Reduction or Waiver of Complete Withdrawal Liability

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 2647

RIN 1212-AA38

Reduction or Waiver of Complete Withdrawal Liability

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This amendment to the Pension Benefit Guaranty Corporation's

regulation on Reduction or Waiver of Complete Withdrawal Liability (29

CFR part 2647) establishes procedures under which covered multiemployer

pension plans may adopt rules, subject to PBGC approval, for the

reduction or waiver of complete withdrawal liability, and establishes

standards for PBGC approval of such rules. The Employee Retirement

Income Security Act of 1974 directs the PBGC to prescribe such

procedures and standards. The amendment allows covered multiemployer

pension plans to develop their own rules for the reduction or waiver of

complete withdrawal liability, and also provides less restrictive time

limits on employer' applications to plans for abatement of complete

withdrawal liability.

EFFECTIVE DATE: April 1, 1994.

FOR FURTHER INFORMATION CONTACT: Ralph L. Landy, Attorney, Office of

the General Counsel, Pension Benefit Guaranty Corporation, 1200 K

Street, NW., Washington, DC 20005-4026; (202) 326-4127 (202-326-4179

for TTY and TDD). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Background

Section 4203 of the Employee Retirement Income Security Act of

1974, as amended (``ERISA'' or ``the Act''), sets forth the

circumstances under which an employer is deemed to have completely

withdrawn from a covered multiemployer pension plan. The amount of

complete withdrawal liability is calculated under section 4211. Section

4207(a) requires the PBGC to provide by regulation for the reduction or

waiver of complete withdrawal liability in the event that an employer

that has withdrawn from a plan subsequently resumes covered operations

under the plan or renews an obligation to contribute under the plan, to

the extent that the PBGC determines that reduction or waiver of

complete withdrawal liability is consistent with the purposes of ERISA.

Section 4207(b) requires the PBGC to prescribe by regulation a

procedure and standards for the amendment of plans to provide

alternative rules for the reduction or waiver of complete withdrawal

liability in the event that an employer that has withdrawn from a plan

subsequently resumes covered operations under the plan or renews an

obligation to contribute under the plan, to the extent such rules are

consistent with the purposes of ERISA.

The PBGC's regulation on Reduction or Waiver of Complete Withdrawal

Liability (29 CFR part 2647; see also 29 CFR 2640.6) provides rules

requiring pension plans to reduce or waive complete withdrawal

liability under ERISA section 4207(a). However, the regulation has not

heretofore provided a procedure for pension plans to adopt alternative

rules for reduction or waiver of complete withdrawal liability under

ERISA section 4207(b).

When the PBGC originally proposed the regulation on Reduction or

Waiver of Complete Withdrawal Liability, the PBGC was not prepared to

propose rules under section 4207(b). The PBGC believed at that time,

however, that ``it is important to provide the relief contemplated

under section 4207(a).'' (49 FR 8036.) Consequently, the PBGC decided

to propose and issue rules under section 4207(a) at that time and to

promulgate rules under section 4207(b) at a later date.

On October 23, 1992, the PBGC published (at 57 FR 48348) a proposed

amendment to the regulation on Reduction or Waiver Of Complete

Withdrawal Liability. The provisions of the proposed amendment included

a procedure for pension plans to adopt alternative rules for reduction

or waiver of complete withdrawal liability, requirements for a plan

sponsor to submit a written request for PBGC approval of a plan

amendment adopting rules for the reduction or waiver of complete

withdrawal liability, a description of the information to be submitted

to the PBGC for its review of the request, the standards for PBGC

approval of the request, a safe harbor period of at least fifteen days

from the date of resuming covered operations for an employer resuming

covered operations to file its application for abatement of complete

withdrawal liability, and an editorial change to expand the purpose of

part 2647 to cover both section 4207(a) and section 4207(b) of ERISA.

All of these provisions were discussed in the preamble to the proposed

amendment. No written comments were received on the proposal, and the

PBGC is adopting the amendment as proposed.

Compliance With Rulemaking Guidelines

The PBGC has determined that this action is not a ``significant

regulatory action'' under the criteria set forth in Executive Order

12866 because it will not have an annual effect on the economy of $100

million or more or adversely affect in a material way the economy, a

sector of the economy, productivity, competition, jobs, the

environment, public health or safety, or State, local, or tribal

governments or communities; create a serious inconsistency or otherwise

interfere with an action taken or planned by another agency; materially

alter the budgetary impact of entitlements, grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or raise

novel legal or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in Executive Order

12866.

Under section 605(b) of the Regulatory Flexibility Act, the PBGC

certifies that this rule will not have a significant economic impact on

a substantial number of small entities. Pension plans with fewer than

100 participants have traditionally been treated as small plans. This

rule affects only multiemployer plans covered by the PBGC. Defining

``small plans'' as those with under 100 participants, they represent

less than 6 percent of all multiemployer plans covered by the PBGC (118

out of 2000). Approximately 500,000 employers contribute to

multiemployer plans, most of them small employers (under 100

employees). The PBGC estimates that fewer than 10,000 (2 percent) of

these employers are required to pay complete withdrawal liability in

any year, and an even smaller percentage subsequently resume their

participation under a plan and thereby become subject to these rules.

Therefore, the PBGC waives compliance with sections 603 and 604 of the

Regulatory Flexibility Act.

Paperwork Reduction Act

The collection of information requirements contained in this rule

(viz., in Sec. 2647.9) have been reviewed and approved by the Office of

Management and Budget under section 3504(h) of the Paperwork Reduction

Act of 1980 under control number 1212-0044. The PBGC estimates that not

more than ten plans per year will make submissions under Sec. 2647.9

and that each submission will take one-quarter hour to prepare and

submit. The total estimated annual burden resulting from this

collection of information is thus not more than two and one-half hours.

