Reversing course on a controversial rule that would have upped the reporting burden for defined benefit plan sponsors, the Pension Benefit Guaranty Corp. on Wednesday proposed a new rule that will exempt as many as 90% of companies from having to disclose “reportable events” such as bankruptcies and mergers.
The increased availability of bankruptcy information and credit reporting, and an internal agency review that found little correlation between such reports and risk to pension plans, were key reasons for the change in course, along with a governmentwide push to ease regulatory burdens on business, said PBGC Director Joshua Gotbaum on a telephone news briefing. “Our goal is to encourage defined benefit plans, so we want to reduce the hassle for plan sponsors,” Mr. Gotbaum said.
“I think plan sponsors will appreciate the approach,” said Aliya Wong, executive director of retirement policy for the U.S. Chamber of Commerce. Ms. Wong said the original proposal, issued in 2009, as well as a similar one for plant shutdowns, “were going the wrong way. This is really an indication that (PBGC officials) have kind of come back. They are listening to plan sponsors.”
The new proposal, which PBGC officials hope to finalize before 2014, would exempt companies that are financially sound, defined as a small business or in situations like bankruptcies for which information is readily available elsewhere. Companies not meeting those tests could still be exempt if their defined benefit plans are either 120% funded on an ongoing basis, or 100% funded on a termination basis.
Mr. Gotbaum said that when agency officials scrutinized 2011 reports from plan sponsors, they found as much as 90% of the reporting to be unnecessary and little correlation between plan funding levels and plan failures. “What we found was critical, was whether the plan sponsor was likely to default on its other obligations,” he said.
Mr. Gotbaum said criticism from plan sponsors about the more-onerous reporting rule in 2009 was legitimate. “It's not very often that a federal agency admits they made a mistake,” he said. The PBGC will also hold a public hearing on June 18 to gather more input on the proposal.