issuance rules.
4041.4 Disaster relief.
4041.5 Maintenance of plan records.
4041.6 Effect of failure to provide required information.
4041.7 Collective bargaining agreement challenges.
4041.8 Post-termination amendments.
Subpart B--Standard Termination Process
4041.21 Requirements for a standard termination.
4041.22 Administration of plan during termination process.
4041.23 Notice of intent to terminate.
4041.24 Notices of plan benefits.
4041.25 Standard termination notice.
4041.26 PBGC review of standard termination notice.
4041.27 Notice of annuity information.
4041.28 Closeout of plan.
4041.29 Post-distribution certification.
4041.30 Requests for deadline extensions.
4041.31 Notice of noncompliance.
Subpart A--General Provisions.
Sec. 4041.1 Purpose and scope.
This part sets forth the rules and procedures for terminating a
single-employer plan in a standard or distress termination under
section 4041 of ERISA, the exclusive means of voluntarily terminating a
plan.
Sec. 4041.2 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
affected party, annuity, benefit liabilities, Code, contributing
sponsor, controlled group, distress termination, distribution date,
EIN, employer, ERISA, guaranteed benefit, insurer, irrevocable
commitment, IRS, mandatory employee contributions, normal retirement
age, notice of intent to terminate, PBGC, person, plan administrator,
plan year, PN, single-employer plan, standard termination, termination
date, and title IV benefit. In addition, for purposes of this part:
Distress termination notice means the notice filed with the PBGC
pursuant to Sec. 4041.45.
Distribution notice means the notice issued to the plan
administrator by the PBGC pursuant to Sec. 4041.47(c) upon the PBGC's
determination that the plan has sufficient assets to pay at least
guaranteed benefits.
Majority owner means an individual who owns, directly or
indirectly, 50 percent or more (taking into account the constructive
ownership rules of section 414 (b) and (c) of the Code) of--
(1) An unincorporated trade or business;
(2) The capital interest or the profits interest in a partnership;
or
(3) Either the voting stock of a corporation or the value of all of
the stock of a corporation.
Notice of noncompliance means a notice issued to a plan
administrator by the PBGC pursuant to Sec. 4041.31 advising the plan
administrator that the requirements for a standard termination have not
been satisfied and that the plan is an ongoing plan.
Notice of plan benefits means the notice to each participant and
beneficiary required by Sec. 4041.24.
Participant means--
(1) Any individual who is currently in employment covered by the
plan and who is earning or retaining credited service under the plan,
including any individual who is considered covered under the plan for
purposes of meeting the minimum participation requirements but who,
because of offset or similar provisions, does not have any accrued
benefits;
(2) Any nonvested individual who is not currently in employment
covered by the plan but who is earning or retaining credited service
under the plan; and
(3) Any individual who is retired or separated from employment
covered by the plan and who is receiving benefits under the plan or is
entitled to begin receiving benefits under the plan in the future,
excluding any such individual to whom an insurer has made an
irrevocable commitment to pay all the benefits to which the individual
is entitled under the plan.
Plan benefits means the benefits to which a participant is, or may
become, entitled under the plan's provisions in effect as of the
termination date, based on the participant's benefit under the plan as
of that date. Each participant's ``plan benefits'' equals that
participant's ``benefit liabilities,'' and the sum of all ``plan
benefits'' equals the plan's ``benefit liabilities.''
Proposed termination date means the date specified as such by the
plan administrator in the notice of intent to terminate or, if later,
in the standard or distress termination notice.
Residual assets means the plan assets remaining after all benefit
liabilities and other liabilities (e.g., PBGC premiums) of the plan
have been satisfied.
Standard termination notice means the notice filed with the PBGC
pursuant to Sec. 4041.25.
State guaranty association means an association of insurers created
by a State, the District of Columbia, or the Commonwealth of Puerto
Rico to pay benefits and to continue coverage, within statutory limits,
under life and health insurance policies and annuity contracts when an
insurer fails.
[[Page 12511]]
Sec. 4041.3 Computation of time; filing and issuance rules.
(a) Computation of time. In computing any period of time under this
part, the day of the event from which the period begins is not counted.
The last day of the period is included. If the last day falls on a
Saturday, Sunday, or Federal holiday, the period runs until the end of
the next regular business day. A proposed termination date may be any
day, including a Saturday, Sunday, or Federal holiday.
(b) Filing with the PBGC.
(1) Method of filing. Any document to be filed under this part
shall be delivered to the PBGC in accordance with the applicable PBGC
termination forms and instructions package.
(2) Date of filing. Any information required or permitted to be
filed with the PBGC shall be deemed filed--
(i) On the date of the United States postmark, if the postmark was
made by the United States Postal Service and the document was mailed
postage prepaid to the PBGC;
(ii) On the date it is deposited for delivery to the PBGC with a
commercial delivery service, provided it is received by the PBGC within
two regular business days; or
(iii) Except as provided in paragraphs (b)(2)(i) or (b)(2)(ii), on
the date it is received by the PBGC. Information received on a weekend
or Federal holiday or after 5:00 p.m. on a weekday is considered filed
on the next regular business day.
(c) Issuance to other parties. The following rules apply to
affected parties (other than the PBGC). For purposes of this paragraph
(c), a person entitled to notice under the spin-off/termination
transaction rules of Secs. 4041.23(c) or 4041.24(f) is treated as an
affected party.
(1) Permissible methods of issuance. The plan administrator shall
issue any notice to an affected party individually--
(i) By hand delivery;
(ii) By first-class mail or commercial delivery service to the
affected party's last known address; or
(iii) By electronic means reasonably calculated to ensure actual
receipt by the affected party.
(2) Date of issuance. Any notice is deemed issued to an affected
party on the date on which it is--
(i) Handed to the affected party;
(ii) Deposited with the mail or a commercial delivery service (as
evidenced by a postmark or written receipt); or
(iii) Transmitted electronically to the affected party.
(3) Omission of affected parties. The failure to issue any notice
to an affected party (other than any employee organization) within the
specified time period will not cause the notice to be untimely if--
(i) After-discovered affected parties. The plan administrator could
not reasonably have been expected to know of the affected party, and
issues the notice promptly after discovering the affected party; or
(ii) De minimis administrative errors. The failure was due to
administrative error involving only a de minimis percentage of affected
parties, and the plan administrator issues the notice to each such
affected party promptly after discovering the error.
(4) Form of notices to affected parties. All notices to affected
parties shall be readable and written in a manner calculated to be
understood by the average plan participant.
(5) Foreign languages. The plan administrator of a plan that (as of
the proposed termination date) covers the numbers or percentages in
Sec. 2520.104b-10(e) of this title of participants literate only in the
same non-English language shall, for any notice to affected parties--
(i) Include a prominent legend in that common non-English language
advising them how to obtain assistance in understanding the notice; or
(ii) Provide the notice in that common non-English language to
those affected parties literate only in that language.
Sec. 4041.4 Disaster relief.
When the President of the United States declares that, under the
Disaster Relief Act (42 U.S.C. 5121, 5122(2), 5141(b)), a major
disaster exists, the Executive Director of the PBGC (or his or her
designee) may, by issuing one or more notices of disaster relief,
extend by up to 180 days any due date under this part.
Sec. 4041.5 Maintenance of plan records.
(a) Retention requirement.
(1) Persons subject to requirement. Each contributing sponsor and
the plan administrator of a plan terminating in a standard termination,
or in a distress termination that closes out in accordance with
Sec. 4041.50, shall maintain all records used to compute benefits with
respect to each individual who is a plan participant or a beneficiary
of a deceased participant as of the termination date. If a contributing
sponsor or the plan administrator complies with part or all of the
requirements of this paragraph (a), the other(s) need not comply with
respect to such information.
