Termination of Single Employer Plans

SUMMARY: In order to extend deadlines and otherwise to simplify the

standard termination process, the Pension Benefit Guaranty Corporation

is proposing amendments to its termination regulation. The amendments

also require that plan administrators provide participants and

beneficiaries with information on state guaranty association coverage.

DATES: Comments must be received on or before May 13, 1997.

ADDRESSES: Comments may be mailed to the Office of the General Counsel,

Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC

20005-4026, or delivered to Suite 340 at the above address. Comments

also may be sent by Internet e-mail to [email protected]. Comments

will be available for public inspection at the PBGC's Communications

and Public Affairs Department, Suite 240.

FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General

Counsel, or Catherine B. Klion, Attorney, Office of the General

Counsel, PBGC, 1200 K Street NW., Washington, DC 20005-4026, 202-326-

4024 (202-326-4179 for TTY and TDD).

SUPPLEMENTARY INFORMATION:

Background

A single-employer plan covered by the PBGC's insurance program may

be voluntarily terminated only in a standard or distress termination.

The rules governing voluntary terminations are in section 4041 of the

Employee Retirement Income Security Act of 1974 and part 4041 of the

PBGC's regulations.

Once the decision is made to terminate a plan in a standard

termination, the plan administrator must meet specific statutory and

regulatory requirements. These requirements have caused difficulty for

some plan administrators and participants. For example, a plan

administrator who misses a deadline must restart the termination

process, resulting in additional cost for the plan administrator and

delayed distributions for participants.

The PBGC proposes to amend its regulations in order to extend

certain deadlines and otherwise to simplify the termination process.

The proposal was developed after conducting focus groups with plan

practitioners and takes into account participant concerns and the

PBGC's experience.

The amendment lessens the likelihood of errors, thereby reducing

burdens on plan administrators and expediting distributions to

participants. The amendment also implements a General Accounting Office

recommendation that plan administrators provide information on state

guaranty association coverage to participants, and makes a limited

number of conforming changes to the distress termination and premium

regulations, along with some conforming and simplifying changes to the

missing participants regulations.

The major changes in the amendment are discussed below.

Standard Termination Process

Notice of intent to terminate: The amendment expands the notice to

include information on state guaranty association coverage. The

amendment also clarifies the language in the notice on freezing of

benefit accruals to better coordinate with section 204(h) of ERISA. The

PBGC's standard termination forms and instructions package will include

a model notice of intent to terminate, along with state guaranty

association coverage information.

Notice of plan benefits: The amendment simplifies and clarifies the

information requirements.

Standard termination notice: The amendment extends the deadline for

filing the standard termination notice with the PBGC from 120 days to

180 days after the proposed termination date. Upon review of the

standard termination notice, the PBGC may require the submission of

additional information relevant to the termination proceeding (e.g.,

where there is a question whether the plan is sufficient for all

benefit liabilities). Such information will normally be due within 30

days after the date of the PBGC's request. The PBGC may shorten the

time period where it determines that the interests of the PBGC or

participants may be prejudiced by a delay in receipt of the

information.

Close-out of plan: The amendment extends the close-out period for

plan administrators that timely apply for an IRS determination letter

from 60 to 120 days after receipt of a favorable letter, and eliminates

the requirement that plan administrators notify the PBGC of the need

for the extension.

In the case of benefits that must be provided in annuity form, the

distribution must be made by purchasing irrevocable commitments from an

insurer. In order to have a valid standard termination under Title IV

of ERISA, the plan administrator must select the insurer in accordance

with the fiduciary standards of Title I of ERISA (see Department of

Labor Interpretive Bulletin 95-1, 60 FR 12328 (March 6, 1995)). The

PBGC intends, as part of its standard termination audit program, to

audit insurer selections for compliance with these standards and to

take appropriate corrective action.

Post-distribution certification: The amendment provides that the

PBGC will not assess a penalty if the post-distribution certification,

which ERISA requires be filed within 30 days after the final

distribution, is filed within 90 days after the distribution deadline.

As discussed elsewhere in today's Federal Register, the PBGC is

implementing this penalty policy immediately.

Extension of deadlines: The PBGC may in its discretion grant case-

by-case extensions in narrow circumstances. The PBGC will grant an

extension where it finds compelling reasons why it is not

administratively feasible for the plan administrator (or other persons

acting on behalf of the plan administrator) to take the action until

the later date and the delay is brief. The PBGC will consider the

length of the delay and whether ordinary business care and prudence in

attempting to meet the deadline is exercised.

