A PBGC proposal to boost defined benefit plan reporting to help the agency access the plan sponsors' financial soundness is drawing strong protests.
Plan executives initially considered proposed changes to the Pension Benefit Guaranty Corp.'s “reportable events” rule an improvement over an earlier approach. Now, however, they are doing everything they can to stop it, saying the idea will hasten the decline of defined benefit pension plans.
The subject proved so touchy that the PBGC took the unusual step of holding its first public hearing on a regulatory proposal, inviting input on the best way to get useful information about companies' financial health before their pension plans become the agency's problem. At that June 18 hearing, PBGC Director Joshua Gotbaum said agency officials are mindful of not scaring away plan sponsors, acknowledging that “we do have to do our jobs, but we also have to keep our customers.”
Plan administrators are required by the Employee Retirement Income Security Act to notify the PBGC of events that could signal problems for the plan sponsor, such as bankruptcies and mergers. When the agency in 2009 proposed to eliminate most rule waivers that well-funded plans had come to rely on, the protests were swift. Characterizing that first attempt as “a mistake,” Mr. Gotbaum and his staff came up with a new proposal they said will exempt as many as 90% of companies from having to disclose “reportable events” if they qualify for certain waivers and pass a financial soundness test, or have fewer than 100 plan participants. Companies not meeting those tests could still be exempt if their defined benefit plans are 120% funded on an ongoing basis or 100% funded on a termination basis.
Plan executives say the proposal is simply not needed. “There is no reason to impose new reporting burdens on voluntary sponsors,” said Deborah Forbes, executive director of the Committee on Investment of Employee Benefit Assets, Bethesda, Md., which represents more than 100 of the largest U.S. corporate pension funds with $1.5 trillion in aggregate assets. “As voluntary sponsors - voluntary — CIEBA members support defined benefit, but this will only serve to enhance the trend toward plan terminations.”