The Pension Benefit Guaranty Corp. has proposed a new debt collection process that would hold back any type of federal payments owed to a company that has terminated its pension plan and has outstanding debts.
In its announcement printed in the Federal Register, the agency said withholding federal payments, such as payments on government contracts, would strengthen its debt collection.
The withheld payment would be considered an offset or a deduction from the amount owed the PBGC.
Just how many companies this would affect is unclear. According to the PBGC's annual report, the agency approved the termination of 88 underfunded plans in 1993, although the actual plan termination may have happened earlier.
Although the proposed regulation may apply to only a few plans, Diane Burkley, an attorney with Fried, Frank, Harris, Shriver & Jacobson, New York, and former deputy executive director and chief negotiator at the PBGC, said this could be a "powerful tool" to use against delinquent payers.
In order to use the offset system, the PBGC first must issue regulations before collecting debts. The agency now is asking for public response to its plan.
The gateway to allow the PBGC to propose this offset process has been open since 1982, when Congress passed the Debt Collection Act, allowing all debt-collecting government agencies to use an offset program to collect outstanding payments.
An agency spokeswoman said the PBGC hopes to use this tool to collect unpaid premiums, interest and late payment penalties.
