Employee
Retirement Income Security Act of 1974 (ERISA), Title IV (Plan Termination
Insurance), Public Law 93-406, as amended; Public Law 96-364; Multiemployer
Pension Plan Amendments Act of 1980; Public Law 99-272; Single-Employer
Pension Plan Amendments Act of 1986; Pension Protection Act of 1987,
Public Law 100- 203; Omnibus Budget Reconciliation Act of 1989,
Public Law 101-239; Retirement Protection Act of 1994, Public Law
103-465.
To
encourage the continuation and maintenance of voluntary private
pension plans for the benefit of their participants, to provide
for the timely and uninterrupted payment of pension benefits to
participants and beneficiaries in plans covered by the PBGC, and
to maintain premiums charged by the PBGC at the lowest level consistent
with carrying out its obligations.
TYPES
OF ASSISTANCE:
Insurance. Place Cursor Here for Definition
USES
AND USE RESTRICTIONS:
Insurance
coverage is mandatory for most private, defined benefit pension
plans. A single-employer plan may terminate in a standard termination
only if it has sufficient assets to provide all benefits, and in
a voluntary distress termination only if the employer sponsoring
the plan can satisfy specified distress criteria. Upon a voluntary
distress termination or a termination initiated by the PBGC, the
PBGC guarantees payment of nonforfeitable benefits under the terms
of the plan within limits specified in the law. The guaranteed basic
benefits payable to a participant or beneficiary under a covered
single-employer plan may not exceed the actuarial value at the time
of termination of a monthly benefit in the form of a life annuity
commencing at age 65 equal to the lesser of: (1) A $750 adjusted
annually to reflect changes in the Social Security contribution
and benefit base since 1974, or (2) a participant's high consecutive
five-year average monthly gross income. When covered plans or amendments
to them are less than 5 years old at termination, benefits are guaranteed
on a graduated basis. Benefits of persons defined as "substantial
owners" are guaranteed on a 30-year graduated basis, subject to
certain additional limits in the case of increased benefits due
to plan amendment. For multiemployer plans there is a program of
reorganization for plans with funding problems. The PBGC is required
to extend financial assistance to insolvent multiemployer plans
in order that they may be able to meet plan obligations for guaranteed
benefits. Insurance coverage is mandatory for any plan that is an
employee pension plan benefit established or maintained by: (1)
An employer engaged in or affecting commerce; (2) an employee organization
engaged in or affecting commerce; or (3) both, if certain requirements
relating to the Internal Revenue Code are met. However, insurance
coverage does not extend to any plan that is: (1) an individual
account plan; (2) established and maintained for Federal, State
or local government employees; (3) a church plan, unless the plan
has made an election under 26 U.S.C. 410(d) and has notified PBGC
of such election; (4) a plan that has not provided for employer
contributions after September 2, 1974; (5) unfunded and maintained
by an employer primarily to provide deferred compensation for a
select group of management or highly compensated employees; (6)
established and maintained outside of the U.S. primarily for the
benefit of non-resident aliens; (7) maintained by an employer solely
for the purpose of providing benefits for certain employees in excess
of the limitations on contributions and benefits imposed by the
Internal Revenue Code; (8) established and maintained exclusively
for substantial owners; (9) that of an international organization
that is exempt from taxation; (10) maintained solely for the purpose
of complying with applicable workmen's compensation laws or unemployment
compensation or disability insurance laws; or (11) established and
maintained by a professional service employer that has not at any
time since September 2, 1974, had more than 25 active participants.
ELIGIBILITY
REQUIREMENTS:
Applicant
Eligibility: Private businesses and organizations
that maintain defined benefit plans and participants (and beneficiaries)
in such plans.
Beneficiary
Eligibility: All participants (and their beneficiaries)
in covered single-employer pension plans may be potentially eligible
for plan termination insurance payments. All covered multiemployer
plans may be eligible for financial assistance needed to ensure
payment of guaranteed benefits.
Credentials/Documentation:
In support of a termination notice, information relating to plan
asset sufficiency must be furnished by the plan administrator
of a single-employer plan. Information relating to financial operations
of the employer must also be furnished for a distress termination.
Pre-application
Coordination: None. This program is excluded
from coverage under E.O. 12372.
Application
Procedure: As soon as practicable after complying
with certain statutory notice requirements, a plan administrator
who intends to terminate a covered single-employer plan must submit
to the PBGC either a standard termination notice or a distress
termination notice depending on the type of termination sought.
