The Pension Benefit Guaranty Corporation issued a final rule on pension plans' requirements to report various corporate and plan events to the agency that the PBGC says focuses on identifying the minority of defined benefit plans and their sponsors that pose the greatest risk of defaulting on their financial obligations.
The new regulations (RIN 1212-AB06) provide most plan sponsors with increased flexibility to determine whether a waiver from reporting requirements will apply, the PBGC said Sept. 10 in announcing the issuance of the rule.
The new rule will help the agency get the information it needs and “will reduce the burden for employers whose pension plans are not at risk,” Alice Maroni, the PBGC's acting director, said in a news release. It will give “companies flexibility to use information they have readily at hand to see if they are eligible for a waiver and need not report to” the PBGC, she said.
The rule will change existing regulations and guidance for pension plans and their sponsors on requirements they face on the reporting to the PBGC of various corporate events, such as loan defaults and controlled group changes, and plan events, such as big drops in the number of active plan participants, missed plan contributions or insufficient funds. The reporting is designed to give the agency a heads-up on events that may indicate the plan or the sponsor is having financial difficulties so the agency can determine if it needs to take action to ensure plan participants continue to receive their benefits.
The final rule, slated for publication in the Federal Register on Sept. 11, finalizes the agency's 2013 proposed rule on reportable events, and will apply to events that occur after Jan. 1, 2016.
‘Seat at the Table.'
Harold J. Ashner, a partner with Keightley & Ashner LLP, said that with the rule, the “PBGC is clearly trying to get a ‘seat at the table’ well in advance of a possible bankruptcy.”
For example, he said the new definition under the final rule of a loan default reportable event, unlike the old definition, captures situations in which there isn't any “loan default as a result of the lender having waived or agreed to an amendment of a loan agreement provision.”
Ashner, who formerly served as the PBGC's assistant general counsel for legislation and regulations, said that because many corporate loan and other agreements include provisions tied to the PBGC's reportable events regulations, practitioners will need to review these significant regulatory changes very carefully to determine how they may affect existing and future agreements. Though the new rules don't go into effect until 2016, they may impact agreements entered into before 2016, depending on how those agreements were or will be drafted, Ashner said.
Representatives of the ERISA Industry Committee and the American Benefits Council said they were concerned about the final rule's continuation of the proposed rules' scheme of connecting reportable events to plan sponsors' financial statements and metrics rather then to the funding of the plans themselves.
Excerpted from a story that ran in Pension & Benefits Daily (09/11/2015).
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