(2) Retention period. The records described in paragraph (a)(1)
shall be preserved for six years after the date when the post-
distribution certification under this part is filed with the PBGC.
(b) Availability of records. The contributing sponsor or plan
administrator shall make records related to the termination available
to the PBGC upon request for inspection and photocopying, and shall
submit such records to the PBGC within 30 days after the date of a
written request by the PBGC or by a later date specified therein.
Sec. 4041.6 Effect of failure to provide required information.
If a plan administrator fails to provide any information required
under this part within the specified time limit, the PBGC may assess a
penalty under section 4071 of ERISA of up to $1,000 a day for each day
that the failure continues. The PBGC may also pursue any other
equitable or legal remedies available to it under the law, including,
if appropriate, the issuance of a notice of noncompliance under
Sec. 4041.31.
Sec. 4041.7 Challenges to plan termination under collective bargaining
agreement.
(a) Suspension upon formal challenge to termination.
(1) Notice of formal challenge.
(i) If the PBGC is advised, before its review period under
Sec. 4041.26(a) ends, or before issuance of a notice of inability to
determine sufficiency or a distribution notice under Sec. 4041.47 (b)
or (c), that a formal challenge to the termination has been initiated
as described in paragraph (c), the PBGC shall suspend the termination
proceeding and so advise the plan administrator in writing.
(ii) If the PBGC is advised of a challenge described in paragraph
(a)(1)(i) of this section after the time specified therein, the PBGC
may suspend the termination proceeding and shall so advise the plan
administrator in writing.
(2) Standard terminations. During any period of suspension in a
standard termination--
(i) The running of all time periods specified in ERISA or this part
relevant to the termination shall be suspended; and
(ii) The plan administrator shall comply with the prohibitions in
Sec. 4041.22.
(3) Distress terminations. During any period of suspension in a
distress termination--
(i) The issuance by the PBGC of any notice of inability to
determine sufficiency or distribution notice shall be stayed or, if any
such notice was previously issued, its effectiveness shall be stayed;
[[Page 12512]]
(ii) The plan administrator shall comply with the prohibitions in
Sec. 4041.42; and
(iii) The plan administrator shall file a distress termination
notice with the PBGC pursuant to Sec. 4041.45.
(b) Existing collective bargaining agreement. For purposes of this
section, an existing collective bargaining agreement means a collective
bargaining agreement that has not been made inoperative by a judicial
ruling and, by its terms, either has not expired or is extended beyond
its stated expiration date because neither of the collective bargaining
parties took the required action to terminate it. When a collective
bargaining agreement no longer meets these conditions, it ceases to be
an ``existing collective bargaining agreement,'' whether or not any or
all of its terms may continue to apply by operation of law.
(c) Formal challenge to termination. A formal challenge to a plan
termination asserting that the termination would violate the terms and
conditions of an existing collective bargaining agreement is initiated
when--
(1) Any procedure specified in the collective bargaining agreement
for resolving disputes under the agreement commences; or
(2) Any action before an arbitrator, administrative agency or
board, or court under applicable labor-management relations law
commences.
(d) Resolution of challenge. Immediately upon the final resolution
of the challenge, the plan administrator shall notify the PBGC in
writing of the outcome of the challenge, provide the PBGC with a copy
of any award or order, and, if the validity of the proposed termination
has been upheld, advise the PBGC whether the proposed termination is to
proceed. The final resolution ends the suspension period under
paragraph (a) of this section.
(1) Challenge sustained. If the final resolution is that the
proposed termination violates an existing collective bargaining
agreement, the PBGC shall dismiss the termination proceeding, all
actions taken to effect the plan termination shall be null and void,
and the plan shall be an ongoing plan. In this event, in a distress
termination, Sec. 4041.42(d) shall apply as of the date of the
dismissal by the PBGC.
(2) Termination sustained. If the final resolution is that the
proposed termination does not violate an existing collective bargaining
agreement and the plan administrator has notified the PBGC that the
termination is to proceed, the PBGC shall reactivate the termination
proceeding by sending a written notice thereof to the plan
administrator, and--
(i) The termination proceeding shall continue from the point where
it was suspended;
(ii) All actions taken to effect the termination before the
suspension shall be effective;
(iii) Any time periods that were suspended shall resume running
from the date of the PBGC's notice of the reactivation of the
proceeding;
(iv) Any time periods that had fewer than 15 days remaining shall
be extended to the 15th day after the date of the PBGC's notice, or
such later date as the PBGC may specify; and
(v) In a distress termination, the PBGC shall proceed to issue a
notice of inability to determine sufficiency or a distribution notice
(or reactivate any such notice stayed under paragraph (a)(3) of this
section), either with or without first requesting updated information
from the plan administrator pursuant to Sec. 4041.45(c).
(e) Final resolution of challenge. A formal challenge to a proposed
termination is finally resolved when--
(1) The parties involved in the challenge enter into a settlement
that resolves the challenge;
(2) A final award, administrative decision, or court order is
issued that is not subject to review or appeal; or
(3) A final award, administrative decision, or court order is
issued that is not appealed, or review or enforcement of which is not
sought, within the time for filing an appeal or requesting review or
enforcement.
(f) Involuntary termination by the PBGC. Notwithstanding any other
provision of this section, the PBGC retains the authority in any case
to initiate a plan termination in accordance with the provisions of
section 4042 of ERISA.
Sec. 4041.8 Post-termination amendments.
Except to the extent necessary to meet a qualification requirement
under section 401 of the Code, a plan amendment that is adopted or
effective after a plan's termination date shall be disregarded with
respect to a participant or beneficiary to the extent the amendment--
(a) Decreases the amount or value of the participant's or
beneficiary's benefits (e.g., by adopting less favorable assumptions
for calculating a lump sum distribution or by eliminating an ancillary
benefit such as a Social Security supplement under section 204(b)(1)(G)
of ERISA); or
(b) Eliminates or restricts an optional form of benefit for the
participant or beneficiary.
Subpart B--Standard Termination Process
Sec. 4041.21 Requirements for a standard termination.
(a) Notice and distribution requirements. A standard termination is
valid if the plan administrator--
(1) Issues a notice of intent to terminate to all affected parties
(other than the PBGC) in accordance with Sec. 4041.23;
(2) Issues notices of plan benefits to all affected parties
entitled to plan benefits in accordance with Sec. 4041.24;
(3) Files a standard termination notice with the PBGC in accordance
with Sec. 4041.25;
(4) Distributes the plan's assets in satisfaction of all of the
plan's benefit liabilities in accordance with Sec. 4041.28(a); and
(5) In the case of a spin-off/termination transaction (as defined
in Sec. 4041.23(c)), provides the notices required by Sec. 4041.23(c),
Sec. 4041.24(f), and Sec. 4041.27(a)(2).
(b) Plan sufficiency.
(1) Commitment to make plan sufficient. A contributing sponsor of a
plan or any other member of the plan's controlled group may make a
commitment to contribute any additional sums necessary to enable the
plan to satisfy benefit liabilities in accordance with Sec. 4041.28(a).
A commitment shall be valid only if--
(i) It is made to the plan;
(ii) It is in writing, signed by the contributing sponsor or
controlled group member(s); and
(iii) In any case in which the person making the commitment is the
subject of a bankruptcy liquidation or reorganization proceeding, as
described in Sec. 4041.41(c) (1) or (c)(2), the commitment is approved
by the court before which the liquidation or reorganization proceeding
is pending or a person not in bankruptcy unconditionally guarantees to
meet the commitment at or before the time distribution of assets is
required.
