By Michael T. Graham, Esq., Maureen O'Brien, Esq., and Patrick D. Ryan, Esq.
McDermott, Will & Emery, Chicago, IL
On July 8, 2014, the Pension
Benefit Guaranty Corporation (PBGC)
issued a press release announcing a moratorium on its enforcement
of Employee Retirement Income Security Act of 1974 (ERISA) §4062(e)
through the end of 2014. In general, ERISA §4062(e) allows PBGC to
require that employers financially guarantee pension obligations in
the form of plan contributions or a bond or escrow amount based on
a plan's unfunded termination liability when an employer with a
pension plan shuts down operations at a facility and, as a result
of the shutdown, more than 20% of the employer's employees who are
plan participants incur a separation from employment.
PBGC had recently been
quite aggressive in its enforcement
actions under ERISA §4062(e). As a result, ordinary business
decisions, like asset deals and other business decisions impacting
less than a facility's full operations, were gaining PBGC's
attention. PBGC believes that the moratorium will enable it to
target future enforcement efforts to those cases where employee
pensions are genuinely at risk and allow it to continue to consult
with businesses, labor and other stakeholders in developing a
practical approach to enforcement. The moratorium runs through
December 31, 2014, and applies to currently pending as well as new
cases. Importantly, PBGC advised that companies must continue to
report potential ERISA §4062(e) events to the PBGC during the
period of the moratorium. Further, the moratorium does not preclude
PBGC enforcing ERISA §4062(e) with respect to any reportable event
that occurs during the moratorium period. The moratorium is not a
safe harbor and there is no indication that it will continue past
December 31, 2014.
For more information, in the Tax Management
Hassel, 357 T.M., Pension Plan Terminations - Single Employer
Plans, and in Tax Practice Series, see ¶5580, Pension
The Bureau of
National Affairs, Inc.
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