Applications relating to a standard or distress termination should
be sent to PBGC, Processing and Technical Assistance Branch, 1200
K Street, NW., Suite 930, Washington, DC 20005-4026. Applications
for multiemployer plan matters should be made in accordance with
applicable PBGC regulations and other published guidelines.
Award
Procedure: The PBGC determines whether the
assets of a covered single-employer plan that has notified the
PBGC of its intent to terminate in a distress termination, or
against which the PBGC has initiated termination proceedings,
are sufficient to pay guaranteed benefits. If plan assets are
found to be insufficient or the PBGC is unable to determine asset
sufficiency, the PBGC will normally have itself named as trustee
to administer the plan. The PBGC pays guaranteed benefits. The
PBGC also pays other benefits funded by plan assets or recoveries
from employers.
Deadlines:
An annual premium must be paid for each covered plan generally
no later than 9 1/2 months into the plan year, e.g., annual premiums
are due October 15th for calendar-year plans (Form 1 or Form 1-EZ).
Plans with 500 or more participants (for the prior year) generally
must also file an estimated premium with the PBGC (for the current
year) by the last day of the second full calendar month following
the close of the prior plan year (Form 1-ES). Premiums must be
paid through the plan year in which all plan benefits are distributed
in a standard termination or a trustee is appointed under ERISA
Section 4042. For further information or copies of forms contact:
PBGC, Collection and Compliance Division, Suite 670, 1200 K Street,
NW., Washington, DC 20005-4026, Telephone (202) 326-4042 or 1-800-736-2444.
Standard Termination: Notice of Intent to Terminate (NOIT). The
plan administrator of a single-employer plan must issue a notice
of intent to terminate the plan, by hand, mail, or electronic
means reasonably calculated to ensure actual receipt, to each
individual plan participant, beneficiary of a deceased participant,
and union representing plan participants (but not to the PBGC)
at least 60 days and no more than 90 days in advance of the proposed
termination date. PBGC Notice: No later than 180 days after the
proposed termination date the administrator must file with the
PBGC a notice including, among other items, an enrolled actuary's
certification that plan assets will be sufficient to provide all
benefit liabilities as of the date of final distribution, with
the underlying total asset and benefit values (Form 500). Notice
of Plan Benefits: No later than the date the PBGC Notice is filed,
the administrator must have provided informatio to each plan participant
and beneficiary in plain language about his or her benefit, including
such matter of the amount of that person's benefit, the form of
benefit valued, and the factors (such as age, length of service,
and actuarial assumptions) used in calculating the benefit. The
plan administrator must also notify each plan participant and
beneficiary of the identity of the insurer or insurers from whom
(or from among whom) the plan administrator intends to purchase
annuities no later than 45 days before the date of distribution.
Asset Distribution: The PBGC has 60 days after receipt of the
PBGC Notice to determine whether the plan termination complies
with the requirements for a standard termination. If the PBGC
does not issue a Notice of Noncompliance and plan assets are sufficient
to provide all benefit liabilities, the administrator may distribute
the plan assets. The distribution must generally be completed
within 180 days after the expiration of the 60-day review period
and be done in accordance with plan provisions and PBGC regulations.
If the plan administrator requests an IRS determination letter
on or before the date of filing Form 500 with PBGC, the asset
distribution deadline is extended to 120 days after the plan receives
a favorable IRS determination letter. Within 30 days after final
distribution of plan assets, the administrator must file with
the PBGC a notice certifying that assets have been distributed
as required (Form 501). However, PBGC will assess a penalty for
a late filing only if it is filed more than 90 days after assets
have been distributed. A terminating plan that is unable to locate
an individual after a diligent search must either purchase an
annuity for the individual and send annuity provider information
to the PBGC or send the PBGC funds to pay for the individual's
benefit (Schedule MP). Distress Termination Notice Requirements:
The notice requirements for a distress termination differ from
those for a standard termination in several ways: the 60-day to
90- day advance NOIT must be provided to the PBGC as well as to
plan participants and other affected parties; the PBGC Notice
(Form 601) must include information to demonstrate that each contributing
sponsor and each member of the sponsor's controlled group meet
at least one of the distress tests (liquidation, reorganization,
business continuation, or unreasonable pension costs due to a
declining workforce) as of the proposed termination date. A plan
administrator must provide Notice of Plan Benefits to plan participants
and beneficiaries in a distress termination only if the plan has
sufficient assets to provide at least guaranteed benefits.