PBGC discretion not to nullify: The amendment also incorporates

section 778(a) of the Retirement Protection Act of 1994, which gives

the PBGC discretion not to nullify defective standard terminations in

certain circumstances if it determines that nullification ``would be

inconsistent with the interests of participants and beneficiaries.''

Distress Termination Process

A plan that is sufficient for at least guaranteed benefits closes

out under procedures that parallel those used in a standard

termination. The amendment makes conforming changes to the distress

termination procedures, primarily with respect to the rules that apply

after the PBGC issues a distribution notice authorizing a plan to close

out in the private sector. The time limits governing the initial

processing of a distress termination are not changed. The PBGC may

address other distress termination issues in a separate rulemaking.

[[Page 12509]]

General Provisions

Filing rules: The amendment changes the date of filing a notice

with the PBGC from the date of receipt to the date of mailing with the

United States Postal Service (as evidenced by a postmark) or deposit

with a commercial delivery service (provided the notice is received by

the PBGC within two regular business days). The amendment also allows

electronic filing with the PBGC and, in certain circumstances,

electronic issuance to third parties.

Maintenance of plan records. The amendment clarifies that, while

the plan administrator and each contributing sponsor of a terminating

plan are subject to the requirement to maintain records used to compute

benefits, if any one of them complies with that requirement, the others

need not comply.

Post-termination amendments: The amendment provides that, except to

the extent necessary to meet a qualification requirement under section

401 of the Code, a plan amendment adopted or effective after a plan's

termination date is disregarded with respect to a participant or

beneficiary to the extent the amendment (1) decreases the amount or

value of the participant's or beneficiary's benefits (e.g., by adopting

less favorable assumptions for calculating a lump sum distribution or

by eliminating an ancillary benefit such as a Social Security

supplement under section 204(b)(1)(G) of ERISA), or (2) eliminates or

restricts an optional form of benefit for the participant or

beneficiary.

Missing Participants: The amendment provides that the diligent

search procedures for a missing participant whose designated benefit is

paid to the PBGC also apply for a missing participant for whom the plan

administrator purchases an annuity. The amendment requires plan

administrators who purchase an annuity for a missing participant to

provide the PBGC with the amount of the participant's normal retirement

benefit (to the extent that information is known). This information

will facilitate the PBGC's ability to respond to participant inquiries

and to target its search efforts.

The amendment eliminates detailed rules that apply in the unusual

circumstance of an individual located or discovered to be missing late

in the distribution process. The PBGC can more effectively deal with

such situations by granting discretionary extensions as appropriate on

a case-by-case basis in order to ensure that adequate time is

available.

The amendment also provides penalty relief for the late filing of

certain information about missing participants comparable to that

provided for late post-distribution certifications.

Effective Date

While the changes will generally apply to new terminations

initiated on or after the effective date of the final rule, the PBGC

intends to allow plan administrators to apply certain portions of the

final rule to terminations in process.

Paperwork Reduction Act

The information requirements contained in this proposed rule have

been submitted to the Office of Management and Budget for review under

the Paperwork Reduction Act of 1995, with a request for a three-year

approval. As part of this request, the PBGC has made clarifying and

other changes (related to the proposed rule) to its implementing forms

and instructions under its regulations on termination of single-

employer plans and missing participants. Copies of the PBGC's request

may be obtained free of charge by writing to the PBGC Communications

and Public Affairs Department, suite 240, 1200 K Street, NW.,

Washington, DC 20005, or by visiting that office between the hours of 9

a.m. and 4 p.m.

The PBGC needs the information required to be submitted to ensure

that a voluntary termination is completed in accordance with statutory

and regulatory requirements and to facilitate the payment of benefits

to missing participants. Participants need the information required to

be disclosed so that they will be informed about the status of the

proposed termination of their plan and about their benefits upon

termination.

Much of the work associated with terminating a plan is performed

for purposes other than meeting the collection of information

requirements in the PBGC's termination and missing participants

regulations. The PBGC estimates that 3,640 plan administrators will be

subject to these requirements each year, and that the total annual

burden of complying with these requirements is 4,983 hours and

$3,139,560.

