WASHINGTON - The Pension Benefit Guaranty Corp. is giving employers that terminate fully funded pension plans more time to meet various deadlines associated with the termination process.
The PBGC also said it would waive certain reporting requirements for small employers that fail to pay, on time, federally required quarterly payments to their pension plans.
The first set of rules applies to employers that go through the standard termination process - terminations of fully and overfunded pension plans. About 3,000 to 4,000 standard terminations occur each year.
Under the rules, which generally will take effect Jan. 1, the deadline for filing a standard termination notice with the PBGC would be extended to 180 days from 120 days after the proposed termination date.
In addition, plan administrators would have up to 120 days - up from the current 60-day maximum - to distribute plan assets after they have received a clearance letter from the Internal Revenue Service. Plan assets are distributed through the purchase of annuities or lump-sum payments.
The new rules also would give plan administrators a model notice to inform participants of the intended plan termination and the effect it would have on their benefits.
That notice would inform participants of the mortality and interest rate assumptions used to calculate their lump-sum benefits. The notice also would have to include information about state guarantee requirements that would apply to benefits if the insurer selected by the employer to provide annuities later becomes insolvent.
Aside from the new termination rules, published in the Nov. 7 issue of the Federal Register, the PBGC last week waived for small employers a rule that requires companies that fail to make required quarterly contributions to notify the agency within 30 days.
In May, the PBGC said small employers only would have to file one annual notice if they missed any quarterly payments. The latest waiver completely exempts small employers from filing a report if they miss making a quarterly contribution to their plans. However, a report would have to be filed if a small employer failed to make a required annual contribution.
The relaxation of the missed contribution reporting rule applies to employers that have 100 or fewer participants in their defined benefit plans or 500 or fewer participants in their defined benefit plans and their plans are at least 90% funded.
The relaxation of the reporting requirements could affect as many as 10,000 employers, the PBGC said.
The extension of more time for employers to complete the termination process and the relaxation of reporting rules for small employers are the latest in a series of changes the pension agency has announced that have won praise from the business community.
Crain News Service