(2) Alternative treatment of majority owner's benefit. A majority
owner may elect to forego receipt of his or her benefit to the extent
necessary to enable the plan to satisfy all other benefit liabilities
in accordance with Sec. 4041.28(a). Any such alternative treatment of
the majority owner's benefit is valid only if--
(i) The election is in writing;
(ii) In any case in which section 205(g) of ERISA requires spousal
consent to the majority owner's receipt of his or her benefit in a form
other than a qualified joint and survivor annuity, the spouse of the
majority owner
[[Page 12513]]
consents in accordance with such section; and
(iii) The majority owner's election is not inconsistent with a
qualified domestic relations order (as defined in section 206(d)(3) of
ERISA).
Sec. 4041.22 Administration of plan during pendency of termination
process.
(a) In general. A plan administrator may distribute plan assets in
connection with the termination of the plan only in accordance with the
provisions of this part. From the first day the plan administrator
issues a notice of intent to terminate to the last day of the PBGC's
review period under Sec. 4041.26(a), the plan administrator shall
continue to carry out the normal operations of the plan. During that
time period, except as provided in paragraph (b), the plan
administrator shall not--
(1) Purchase irrevocable commitments to provide any plan benefits;
or
(2) Pay benefits attributable to employer contributions, other than
death benefits, in any form other than an annuity.
(b) Exception. The plan administrator may pay benefits attributable
to employer contributions either through the purchase of irrevocable
commitments or in a form other than an annuity if--
(1) The participant has separated from active employment;
(2) The distribution is consistent with prior plan practice; and
(3) The distribution is not reasonably expected to jeopardize the
plan's sufficiency for benefit liabilities.
Sec. 4041.23 Notice of intent to terminate.
(a) Notice requirement.
(1) In general. At least 60 days and no more than 90 days before
the proposed termination date, the plan administrator shall issue a
notice of intent to terminate to each person (other than the PBGC) that
is, as of the proposed termination date, an affected party. (The PBGC's
standard termination forms and instructions package includes a model
notice of intent to terminate.)
(2) Early issuance of NOIT. The PBGC may consider a notice of
intent to terminate to be timely under paragraph (a)(1) if the notice
was early by a de minimis number of days and the PBGC finds that the
early issuance was the result of administrative error.
(b) Contents of notice. The notice of intent to terminate shall
include--
(1) Identifying information. The name and PN of the plan, the name
and EIN of each contributing sponsor, and the name, address, and
telephone number of the person who may be contacted by an affected
party with questions concerning the plan's termination;
(2) Intent to terminate plan. A statement that the plan
administrator intends to terminate the plan in a standard termination
as of a specified proposed termination date and will notify the
affected party if the proposed termination date is changed to a later
date or if the termination does not occur;
(3) Sufficiency requirement. A statement that, in order to
terminate in a standard termination, plan assets must be sufficient to
provide all benefit liabilities under the plan;
(4) Cessation of accruals. A statement (as applicable) informing
affected parties that--
(i) Benefit accruals will cease as of the termination date, but
will continue if the plan does not terminate;
(ii) A plan amendment has been adopted under which benefit accruals
will cease, in accordance with section 204(h) of ERISA, as of the
proposed termination date or a specified date before the proposed
termination date, whether or not the plan is terminated; or
(iii) Benefit accruals ceased, in accordance with section 204(h) of
ERISA, as of a specified date before the notice of intent to terminate
was issued;
(5) Annuity information. If required under Sec. 4041.27, the
annuity information described therein;
(6) Benefit information. A statement that each affected party
entitled to plan benefits will receive a written notification regarding
his or her benefits;
(7) Continuation of monthly benefits. For those persons who are (as
of the proposed termination date) in pay status, a statement that their
monthly (or other periodic) benefit amounts will not be affected by the
plan's termination; and
(8) Extinguishment of guarantee. A statement that after plan assets
have been distributed in full satisfaction of all pension benefits
under the plan with respect to a participant or a beneficiary of a
deceased participant, either by the purchase of irrevocable commitments
(annuity contracts) or by an alternative form of distribution provided
for under the plan, the PBGC no longer guarantees that participant's or
beneficiary's plan benefits.
(c) Spin-off/termination transactions. In the case of a transaction
in which a single defined benefit plan is split into two or more plans
and there is a reversion of residual assets to an employer upon the
termination of one or more but fewer than all of the resulting plans (a
``spin-off/termination transaction''), the plan administrator shall,
within the time period specified in paragraph (a), provide all
participants, beneficiaries of deceased participants, and alternate
payees in the original plan who are (as of the proposed termination
date) covered by an ongoing plan with a notice describing the
transaction.
Sec. 4041.24 Notices of plan benefits.
(a) Notice requirement. The plan administrator shall, no later than
the time the plan administrator files the standard termination notice
with the PBGC, issue a notice of plan benefits to each person (other
than the PBGC and any employee organization) who is, as of the proposed
termination date, an affected party.
(b) Contents of notice. The plan administrator shall include in
each notice of plan benefits--
(1) The name and PN of the plan, the name and EIN of each
contributing sponsor, and the name, address, and telephone number of an
individual who may be contacted to answer questions concerning a
benefit;
(2) The proposed termination date given in the notice of intent to
terminate and any extended proposed termination date under
Sec. 4041.25(b);
(3) If the amount of the plan benefits set forth in the notice is
an estimate, a statement that the amount is an estimate and that
benefits paid may be greater than or less than the estimate;
(4) Except in the case of an affected party in pay status for more
than one year as of the proposed termination date--
(i) The personal data used to calculate the affected party's plan
benefits; and
(ii) A statement requesting that the affected party review the
personal data and notify the plan administrator of any incorrect data;
and
(5) The information in paragraph (c), (d), or (e), as applicable.
(c) Benefits of persons in pay status. For an affected party in pay
status as of the proposed termination date, the plan administrator
shall include in the notice of plan benefits--
(1) The amount and form of the participant's or beneficiary's plan
benefits payable as of the proposed termination date;
(2) The amount and form of benefit, if any, payable to a
beneficiary upon the participant's death and the name of the
beneficiary; and
(3) The amount and date of any increase or decrease in the benefit
scheduled to occur (or that has already occurred) after the proposed
termination date and an explanation of the increase or decrease,
including, where applicable, a reference to the pertinent plan
provision.
[[Page 12514]]
(d) Benefits of persons with valid elections or de minimis
benefits. For an affected party who is not in pay status as of the
proposed termination date, but who has, as of that date, validly
elected a form and starting date, or with respect to whom the plan
administrator has determined that a nonconsensual lump sum distribution
will be made, the plan administrator shall include in the notice of
plan benefits--
(1) The amount and form of the person's plan benefits payable as of
the projected benefit starting date, and what that date is;
(2) The information in paragraphs (c)(2) and (c)(3);
(3) If the plan benefits will be paid in any form other than a lump
sum and the age at which, or form in which, the plan benefits will be
paid differs from the normal retirement benefit--
(i) The age or form stated in the plan; and
(ii) The age or form adjustment factors; and
(4) If the plan benefits will be paid in a lump sum--
(i) An explanation of when a lump sum may be paid without the
consent of the participant or the participant's spouse;
(ii) The interest rate used to convert to the lump sum benefit and
a reference to the pertinent plan provisions;
(iii) An explanation of how the interest rate is used to calculate
the lump sum;
(iv) A statement that the use of a higher interest rate results in
a smaller lump sum amount; and
(v) A statement that the applicable interest rate may change before
the distribution date.