Comments concerning the accuracy of this burden estimate and any

suggestions for reducing the burden should be directed to the Office of

the General Counsel of the Pension Benefit Guaranty Corporation at the

address set forth above and to the Office of Management and Budget,

Office of Information and Regulatory Affairs, Attention: Desk Officer

for Pension Benefit Guaranty Corporation, Washington, DC 20503.

List of Subjects in 29 CFR Part 2647

Employee benefit plans, Pension Benefit Guaranty Corporation,

Reporting and recordkeeping requirements.

In consideration of the foregoing, the PBGC amends 29 CFR part 2647

as follows:

PART 2647--REDUCTION OR WAIVER OF COMPLETE WITHDRAWAL LIABILITY

1. The authority for part 2647 is revised to read as follows:

Authority: 29 U.S.C. 1302(b)(3) and 1387.

2. Section 2647.1 is amended by adding a sentence to the end of

paragraph (a) to read as follows:

Sec. 2647.1 Purpose and scope.

(a) Purpose. * * * This part also provides procedures, pursuant to

section 4207(b) of the Act, for plan sponsors of multiemployer plans to

apply to PBGC for approval of plan amendments that provide for the

reduction or waiver of complete withdrawal liability under conditions

other than those specified in section 4207(a) of the Act and this part.

* * * * *

3. Section 2647.2 is amended by revising the second and fourth

sentences of paragraph (a) to read as follows:

Sec. 2647.2 Abatement.

(a) General. * * * Applications shall be filed by the date of the

first scheduled withdrawal liability payment falling due after the

employer resumes covered operations or, if later, the fifteenth

calendar day after the employer resumes covered operations. * * * Upon

receiving an application for abatement, the plan sponsor shall

determine, in accordance with paragraph (b) of this section, whether

the employer satisfies the requirements for abatement of its complete

withdrawal liability under Sec. 2647.4, Sec. 2647.8, or a plan

amendment which has been approved by PBGC pursuant to Sec. 2647.9.

* * *

* * * * *

4. Section 2647.9 is added to read as follows:

Sec. 2647.9 Plan rules for abatement.

(a) General rule. Subject to the approval of the PBGC, a plan may,

by amendment, adopt rules for the reduction or waiver of complete

withdrawal liability under conditions other than those specified in

Secs. 2647.4 and 2647.8(c) and (d), provided that such conditions

relate to events occurring or factors existing subsequent to a complete

withdrawal year. The request for PBGC approval shall be filed after the

amendment is adopted. A plan amendment under this section may not be

put into effect until it is approved by the PBGC. However, an amendment

that is approved by the PBGC may apply retroactively to the date of the

adoption of the amendment. PBGC approval shall also be required for any

subsequent modification of the amendment, other than repeal of the

amendment. Sections 2647.5, 2647.6, and 2647.7 shall apply to all

subsequent partial withdrawals after a reduction or waiver of complete

withdrawal liability under a plan amendment approved by the PBGC

pursuant to this section.

(b) Who may request. The plan sponsor, or a duly authorized

representative acting on behalf of the plan sponsor, shall sign and

submit the request.

(c) Where to file. The request shall be addressed to the Case

Operations and Compliance Department, Pension Benefit Guaranty

Corporation, 1200 K Street, NW., Washington, DC 20005-4026.

(d) Information. Each request shall contain the following

information:

(1) The name and address of the plan for which the plan amendment

is being submitted and the telephone number of the plan sponsor or its

duly authorized representative.

(2) The nine-digit Employer Identification Number (EIN) assigned to

the plan sponsor by the Internal Revenue Service and the three-digit

Plan Identification Number (PN) assigned to the plan by the plan

sponsor, and, if different, the EIN and PN last filed with the PBGC. If

no EIN or PN has been assigned, that should be indicated.

(3) A copy of the executed amendment, including--

(i) The date on which the amendment was adopted;

(ii) The proposed effective date; and

(iii) The full text of the rules on the reduction or waiver of

complete withdrawal liability.

(4) A copy of the most recent actuarial valuation report of the

plan.

(5) A statement certifying that notice of the adoption of the

amendment and of the request for approval filed under this section has

been given to all employers that have an obligation to contribute under

the plan and to all employee organizations representing employees

covered under the plan.

(e) Supplemental information. In addition to the information

described in paragraph (d) of this section, a plan may submit any other

information that it believes it pertinent to its request. The PBGC may

require the plan sponsor to submit any other information that the PBGC

determines it needs to review a request under this section.

(f) Criteria for PBGC approval. The PBGC shall approve a plan

amendment authorized by paragraph (a) of this section if it determines

that the rules therein are consistent with the purposes of the Act. An

abatement rule is not consistent with the purposes of the Act if--

(1) Implementation of the rule would be adverse to the interest of

plan participants and beneficiaries; or

(2) The rule would increase the PBGC's risk of loss with respect to

the plan.

Issued at Washington, DC, on this 17th day of February 1994.

Robert B. Reich,

Chairman, Board of Directors, Pension Benefit Guaranty Corporation.

Issued pursuant to a resolution of the Board of Directors

approving, and authorizing its chairman to issue, this final rule.

Carol Connor Flowe,

Secretary, Board of Directors, Pension Benefit Guaranty Corporation.

[FR Doc. 94-4692 Filed 3-1-94; 8:45 am]

BILLING CODE 7708-01-M