Range
of Approval/Disapproval Time: Not applicable.
Appeals:
Any person aggrieved by an initial determination made by the PBGC
which is covered by the appeals procedures may file an appeal.
An appeal or a request for an extension of time to appeal should
be submitted to the Appeals Board, Pension Benefit Guaranty Corporation,
1200 K Street, Suite 480, NW, Washington, DC 20005-4026. In addition,
the PBGC has the authority to review informally, upon request,
determinations that are not covered by the appeals procedures
when it determines that it would be appropriate to do so.
Renewals:
Not applicable.
ASSISTANCE
CONSIDERATIONS:
Formula
and Matching Requirements: Not applicable.
Length
and Time Phasing of Assistance: Not applicable,
except as noted in USES AND USE RESTRICTIONS section of this program.
POST
ASSISTANCE REQUIREMENTS:
Reports:
An annual report (Form 5500 series) must be filed by the plan administrator
with the Department of Labor no later than the last day of the seventh
month after the close of the prior plan year, subject to extensions.
Certain events that may indicate serious problems relating to a
plan also must be reported to the PBGC, normally within 30 days
after the plan administrator or contributing sponsor learns of them.
Such reportable events include failure to meet minimum funding standards;
bankruptcy, insolvency or similar settlements; liquidation or dissolution;
or transactions involving a change of employer. In the case of certain
privately held companies, the PBGC must be given 30 days advance
notice of certain corporate or plan events. Controlled groups that
have more than $50 million in unfunded vested benefits are required
to provide plan actuarial and company financial information to the
PBGC annually. Certain plans are required to provide participants
annually with plan underfunding information, and to certify in the
premium filing to the PBGC that they have provided the information.
Audits:
The PBGC determines whether the assets of a covered single-employer
plan (that has either notified the Corporation of its intent to
terminate in a distress termination, or against which the Corporation
has initiated termination proceedings) are sufficient to pay plan
benefit liabilities. Title IV imposes liability on an employer
that terminates an insufficient single-employer plan for the amount
of unfunded benefit liabilities. The PBGC also audits a statistically
significant number of single-employer plans terminated in a standard
termination to ensure that assets were distributed in full satisfaction
of all benefit liabilities. In addition, the PBGC audits premium
filings.
Records:
Records to support or validate premium payments must be kept for
6 years from the premium due date. In addition, records maintenance
requirements for pension plans are specified by the Pension and
Welfare Benefits Administration, Department of Labor.
FINANCIAL
INFORMATION:
Account
Identification: 16-4204-0-3-601.
Obligations:
(Benefit payments) FY 01 $963,370,000; FY 02 est $1,169,790,000;
and FY 03 est $1,151,000,000. (Financial Assistance to Multiemployer
Plans) FY 01 $94,330,000; FY 02 est $6,266,000; and FY 03 est
$6,270,000.
Range
and Average of Financial Assistance:
Monthly benefit range per retiree of PBGC'S guarantee as of September
30, 2000, in the single employer program: $10 to the maximum guarantee
from PBGC funds of $3,221.59; average monthly benefit per retiree,
fiscal year 2001 estimate single-employer: $430.
The PBGC administers an insurance program guaranteeing certain pension
benefits to approximately 43 million participants in over 38,000
private defined benefit pensions. In fiscal year 2001, there are
an estimated 240,486 participants in pay status and the PBGC will
pay $1,169,800,000. The PBGC estimates that it will pay $1,151,000,000
in benefits in fiscal year 2002 to an estimated 259,580 participants.
REGULATIONS,
GUIDELINES, AND LITERATURE:
Title 29 CFR, Chapter 40; PBGC Form 1-ES Package; PBGC Form 1 Package;
PBGC Form 500 Package; Schedule MP Package; PBGC Form 600 Package;
PBGC Form 200; PBGC Form 10; PBGC Form 10-Advance; PBGC's Home Page
on the World Wide Web at http://www.pbgc.gov.
INFORMATION
CONTACTS:
Regional
or Local Office: Individuals may contact PBGC
through any Department of Labor, Pension Welfare Benefits Administration
Regional Office listed in Appendix IV of the Catalog.
Headquarters
Office: Pension Benefit Guaranty Corporation,
1200 K Street, NW., Washington, DC 20005-4026. Telephone: (202)
326-4000.