(e) Benefits of all other persons not in pay status. For any other
affected party not described in paragraph (c) or (d), the plan
administrator shall include in the notice of plan benefits--
(1) The amount and form of the person's plan benefits payable at
normal retirement age in any form permitted under the plan;
(2) Any alternative benefit forms, including those payable to a
beneficiary upon the person's death either before or after benefits
commence;
(3) If the person is or may become entitled to a benefit that would
be payable before normal retirement age, the amount and form of benefit
that would be payable at the earliest benefit commencement date (or, if
more than one such form is payable at the earliest benefit commencement
date, any one of those forms) and whether the benefit commencing on
such date would be subject to future reduction; and
(4) If the plan benefits may be paid in a lump sum, the information
in paragraph (d)(4).
(f) Spin-off/termination transactions. In the case of a spin-off/
termination transaction (as defined in Sec. 4041.23(c)), the plan
administrator shall, no later than the time the plan administrator
files the standard termination notice for any terminating plan, provide
all participants, beneficiaries of deceased participants, and alternate
payees in the original plan who are (as of the proposed termination
date) covered by an ongoing plan with a notice of plan benefits
containing the information in paragraphs (b) through (e).
Sec. 4041.25 Standard termination notice.
(a) Notice requirement. The plan administrator shall file with the
PBGC a standard termination notice, consisting of the PBGC Form 500,
completed in accordance with the instructions thereto, on or before the
180th day after the proposed termination date.
(b) Change of proposed termination date. The plan administrator
may, in the standard termination notice, select a proposed termination
date that is later than the date specified in the notice of intent to
terminate, provided it is not later than 90 days after the earliest
date on which a notice of intent to terminate was issued to any
affected party.
(c) Request for IRS determination letter. To qualify for the
distribution deadline in Sec. 4041.28(a)(1)(ii), the plan administrator
shall submit to the IRS a valid request for a determination of the
plan's qualification status upon termination (``determination letter'')
by the time the standard termination notice is filed.
Sec. 4041.26 PBGC review of standard termination notice.
(a) Review period.
(1) In general. The PBGC shall notify the plan administrator in
writing of the date on which it received a complete standard
termination notice at the address provided in the PBGC's standard
termination forms and instructions package. If the PBGC does not issue
a notice of noncompliance during its 60-day review period following
such date, the plan administrator shall proceed to close out the plan
in accordance with Sec. 4041.28.
(2) Extension of review period. The PBGC and the plan administrator
may, before the expiration of the PBGC review period in paragraph
(a)(1), agree in writing to extend that period.
(b) If standard termination notice is incomplete.
(1) For purposes of timely filing. If the standard termination
notice is incomplete, the PBGC may, based on the nature and extent of
the omission, provide the plan administrator an opportunity to complete
the notice. In such a case, the standard termination notice shall be
deemed to have been complete as of the date when originally filed for
purposes of Sec. 4041.25(a), provided the plan administrator provides
the missing information by the later of--
(i) The 180th day after the proposed termination date; or
(ii) The 30th day after the date of the PBGC notice that the filing
was incomplete.
(2) For purposes of PBGC review period. If the standard termination
notice is completed under paragraph (b)(1), the PBGC shall determine
whether the notice shall be deemed to have been complete as of the date
when originally filed for purposes of determining when the PBGC's
review period begins under Sec. 4041.26(a)(1).
(c) Additional information.
(1) Deadline for providing additional information. The PBGC may in
any case require the submission of additional information relevant to
the termination proceeding. Any such additional information becomes
part of the standard termination notice and shall be submitted within
30 days after the date of a written request by the PBGC, or within a
different time period specified therein. The PBGC may in its discretion
shorten the time period where it determines that the interests of the
PBGC or participants may be prejudiced by a delay in receipt of the
information.
(2) Effect on termination proceeding. A request for additional
information shall suspend the running of the PBGC's 60-day review
period. The review period shall begin running again on the day the
required information is received and continue for the greater of--
(i) The number of days remaining in the review period; or
(ii) Five regular business days.
Sec. 4041.27 Notice of annuity information.
(a) Notice requirement.
(1) In general. The plan administrator shall provide notices in
accordance with this section to each affected party other than--
(i) An affected party whose plan benefits will be distributed in
the form of a nonconsensual lump sum; and
(ii) The PBGC.
(2) Spin-off/termination transactions. The plan administrator shall
provide the information in paragraph (d) to a person entitled to notice
under Secs. 4041.23(c) or 4041.24(f), at the same time and in the same
manner as required for an affected party other than the PBGC.
[[Page 12515]]
(b) Content of notice. The plan administrator shall include, as
part of the notice of intent to terminate--
(1) Identity of insurers. The name and address of the insurer or
insurers from whom (if known), or (if not) from among whom, the plan
administrator intends to purchase irrevocable commitments (annuity
contracts);
(2) Change in identity of insurers. A statement that if the plan
administrator later decides to select a different insurer, affected
parties will receive a supplemental notice no later than 45 days before
the distribution date; and
(3) State guaranty association coverage information. The
information on state guaranty association coverage of annuities
described in paragraphs (a)(3) (i) and (ii) of this section:
(i) The following notice:
Under your pension plan, your benefits may be paid in the form
of an annuity purchased from a licensed insurance company. If we
purchase an annuity for you to provide all your pension benefits
under the plan, the insurance company will be responsible for paying
your benefits.
All states, the District of Columbia, and the Commonwealth of
Puerto Rico have established ``guaranty associations'' to protect
policyholders in the event of an insurance company's financial
failure. All insurance companies licensed to sell insurance in a
state are required to be members of that state's guaranty
association. If a member insurance company fails, the association
collects money from the other member insurance companies to continue
coverage up to statutory limits, as specified by law, for its
policyholders.
State guaranty association coverage of your annuity means that
the guaranty association may pay part or all of your annuity if the
insurance company responsible for the annuity cannot pay. How much
of your annuity the fund would pay, if any, may depend on factors
such as the amount of your annuity, the state in which you reside at
the time the insurance company fails to pay, and the state in which
the insurance company is located. Since state laws vary, you will
need to see what the law in your state says at the relevant time.
State guaranty association coverage is limited by statute in
total dollar amount. In most states, the maximum amount of annuity
coverage is stated in terms of the present value of the annuity. The
maximum amount and how it is stated varies from state to state and
may change over time.
This notice is intended to help you understand the general
nature of state guaranty association protection of the annuity you
may receive. It is only a summary. Listings of state guaranty
associations and their addresses and telephone numbers, and of their
general coverage limits are attached.
(ii) Listings of the addresses and telephone numbers of the state
guaranty association offices in all 50 states, the District of
Columbia, and the Commonwealth of Puerto Rico, and of the dollar
coverage limitations applicable to each state, along with the date as
of which the listings were prepared. The plan administrator shall use
listings that are at least as current as those included as sample
listings in the standard termination forms and instructions package
applicable to the plan termination proceeding.
(c) Where insurer(s) not known.
(1) Extension of deadline for notice. If the identity-of-insurer
information in paragraph (b)(1) is not known at the time the plan
administrator is required to provide it to an affected party as part of
a notice of intent to terminate, the plan administrator shall instead
provide it in a supplemental notice under paragraph (d).
(2) Alternative NOIT information. A plan administrator that
qualifies for the extension in paragraph (c)(1) with respect to a
notice of intent to terminate shall include therein (in lieu of the
information in paragraph (b)) a statement that--
(i) Irrevocable commitments (annuity contracts) may be purchased
from an insurer to provide some or all of the benefits under the plan;
(ii) The insurer or insurers have not yet been identified; and
(iii) Affected parties will be notified at a later date (but no
later than 45 days before the distribution date) of the name and
address of the insurer or insurers from whom (if known), or (if not)
from among whom, the plan administrator intends to purchase irrevocable
commitments (annuity contracts).