Comments on the paperwork provisions under this proposed rule

should be mailed to the Office of Information and Regulatory Affairs,

Office of Management and Budget, Attention: Desk Officer for the

Pension Benefit Guaranty Corporation, Washington, DC 20503. Comments

may address (among other things)--

Whether the proposed collection of information is needed

for the proper performance of the PBGC's functions and will have

practical utility;

The accuracy of the PBGC's estimate of the burden of the

proposed collection of information, including the validity of the

methodology and assumptions used;

Enhancement of the quality, utility, and clarity of the

information to be collected; and

Minimizing the burden of the collection of information on

those who are to respond, including through the use of appropriate

automated, electronic, mechanical, or other technological collection

techniques or other forms of information technology, e.g., permitting

electronic submission of responses.

The PBGC already allows electronic submission of participant and

beneficiary data in a distress termination and has been actively

considering whether to allow other information to be provided

electronically. In certain circumstances, this proposed rule allows

electronic filing with the PBGC and electronic issuance of notices to

third parties. The PBGC welcomes comments on electronic filing and

issuance requirements, particularly on how to ensure that notices

issued electronically to third parties are actually received by the

persons entitled to receive them.

The PBGC also invites comments on whether, given the PBGC's limited

role in standard terminations, the burden of the standard termination

filing process could be further reduced.

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.

The PBGC certifies under section 605(b) of the Regulatory

Flexibility Act that this rule will not have a significant economic

impact on a substantial number of small entities. While this rule

simplifies procedures and extends deadlines, the actions required to

terminate a plan are essentially unchanged. Accordingly, sections 603

and 604 of the Regulatory Flexibility Act do not apply.

List of Subjects

29 CFR Part 4001

Pension insurance, Pensions, Reporting and recordkeeping

requirements.

[[Page 12510]]

29 CFR Part 4006

Penalties, Pension insurance, Pensions, Reporting and recordkeeping

requirements.

29 CFR Part 4041

Pension insurance, Pensions, Reporting and recordkeeping

requirements.

29 CFR Part 4050

Pensions, Reporting and recordkeeping requirements.

For the reasons set forth above, the PBGC proposes to amend parts

4001, 4006, 4041, and 4050 of 29 CFR chapter LX as follows.

PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS

1. The authority citation for Part 4041 continues to read as

follows:

Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.

Secs. 4041.46 and 4041.48 [Removed]

2. Section 4041.46 is removed.

Sec. 4041.47 and Secs. 4041.41 Through 4041.45 [Redesignated as

Secs. 4041.49 and 4041.43 through 4041.47]

3. Sec. 4041.47 is redesignated as Sec. 4041.49; and Secs. 4041.41

through 4041.45 are redesignated as Secs. 4041.43 through 4041.47.

Sec. 4041.3 [Amended and Redesignated as Sec. 4041.41]

4. In Sec. 4041.3, the section heading is amended by removing the

words ``a standard termination or''; paragraphs (a) and (b) are

removed; paragraphs (c) through (g) are redesignated as paragraphs (a)

through (e); and as so amended, Sec. 4041.3 is redesignated as

Sec. 4041.41. (Redesignated Sec. 4041.41 is the first section under

Subpart C.)

Sec. 4041.4 [Amended and Redesignated]

5. In 4041.4, paragraphs (b), (d) and (e) are removed; paragraphs

(c) and (f) through (h) are redesignated as paragraphs (b) through (e);

and as so amended, Sec. 4041.4 is redesignated as Sec. 4041.42.

Subparts A and B [Amended]

6. Subparts A and B of Part 4041 are revised to read as follows:

PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS

Subpart A--General Provisions

Sec.

4041.1 Purpose and scope.

4041.2 Definitions.

4041.3 Computation of time; filing and issuance rules.

4041.4 Disaster relief.

4041.5 Maintenance of plan records.

4041.6 Effect of failure to provide required information.

4041.7 Collective bargaining agreement challenges.

4041.8 Post-termination amendments.

Subpart B--Standard Termination Process

4041.21 Requirements for a standard termination.

4041.22 Administration of plan during termination process.

4041.23 Notice of intent to terminate.

4041.24 Notices of plan benefits.

4041.25 Standard termination notice.

4041.26 PBGC review of standard termination notice.

4041.27 Notice of annuity information.

4041.28 Closeout of plan.

4041.29 Post-distribution certification.

4041.30 Requests for deadline extensions.

4041.31 Notice of noncompliance.

Subpart A--General Provisions.

Sec. 4041.1 Purpose and scope.

This part sets forth the rules and procedures for terminating a

single-employer plan in a standard or distress termination under

section 4041 of ERISA, the exclusive means of voluntarily terminating a

plan.

