PBGC Proposal Eases Rules Related to Multiemployer Plan Filing and Notice Requirements
On January 28th, 2014, the PBGC issued a proposed rule that would ease certain multiemployer plan filing and notice requirements. One important aspect of the proposed rule would ease the notice requirement for plan sponsors contemplating a plan merger. Plan sponsors currently considering a merger with another multiemployer plan must notify the PBGC 120 days in advance of such merger. The proposed rule would shorten this notice requirement to 45 days for certain types of mergers. The notice, which contains information about the merger, the plans involved, and required actuarial valuations, is designed to allow the PBGC to evaluate whether the merger will satisfy certain statutory requirements. In proposing to shorten the advance notice requirement, the PBGC recognized that many plan sponsors, in an effort to complete plan mergers before the end of a year, often request a waiver of the 120-day advance notice period. The shortened notice period is designed to accommodate the needs of plan sponsors, while maintaining the PBGC’s oversight in this area.
The PBGC also proposed to limit reporting in two other areas. First, multiemployer plans that become insolvent—meaning that they can only pay benefits at minimum levels set by the PBGC—are typically required to provide annual notices to the PBGC, participants, and beneficiaries. Since adopting this rule, the PBGC recognized that insolvent plans rarely return to financial health. Accordingly, the proposed rule would require the plan sponsor to issue these notices only once, rather than on an annual basis. Second, the PBGC proposed to limit the requirement that certain terminated plans perform annual valuations. Under current rules, a terminated but not insolvent plan is required to report an annual valuation to the PBGC so that the PBGC can adequately evaluate its risks should the plan become insolvent. In reviewing this regulation, PBGC recognized that the costs of requiring an annual valuation would accelerate plan insolvency and require PBGC intervention. To alleviate this problem, the proposed rule would require terminated multiemployer plans with less than $25 million in nonforfeitable benefits to provide valuations to the PBC every three years.