(d) Supplemental notice. The plan administrator shall provide a
supplemental notice to an affected party in accordance with this
paragraph (d) if the plan administrator did not previously notify the
affected party of the identity of insurer(s) or, after having
previously notified the affected party of the identity of insurer(s),
decides to select a different insurer. A failure to provide a required
supplemental notice to an affected party shall be deemed to be a
failure to comply with the notice of intent to terminate requirements.
(1) Deadline for supplemental notice. The deadline for issuing the
supplemental notice is 45 days before the affected party's distribution
date (or, in the case of an employee organization, 45 days before the
earliest distribution date for any affected party that it represents).
(2) Content of supplemental notice. The supplemental notice shall
include--
(i) The identity-of-insurer information in paragraph (b)(1);
(ii) The information regarding change of identity of insurer(s) in
paragraph (b)(2); and
(iii) Unless the state guaranty association coverage information in
paragraph (b)(3) was previously provided to the affected party, such
information and the extinguishment-of-guarantee information in
Sec. 4041.23(b)(8).
Sec. 4041.28 Closeout of plan.
(a) Distribution deadline.
(1) In general. Unless a notice of noncompliance is issued under
Sec. 4041.31(a), the plan administrator shall complete the distribution
of plan assets in accordance with paragraph (c) by the later of--
(i) 180 days after the expiration of the PBGC's 60-day (or
extended) review period under Sec. 4041.26(a); or
(ii) If the plan administrator meets the requirements of
Sec. 4041.25(c), 120 days after receipt of a favorable determination
from the IRS.
(2) Revocation of notice of noncompliance. If the PBGC revokes a
notice of noncompliance issued under Sec. 4041.31(a), the distribution
deadline is extended until the 180th day after the date of the
revocation.
(b) Assets insufficient to satisfy benefit liabilities. If the plan
administrator determines that plan assets are not sufficient to satisfy
all benefit liabilities at the time of any distribution (with assets
determined net of other liabilities, including PBGC premiums), the plan
administrator shall not make any further distribution of assets to
effect the plan's termination and shall promptly notify the PBGC.
(c) Method of distribution.
(1) In general. The plan administrator shall, in accordance with
all applicable requirements under the Code and ERISA, distribute plan
assets in satisfaction of all benefit liabilities (determined as of the
termination date). In the case of benefit liabilities that must be
provided in annuity form, the distribution shall be made by purchasing
irrevocable commitments from an insurer selected in accordance with the
fiduciary standards of Title I of ERISA.
(2) Participating annuity contracts. In the case of a plan in which
any residual assets are to be distributed to participants, a
participating annuity contract may be purchased to satisfy the
requirement that annuities be provided by the purchase of irrevocable
commitments only if the portion of the price of the contract that is
attributable to the participation feature--
[[Page 12516]]
(i) Is not taken into account in determining the amount of residual
assets; and
(ii) Is not paid from residual assets allocable to participants.
(3) Missing participants. The plan administrator shall distribute
benefits to missing participants in accordance with part 4050.
(d) Notice of annuity contract. If benefit liabilities are provided
through the purchase of irrevocable commitments--
(1) Either the plan administrator or the insurer shall, within 30
days after it is available, provide each participant and beneficiary
with a copy of the annuity contract or certificate showing the
insurer's name and address and clearly reflecting the insurer's
obligation to provide the participant's or beneficiary's benefit; and
(2) If such a contract or certificate is not available on or before
the date on which the post-distribution certificate is required to be
filed in order to avoid the assessment of penalties under
Sec. 4041.29(b), the plan administrator shall, no later than such date,
provide each participant and beneficiary with a written notice
stating--
(i) That the obligation for providing the participant's or
beneficiary's plan benefits has transferred to the insurer;
(ii) The name and address of the insurer;
(iii) The name, address, and telephone number of the person
designated by the insurer to answer questions concerning the annuity;
and
(iv) That the participant or beneficiary will receive from the plan
administrator or insurer a copy of the annuity contract or a
certificate showing the insurer's name and address and clearly
reflecting the insurer's obligation to provide the participant's or
beneficiary's benefit.
Sec. 4041.29 Post-distribution certification.
(a) Deadline. Within 30 days after the last distribution date for
any affected party, the plan administrator shall file with the PBGC a
post-distribution certification consisting of the PBGC Form 501,
completed in accordance with the instructions thereto.
(b) Assessment of penalties. The PBGC will assess a penalty for
late filing of a post-distribution certification only to the extent the
certification is filed more than 90 days after the distribution
deadline (including extensions) under Sec. 4041.28(a).
Sec. 4041.30 Requests for deadline extensions.
(a) In general. In narrow circumstances, the PBGC may in its
discretion extend a deadline for taking action under this subpart to a
later date. The PBGC will grant such an extension where it finds
compelling reasons why it is not administratively feasible for the plan
administrator (or other persons acting on behalf of the plan
administrator) to take the action until the later date and the delay is
brief. The PBGC shall consider--
(1) The length of the delay; and
(2) Whether ordinary business care and prudence in attempting to
meet the deadline is exercised.
(b) Time of extension request. Any request for an extension under
paragraph (a) that is filed later than the 15th day before the
applicable deadline shall include a justification for not filing the
request earlier.
(c) IRS determination letter requests. Any request for an extension
under paragraph (a) of the deadline in Sec. 4041.25(c) for submitting a
determination letter request to the IRS (in order to qualify for the
distribution deadline in Sec. 4041.28(a)(1)(ii)) shall be deemed to be
granted unless the PBGC notifies the plan administrator otherwise
within 60 days after receipt of the request (or, if later, by the end
of the PBGC's review period under Sec. 4041.26(a)). The PBGC shall
notify the plan administrator in writing of the date on which it
receives such request.
(d) Statutory deadlines not extendable. The PBGC may not--
(1) Extend the 60-day time limit under Sec. 4041.23(a) for issuing
the notice of intent to terminate;
(2) Waive the requirement in Sec. 4041.24(a) that the notice of
plan benefits be issued by the time the plan administrator files the
standard termination notice with the PBGC; or
(3) Extend the deadline under Sec. 4041.29(a) for filing the post-
distribution certification. However, the PBGC will assess a penalty for
late filing of a post-distribution certification only under the
circumstances described in Sec. 4041.29(b).
Sec. 4041.31 Notice of noncompliance.
(a) Failure to meet pre-distribution requirements.
(1) In general. Except as provided in paragraphs (a)(2) and (c),
the PBGC shall issue a notice of noncompliance within the 60-day (or
extended) time period prescribed by Sec. 4041.26(a) whenever it
determines that--
(i) The plan administrator failed to issue the notice of intent to
terminate to all affected parties (other than the PBGC) in accordance
with Secs. 4041.23;
(ii) The plan administrator failed to issue notices of plan
benefits to all affected parties entitled to plan benefits in
accordance with Sec. 4041.24;
(iii) The plan administrator failed to file the standard
termination notice in accordance with Sec. 4041.25;
(iv) As of the distribution date proposed in the standard
termination notice, plan assets will not be sufficient to satisfy all
benefit liabilities under the plan; or
(v) In the case of a spin-off/termination transaction (as described
in Sec. 4041.23(c)), the plan administrator failed to issue the notices
required by Sec. 4041.23(c), Sec. 4041.24(f), and Sec. 4041.27(a)(2).
