On December 22, 2017, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations in connection with its program for maintaining retirement benefits on behalf of terminated benefit plans for missing beneficiaries and participants.
The purpose of this regulation is to enhance the program by expanding it to include:
Previously this program was limited to single employer pension plans.
Additionally, the new regulations simplify the rules by repealing unnecessary provisions and allows the PBGC to charge an administrative fee.
The final rule does not apply to participants in connection with plans terminated prior to December 31, 2017. This final regulation is scheduled to be effective January 22, 2018. Historically, single employer defined benefit plans paid a fee (insurance) to the PBGC for administration of the pension plan termination insurance program which is governed under the Employee Retirement Income Security Act of 1974 (ERISA). Before a plan can formally terminate, all plan assets must be distributed.
One of the challenges for plan administrators is locating remaining participants and beneficiaries so the balance of plan assets can be distributed. The PBGC has issued guidance for plan administrators to locate missing participants and methods for how benefits should be computed, however, guidance had been lacking for defined contribution and multiemployer plans. In 2014, the Department of Labor issued guidance for defined contribution plans in field assistance bulletin (FAB) 2014-01 which included steps that administrators should take to search for missing participants and distribution options.
The PBGC received 14 comment letters on the initial proposed rules and as a result, a few changes were made to the final guidance. Although the requirements are the same across plan type, the regulation is divided into subpart A through D depending on the nature of the plan:
The diligent search must be completed within nine months before the last distribution to a non-missing distribute or within nine months before the benefits are transferred to the PBGC.
The regulation also includes a further explanation on the amounts to be transferred, types of benefits to be paid, forms to be filed including deadlines. The PBGC notes that it is relying on information provided by the terminating plans and respective sponsors and it accepts that information as is, therefore they have removed from the final regulation the provisions which dealt with audits and associated areas.
The overall goal of the new rules is to provide increased opportunity for missing distributes (participants and beneficiaries) being found and receiving the benefits which they are entitled to, and reduce the burden on plan administrators. For additional information about the program and the new guidance visit the PBGC’s website, or contact a member of Withum’s ERISA Services Group by filling out the form below to discuss how these new regulations may impact your plan and plan administration.
Author: Jessica Offer, CPA | firstname.lastname@example.org