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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.
In another pension-related step, 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 4000 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 employers a model notice that plan administrators could use 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 will 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 to their pensions.
The relaxation of the missed contribution reporting rule applies to employers that have:
100 or fewer participants in their defined benefit plans.
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 recent changes the pension agency has announced that have won praise from the business community.
The changes were announced last week by PBGC Executive Director David Strauss at the annual Washington meeting of the American Society of Pension Actuaries.
In the first of the agency's recent reforms, in September the PBGC eliminated its annual list of the 50 worst-funded corporate pension plans. Mr. Strauss said the list, once seen as a publicity device to prod employers to make additional contributions to their plans, had become unnecessary because of a 1994 federal statute that requires employers to accelerate contributions to underfunded plans and to notify participants of shortfalls in plan funding.
Benefit lobbyists had repeatedly criticized the Top 50 list, charging it needlessly alarmed plan participants about the security of their benefits.
The second change involves the PBGC's audit program used to determine if targeted employers have paid the correct termination insurance premiums to the agency. Effective last month, the PBGC said employers selected for audits generally only would have to supply three years of premium-related information. The agency had been requiring six years of information.
That move also was cheered by employers who said it was difficult and expensive to come up with such old records. Under the change in policy, six years of information only will be sought if PBGC discovers problems in its audit of an employer's first three years of premium-related information (BI, Oct. 27).
Mr. Strauss, who joined the PBGC in July after nearly four years as deputy chief of staff for Vice President Al Gore, says these changes are part of his objective of being sensitive to employers' needs as well as those of plan participants.
"I believe we have done a great job focusing on customer service for workers and retirees, and my goal is to make sure we pay the same attention to the premium payers and other pension professionals who rely on our agency," he said at the ASPA meeting.
"The first rule of reinventing government is to identify your customers and win them over," Mr. Strauss added.
Benefit experts welcome that sensitivity to business concerns.
"Mr. Strauss seems to understand that practitioners and plan sponsors are trying their best to comply with the rules. He is making an effort to make the rules more reasonable," said Pam Scott, a principal with The Kwasha Lipton Group in Fort Lee, N.J.