(2) Interests of participants. The PBGC may decide not to issue a
notice of noncompliance based on a failure to meet a requirement under
paragraphs (a)(1)(i) through (a)(1)(iii) or (a)(1)(v) of this section
if it determines that issuance of the notice would be inconsistent with
the interests of participants and beneficiaries.
(3) Continuing authority. The PBGC may issue a notice of
noncompliance or suspend the termination proceeding based on a failure
to meet a requirement under paragraphs (a)(1)(i) through (a)(1)(v) of
this section after expiration of the 60-day (or extended) time period
prescribed by Sec. 4041.26(a) (including upon audit) if the PBGC
determines such action is necessary to carry out the purposes of Title
IV.
(b) Failure to meet distribution requirements.
(1) In general. If the PBGC determines, as part of an audit or
otherwise, that the plan administrator has not satisfied any
distribution requirement of Sec. 4041.28(a), it may issue a notice of
noncompliance.
(2) Criteria. In deciding whether to issue a notice of
noncompliance under paragraph (b)(1) of this section, the PBGC may
consider--
(i) The nature and extent of the failure to satisfy a requirement
of Sec. 4041.28(a);
(ii) Any corrective action taken by the plan administrator; and
(iii) The interests of participants and beneficiaries.
(3) Late distributions. The PBGC shall not issue a notice of
noncompliance for failure to distribute timely based on any facts
disclosed in the post-distribution certification if 60 or more days
have passed from the PBGC's receipt of the post-distribution
certification.
(c) Correction of errors. The PBGC shall not issue a notice of
noncompliance based solely on the plan administrator's inclusion of
erroneous information (or omission of correct information) in a notice
required to be provided to any person under this part if--
(1) The PBGC determines that the plan administrator acted in good
faith in connection with the error;
[[Page 12517]]
(2) The plan administrator corrects the error no later than--
(i) In the case of an error in the notice of plan benefits under
Sec. 4041.24, the latest date an election notice may be provided to the
person; or
(ii) In any other case, as soon as practicable after the plan
administrator knows or should know of the error, or by any later date
specified by the PBGC; and
(3) The PBGC determines that the delay in providing the correct
information will not substantially harm any person.
(d) Reconsideration. A plan administrator may request
reconsideration of a notice of noncompliance in accordance with the
rules prescribed in part 4003, subpart C.
(e) Consequences of notice of noncompliance.
(1) Effect on termination. A notice of noncompliance ends the
standard termination proceeding, nullifies all actions taken to
terminate the plan, and renders the plan an ongoing plan. A notice of
noncompliance is effective upon the expiration of the period within
which the plan administrator may request reconsideration under
paragraph (d) of this section or, if reconsideration is requested, a
decision by the PBGC upholding the notice. However, once a notice is
issued, the plan administrator shall take no further action to
terminate the plan (except by initiation of a new termination) unless
and until the notice is revoked pursuant to a decision by the PBGC on
reconsideration. A plan administrator that still desires to terminate a
plan shall initiate the termination process again, starting with the
issuance of a new notice of intent to terminate.
(2) Effect on plan administration. If the PBGC issues a notice of
noncompliance, the prohibitions in Sec. 4041.22(a) shall cease to
apply--
(i) Upon expiration of the period during which reconsideration may
be requested or, if earlier, at the time the plan administrator decides
not to request reconsideration; or
(ii) If reconsideration is requested, upon PBGC issuance of
decision on reconsideration upholding the notice of noncompliance.
(f) If no notice of noncompliance is issued. A standard termination
is deemed to be valid if--
(1) The plan administrator files a standard termination notice
under Sec. 4041.25 and the PBGC does not issue a notice of
noncompliance pursuant to Sec. 4041.31(a); and
(2) The plan administrator files a post-distribution certification
under Sec. 4041.29 and the PBGC does not issue a notice of
noncompliance pursuant to Sec. 4041.31(b).
(g) Notice to affected parties. Upon a decision by the PBGC on
reconsideration affirming the issuance of a notice of noncompliance or,
if earlier, upon the plan administrator's decision not to request
reconsideration, the plan administrator shall notify the affected
parties (other than the PBGC), and any persons who were provided notice
under Sec. 4041.23(c), in writing that the plan is not going to
terminate or, if applicable, that the termination was invalid but that
a new notice of intent to terminate is being issued.
Sec. 4041.41 [Amended]
7. Paragraph (a) of redesignated Sec. 4041.41 is amended by
removing the words ``Requirements for a distress termination'' and
adding in their place, ``Distress requirements'' in the title.
8. Paragraph (a)(1) of redesignated Sec. 4041.41 is amended by
removing ``4041.41'' and adding in its place ``4041.43'' and by adding
the words ``(except with PBGC approval)'' after ``and'' and before
``not''.
9. Paragraph (a)(2) of redesignated Sec. 4041.41 is amended by
removing ``4041.43'' and adding in its place ``4041.45'' and by
removing the words ``or, if applicable, no later than the due date
established in an extension notice issued under Sec. 4041.8''.
10. Paragraphs (a)(3) and (e) of redesignated Sec. 4041.41 are
amended by removing ``paragraph (e)'' and adding in its place
``paragraph (c)''.
11. Paragraph (b)(1) of redesignated Sec. 4041.41 is amended by
removing the word ``If'' and adding in its place ``Except as provided
in paragraph (b)(2)(i) of this section, if''; and by removing the words
``of paragraph (b) of this section for a standard termination or,
except as provided in paragraph (d)(2)(i) of this section, all of the
requirements of paragraph (c) of this section''
12. Paragraph (b)(2)(i) of redesignated Sec. 4041.41 is amended by
removing ``(c)(1)'' and adding in its place ``(a)(1)''; and by removing
``(c)(2)'' and adding in its place ``(a)(2)''.
13. Paragraphs (d)(1) and (d)(2) of redesignated Sec. 4041.41 are
amended by removing ``(e)(2)'' and adding in its place ``(c)(2)''.
14. Paragraphs(d)(1)(i), (d)(1)(iii), and (d)(2) of redesignated
Sec. 4041.41 are amended by removing ``(e)(3)'' and adding in its place
``(c)(3)''.
Sec. 4041.42 [Amended]
15. Redesignated Sec. 4041.42 is amended by removing the words
``pendency of termination proceedings'' and adding in their place
``termination process'' in the title.
16. Paragraph (a) of redesignated Sec. 4041.42 is amended by adding
the word ``and'' after ``due the plan,''; and by removing the words
``and, during the pendency of a standard termination, making loans to
participants,''.
17. Paragraph (b) of redesignated Sec. 4041.42 is amended by
removing the words ``in a distress termination'' in the title; and by
removing ``4041.48'' and adding in its place ``4041.50''.
18. Paragraph (c) of redesignated Sec. 4041.42 is amended by
removing the words ``in a distress termination'' in the title.
19. Paragraph (d) of redesignated Sec. 4041.42 is amended by
removing ``4041.42(c)'' and adding in its place ``4041.44(c)''; and by
removing ``4041.44(c)(1)'' and adding in its place ``4041.46(c)(1)''.
20. Paragraph (d)(1) of redesignated Sec. 4041.42 is amended by
removing ``(c)'' and adding in its place ``(b)''; and by removing
``(c)(1)'' and adding in its place ``(b)(1)''.
21. Paragraph (d)(1)(i) of redesignated Sec. 4041.42 is amended by
removing ``4041.42(e) and 4041.44(d)'' and adding in its place
``4041.44(e) and 4041.46(e)''.
