The Pension Benefit Guaranty Corp. is seeking public comment on whether to allow multiemployer plans two options for handling withdrawal liability when employers leave a pension fund, according to a request for information published Wednesday.
In its Retirement Matters blog, the PBGC said several pension funds have asked to use a “two pool” alternative method, which under current law is only allowed by permission from PBGC.
Officials have been studying the concept of two separate withdrawal liability pools that would help pension funds attract new employers or retain employers who might otherwise leave. “But, depending on their structure, they might also increase the risk of loss to plan participants and beneficiaries or to the multiemployer insurance program,” the blog said.
Under the alternative arrangements, employers are in separate unfunded vested benefit pools, with all old liabilities in one pool and future liabilities of some employers, depending on when they joined the fund, in another. Plans have asked the PBGC to create terms and conditions to allow employers to move from the old pool to the new pool, while paying frozen withdrawal liability in the old pool and getting relief from other liability. “PBGC is particularly interested in whether these methods provide a path for some plans to become healthier over time,” the blog said.
Possible terms and conditions for new and current employers could include alternative benefit schedules, special allocation and payment terms for withdrawal liability and mass withdrawal liability, and various alternative arrangements.
“We are very interested in the benefits and risks these arrangements present to participants and the multiemployer insurance program,” the blog said. “We encourage the innovative use of existing statutory and regulatory tools to reduce risk and protect benefits.”
The RFI will be published in the Federal Register on Thursday.