Representatives of corporate pension plan sponsors say they have yet to see the kindler, gentler PBGC — at least when it comes to a section of ERISA that gives the agency the power to put its hand in the wallet of companies experiencing financial problems.
The announcement last fall by Joshua Gotbaum, director of the Pension Benefit Guaranty Corp., Washington, that his agency was going easier on defined benefit plan sponsors experiencing business shutdowns was supposed to make employers happy, or at least less grumpy. Yet despite new figures showing the agency has passed up the opportunity to impose nearly $1 billion in additional pension funding demands, plan executives still complain the agency holds all the cards.
“They will work with you, but they still tend to be fairly aggressive,” said attorney Brian Dougherty, a partner in the employee benefits and executive compensation practice of law firm Morgan Lewis & Bockius LLP in Philadelphia.
Corporate pension executives have been griping since 2007, when PBGC officials figured out a formula for calculating pension liabilities that could be assessed under Section 4062(e) of the Employee Retirement Income Security Act in the event of operational shutdowns, and started aggressively enforcing the law, which allows the agency to act if 20% or more of employees covered by a defined benefit plan will lose their jobs.
That enforcement has led corporate executives to complain of agency overreach in cases involving routine business transactions that do not threaten pension plans. But Ajit Gadre, program manager for the PBGC's corporate finance restructuring group, counters that the agency is simply doing what it is supposed to do when companies' financial situations change.
“We've been interpreting the law as Congress requires us to do,” he said. “We adopted a very plain-language approach.?For example, "cessation of operations at a facility' means that a company stops doing some discrete, identifiable activity at a place.”
PBGC officials acknowledge the more consistent enforcement in recent years has rattled employers, and are hopeful that the pilot program announced last fall that exempts companies deemed to be financially sound will allay fears. That, plus an exemption for plans with 100 participants or less, puts 92% of plan sponsors on the sidelines, the officials say.