22. Paragraph (d)(2) of redesignated Sec. 4041.42 is amended by
removing ``(f)'' and adding in its place ``(c)''.
23. Paragraph (e) of redesignated Sec. 4041.42 is amended by
removing ``4041.47(b)'' and adding in its place ``4041.49(b)''; by
removing ``4041.47(d)'' and adding in its place ``4041.49(d)''; by
removing ``(c)'' and adding in its place ``(b)''; and by removing
``4041.47(e)'' and adding in its place ``4041.49(e)''.
Sec. 4041.43 [Amended]
24. Paragraph (a)(3) of redesignated Sec. 4041.43 is amended by
removing ``(d)'' and adding in its place ``(b)''.
25. Paragraphs (b) and (c) of redesignated Sec. 4041.43 are
removed.
26. Paragraph (d) of redesignated Sec. 4041.43 is redesignated as
paragraph (b), and as so redesignated is amended by removing the words
``employer identification number (``EIN')'' and adding in their place
``EIN''; and by removing the words ``plan number (`PN')'' and adding in
their place ``PN'' in paragraph (d)(2); by removing ``.'' and adding in
its place ``;'' in paragraph (d)(4); and by removing the words ``A
statement that benefit and service accruals will continue until the
termination date or, if applicable, that benefit accruals were or will
be frozen as of a specific date in accordance with section 204(h) of
ERISA'' and by adding in their place ``The cessation of accruals
[[Page 12518]]
information in Sec. 4041.23(b)(4)'' in paragraph (d)(5).
27. Paragraph (e) of redesignated Sec. 4041.43 is redesignated as
paragraph (c) and as so redesignated is amended by removing
``4041.21(f)'' and adding in its place ``4041.23(c)''.
Sec. 4041.44 [Amended]
28. In redesignated Sec. 4041.44, paragraphs (a)(1), (b), and (c)
are amended by removing ``4041.41'' and adding in its place
``4041.43''.
29. Paragraph (b)(3) of redesignated Sec. 4041.44 is amended by
removing ``4041.43'' and adding in its place ``4041.45''.
30. Paragraph (c) of redesignated Sec. 4041.44 is amended by
removing ``4041.3(d)(2)(i)'' and adding in its place
``4041.41(b)(2)(i)''.
31. Paragraph (f) of redesignated Sec. 4041.44 is amended by
removing ``4041.41(e))'' and adding in its place ``4041.43(e))''; and
by removing the sentence ``The notice required by this paragraph shall
be provided in the manner described in Sec. 4041.26(d)(2).''.
Sec. 4041.45 [Amended]
32. Paragraph (b)(1)(ii) of redesignated Sec. 4041.45 is amended by
removing ``4041.44(b)'' and adding in its place ``4041.46(b)''.
33. Redesignated Sec. 4041.45(d) is removed.
Sec. 4041.46 [Amended]
34. Paragraphs (a) and (b) of redesignated Sec. 4041.46 are amended
by removing ``4041.3(c)'' and adding in its place ``4041.41(c)''.
35. Paragraph (b) of redesignated Sec. 4041.46 is amended by
removing ``4041.43(b)'' and adding in its place ``4041.45(b)''.
36. Paragraph (c)(1) of redesignated Sec. 4041.46 is amended by
removing ``4041.3(c)'' and adding in its place ``4041.41''; and by
removing ``4041.3(d)'' and adding in its place ``4041.41(b)''.
37. Paragraph (c)(2) of redesignated Sec. 4041.46 is amended by
removing the words ``, or, if applicable, no later than the due date
established in an extension notice issued under Sec. 4041.8''.
38. Paragraph (e) of redesignated Sec. 4041.46 is amended by
removing ``4041.41(e)'' and adding in its place ``4041.43(e)''; and by
removing the sentence ``The notice required by this paragraph shall be
provided in the manner described in Sec. 4041.26(d)(2).''
Sec. 4041.47 [Amended]
39. Paragraph (a) of redesignated Sec. 4041.47 is amended by
removing ``4041.43(b)(1)'' and adding in its place ``4041.45(b)(1)''.
40. Paragraph (b)(1) of redesignated Sec. 4041.47 is amended by
removing ``4041.4'' and adding in its place ``4041.42''.
41. Paragraph (c)(1) of redesignated Sec. 4041.47 is amended by
removing ``4041.46'' and adding in its place ``4041.48''.
42. Paragraph (c)(2) of redesignated Sec. 4041.47 is amended by
removing ``4041.48'' and adding in its place ``4041.50''.
43. Paragraph (c)(3) of redesignated Sec. 4041.47 is amended by
removing ``4041.48(b)'' and adding in its place ``4041.50(b)''.
44. Paragraph (c)(4) of redesignated Sec. 4041.47 is amended by
removing ``4041.11'' and adding in its place ``4041.5''.
45. Redesignated Sec. 4041.47 is amended by adding a new paragraph
(d) to read as follows:
Sec. 4041.47 PBGC determination of plan sufficiency/insufficiency.
* * * * *
(d) Alternative treatment of majority owner's benefit. A majority
owner may elect to forego receipt of all or part of his or her benefit
in connection with a distress termination. Any such alternative
treatment--
(1) Is valid only if the conditions in Sec. 4041.21(b)(2)(i)
through (iii) are met; and--
(2) Is subject to the PBGC's approval if the election--
(i) Is made after the termination date; and
(ii) Would result in the PBGC determining that the plan is
sufficient for guaranteed benefits under paragraph (c).
46. Sec. 4041.48 is revised to read as follows:
Sec. 4041.48 Sufficient plans; notice requirements.
(a) Notices of benefit distribution. When a distribution notice is
issued by the PBGC pursuant to Sec. 4041.47, the plan administrator
shall issue notices of benefit distribution in accordance with the
rules regarding notice of plan benefits in Sec. 4041.24, except that--
(1) The deadline for issuing the notices of benefit distribution is
the 60th day after receipt of the distribution notice; and
(2) With respect to the information described in Sec. 4041.24(b),
the terms ``plan benefits'' and ``pension benefits'' are replaced with
``Title IV benefits'' and the term ``proposed termination date'' is
replaced with ``termination date''.
(b) Certification to PBGC. No later than 15 days after the date on
which the plan administrator completes the issuance of the notices of
benefit distribution, the plan administrator shall file with the PBGC a
certification that the notices were so issued in accordance with the
requirements of this section.
(c) Notice of annuity information. (1) In general. Unless all plan
benefits will be distributed in the form of nonconsensual lump sums,
the plan administrator shall provide a notice of annuity information to
each affected party other than--
(i) An affected party whose plan benefits will be distributed in
the form of a nonconsensual lump sum; and
(ii) The PBGC.
(2) Spin-off/termination transactions. The plan administrator shall
provide the information in paragraph (c)(4) of this section to a person
entitled to notice under Sec. 4041.43(c), at the same time and in the
same manner as required for an affected party described in paragraph
(c)(1) of this section.
(3) Selection of different insurer. A plan administrator that
decides to select a different insurer after having previously notified
the affected party of the identity of insurer(s) under this paragraph
shall provide another notice of annuity information.
(4) Content of notice. The notice shall include--
(i) The identity-of-insurer information in Sec. 4041.27(b)(1);
(ii) The information regarding change in identity of insurer(s) in
Sec. 4041.27(b)(2); and
(iii) Unless the state guaranty coverage information in
Sec. 4041.27(b)(3) was previously provided to the affected party, such
information and the extinguishment-of-guaranty information in
Sec. 4041.23(b)(8) (replacing the term ``pension benefits'' with
``Title IV benefits'').
