PBGC proposes clarifying downsizing liability rule

The PBGC proposed a clarification to a rule determining the liability when an employer shuts down a facility that leads to layoffs of more than 20% of the active participants in a defined benefit plan.

Under the proposed clarification, published in the Aug. 10 edition of the Federal Register, the previous employer could face special downsizing liability, even if the facility remains open and employees remain in their jobs after the facility is sold, said Harold Ashner, a partner with the law firm Keightley & Ashner and former PBGC assistant general counsel for legislation and regulations.

“PBGC is taking an expansive position on the circumstances in which this downsizing liability is triggered,” Mr. Ashner said.

“If this proposed rule goes into effect without substantial change, employers can expect PBGC to get involved in more downsizing and other corporate events and to pursue this liability even more aggressively than it has been in recent years.”

Comments on the PBGC's proposed rule clarification are due by Oct. 12.

Marc Hopkins, a PBGC spokesman, declined to comment.