(5) Deadline for notice. The plan administrator shall issue the
notice of annuity information to each affected party by the deadline in
Sec. 4041.27(d)(1).
(d) Request for IRS determination letter. To qualify for the
distribution deadline in Sec. 4041.28(a)(1)(ii) (as modified and made
applicable by Sec. 4041.50(c)), the plan administrator shall submit to
the IRS a valid request for a determination of the plan's qualification
status upon termination (``determination letter'') by the day on which
the plan administrator completes the issuance of the notices of benefit
distribution.
Sec. 4041.49 [Amended]
47. Paragraphs (a) and (c) of redesignated Sec. 4041.49 are amended
by
[[Page 12519]]
removing ``4041.48'' and adding in its place ``4041.50''.
48. Paragraph (b)(1)(i) of redesignated Sec. 4041.49 is amended by
removing ``4041.45(b)'' and adding in its place ``4041.47(b)''.
49. Paragraph (e) of redesignated Sec. 4041.49 is amended by
removing ``4041.4(c)'' and adding in its place ``4041.42''.
50. Sec. 4041.50 is added to read as follows:
Sec. 4041.50 Closeout of plan.
If a plan administrator receives a distribution notice from the
PBGC pursuant to Sec. 4041.47 and neither the plan administrator nor
the PBGC makes the finding described in Sec. 4041.49(b) or (d), the
plan administrator shall distribute plan assets in accordance with
Sec. 4041.28 and file a post-distribution certification in accordance
with Sec. 4041.29, except that--
(a) The term ``benefit liabilities'' is replaced with ``Title IV
benefits'';
(b) For purposes of applying the distribution deadline in
Sec. 4041.28(a)(1)(i), the phrase ``after the expiration of the PBGC's
60-day (or extended) review period under Sec. 4041.26(a)'' is replaced
with ``the day on which the plan administrator completes the issuance
of the notices of benefit distribution pursuant to Sec. 4041.48(a)'';
and
(c) For purposes of applying the distribution deadline in
Sec. 4041.28(a)(1)(ii), the phrase ``the requirements of
Sec. 4041.25(c)'' is replaced with ``the requirements of
Sec. 4041.48(d)''.
PART 4001--TERMINOLOGY
51. The authority citation for Part 4001 continues to read as
follow:
Authority: 29 U.S.C. 1301, 1302(b)(3).
Sec. 4001.2 [Amended]
52. In Sec. 4001.2, paragraph (2) of the definition of Distribution
date is amended by removing the words ``Other than for purposes of
determining the interest rate to be used in calculating the value of a
benefit to be paid as a lump sum to a late-discovered participant,
the'' and adding in their place ``The''; and by removing the words
``PBGC, a benefit provided after the deemed distribution date to a
late-discovered participant, or an irrevocable commitment purchased
from an insurer after the deemed distribution date for a recently-
missing participant'' and adding in their place the word ``PBGC''.
PART 4006--PREMIUM RATES
53. The authority citation for Part 4006 continues to read as
follow:
Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.
Sec. 4006.5 [Amended]
54. In Sec. 4006.5, paragraph (f)(3) is amended by removing the
words ``or, if later (in the case of a single-employer plan), the date
30 days prior to the date the PBGC receives the plan's post-
distribution certification''.
PART 4050--MISSING PARTICIPANTS
55. The authority citation for Part 4050 is added to read as
follow:
Authority: 29 U.S.C. 1302(b)(3), 1350.
Sec. 4050.1 [Amended]
56. In Sec. 4050.1, the reference ``Sec. 4041.27(c)'' is removed
and the reference ``Sec. 4041.28(c)'' is added in its place.
57. In Sec. 4050.2, the definition of Late-discovered participant
is removed; the definition of Recently-missing participant is removed;
the definition of Post-distribution certification is amended by
removing the words ``Sec. 4041.27(h) or Sec. 4041.48(b)'' and adding in
their place the words ``Sec. 4041.29 or Sec. 4041.50''; and the
definition of Deemed distribution date is revised to read as follows:
Sec. 4050.2 Definitions.
* * * * *
Deemed distribution date ordinarily means the last day of the
period in which distribution may be made (determined without regard to
the provisions of this part) under part 4041 of this chapter. The plan
administrator may select an earlier date, provided that the selected
date is no earlier than the date when all benefit distributions have
been made under the plan except for distributions to missing
participants whose designated benefits are paid to the PBGC.
* * * * *
Sec. 4050.3 [Amended]
58. In Sec. 4050.3, paragraph (a) is amended by removing the words
``Sec. 4041.27(c) or Sec. 4041.48(a)(1)'' and adding in their place the
words ``Sec. 4041.28(c) or Sec. 4041.50''.
59. In Sec. 4050.4, paragraph (b)(1) is amended by removing the
words ``(or, in the case of a recently-missing participant, on or
before the 90th day after the deemed distribution date)''; and
paragraph (a) is revised to read as follows:
Sec. 4050.4 Diligent search.
(a) Search required. A diligent search shall be made for each
missing participant before information about the missing participant or
payment is submitted to the PBGC pursuant to Sec. 4050.6.
* * * * *
60. In Sec. 4050.6, paragraphs (a)(2) and (a)(3) are removed;
paragraph (a)(1) is redesignated as paragraph (a), the heading is
revised as set forth below, and the reference ``Sec. 4041.9'' is
revised to read ``Sec. 4041.3(b)'; paragraph (b) is amended by removing
the words ``If the plan administrator'' and adding in their place the
words ``Except as provided in paragraph (b)(2) of this section, if the
plan administrator'; the heading and text of paragraph (b) (as so
amended) are redesignated as paragraph (b)(1); a new heading is added
to paragraph (b), and new paragraph (b)(2) is added, to read as
follows:
Sec. 4050.6 Payment and required documentation.
(a) Time of payment and filing.
* * * * *
(b) Late charges.
(1) Interest on late payments. * * *
(2) Assessment of interest and penalties. The PBGC will assess
interest for late payment of a designated benefit or a penalty for late
filing of information only to the extent paid or filed beyond the time
provided in Sec. 4041.29(b).
* * * * *
Sec. 4050.7 [Amended]
61. In Sec. 4050.7, paragraph (a) is amended by removing the words
``the insurer and the relevant policy number'' and adding in their
place the words ``the insurer, the relevant policy number, and (to the
extent known) the amount or value of the benefit''.
Sec. 4050.12 [Amended]
62. In Sec. 4050.12, paragraphs (a) and (h) are removed and
paragraphs (b), (c), (d), (e), (f), (g), and (i) are redesignated as
paragraphs (a), (b), (c), (d), (e), (f), and (g) respectively;
redesignated paragraph (a) is amended by removing the words ``treat the
missing participant like a late-discovered participant'' and adding in
their place the words ``make distribution to the individual in such
manner as the PBGC shall direct''; redesignated paragraph (c) is
amended by removing the references ``paragraph (d)(2)'', ``paragraph
(d)(2)(i)'', and ``paragraph (d)(2)(ii)'' and adding in their place the
references ``paragraph (c)(2)'', ``paragraph (c)(2)(i)'', and
``paragraph (c)(2)(ii)'' respectively; and redesignated paragraph (g)
is amended by removing the reference ``paragraph
[[Page 12520]]
(i)'' in both places where it appears and adding in each place the
reference ``paragraph (g)''.
Sec. 4050.13 [Removed]
63. Section 4050.13 is removed.
Issued in Washington, DC, this 11th day of March, 1997.
John Seal,
Acting Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 97-6500 Filed 3-13-97; 8:45 am]
BILLING CODE 7708-01-P