Sec. 4041.2 Definitions.

The following terms are defined in Sec. 4001.2 of this chapter:

affected party, annuity, benefit liabilities, Code, contributing

sponsor, controlled group, distress termination, distribution date,

EIN, employer, ERISA, guaranteed benefit, insurer, irrevocable

commitment, IRS, mandatory employee contributions, normal retirement

age, notice of intent to terminate, PBGC, person, plan administrator,

plan year, PN, single-employer plan, standard termination, termination

date, and title IV benefit. In addition, for purposes of this part:

Distress termination notice means the notice filed with the PBGC

pursuant to Sec. 4041.45.

Distribution notice means the notice issued to the plan

administrator by the PBGC pursuant to Sec. 4041.47(c) upon the PBGC's

determination that the plan has sufficient assets to pay at least

guaranteed benefits.

Majority owner means an individual who owns, directly or

indirectly, 50 percent or more (taking into account the constructive

ownership rules of section 414 (b) and (c) of the Code) of--

(1) An unincorporated trade or business;

(2) The capital interest or the profits interest in a partnership;

or

(3) Either the voting stock of a corporation or the value of all of

the stock of a corporation.

Notice of noncompliance means a notice issued to a plan

administrator by the PBGC pursuant to Sec. 4041.31 advising the plan

administrator that the requirements for a standard termination have not

been satisfied and that the plan is an ongoing plan.

Notice of plan benefits means the notice to each participant and

beneficiary required by Sec. 4041.24.

Participant means--

(1) Any individual who is currently in employment covered by the

plan and who is earning or retaining credited service under the plan,

including any individual who is considered covered under the plan for

purposes of meeting the minimum participation requirements but who,

because of offset or similar provisions, does not have any accrued

benefits;

(2) Any nonvested individual who is not currently in employment

covered by the plan but who is earning or retaining credited service

under the plan; and

(3) Any individual who is retired or separated from employment

covered by the plan and who is receiving benefits under the plan or is

entitled to begin receiving benefits under the plan in the future,

excluding any such individual to whom an insurer has made an

irrevocable commitment to pay all the benefits to which the individual

is entitled under the plan.

Plan benefits means the benefits to which a participant is, or may

become, entitled under the plan's provisions in effect as of the

termination date, based on the participant's benefit under the plan as

of that date. Each participant's ``plan benefits'' equals that

participant's ``benefit liabilities,'' and the sum of all ``plan

benefits'' equals the plan's ``benefit liabilities.''

Proposed termination date means the date specified as such by the

plan administrator in the notice of intent to terminate or, if later,

in the standard or distress termination notice.

Residual assets means the plan assets remaining after all benefit

liabilities and other liabilities (e.g., PBGC premiums) of the plan

have been satisfied.

Standard termination notice means the notice filed with the PBGC

pursuant to Sec. 4041.25.

State guaranty association means an association of insurers created

by a State, the District of Columbia, or the Commonwealth of Puerto

Rico to pay benefits and to continue coverage, within statutory limits,

under life and health insurance policies and annuity contracts when an

insurer fails.

[[Page 12511]]

Sec. 4041.3 Computation of time; filing and issuance rules.

(a) Computation of time. In computing any period of time under this

part, the day of the event from which the period begins is not counted.

The last day of the period is included. If the last day falls on a

Saturday, Sunday, or Federal holiday, the period runs until the end of

the next regular business day. A proposed termination date may be any

day, including a Saturday, Sunday, or Federal holiday.

(b) Filing with the PBGC.

(1) Method of filing. Any document to be filed under this part

shall be delivered to the PBGC in accordance with the applicable PBGC

termination forms and instructions package.

(2) Date of filing. Any information required or permitted to be

filed with the PBGC shall be deemed filed--

(i) On the date of the United States postmark, if the postmark was

made by the United States Postal Service and the document was mailed

postage prepaid to the PBGC;

(ii) On the date it is deposited for delivery to the PBGC with a

commercial delivery service, provided it is received by the PBGC within

two regular business days; or

(iii) Except as provided in paragraphs (b)(2)(i) or (b)(2)(ii), on

the date it is received by the PBGC. Information received on a weekend

or Federal holiday or after 5:00 p.m. on a weekday is considered filed

on the next regular business day.

(c) Issuance to other parties. The following rules apply to

affected parties (other than the PBGC). For purposes of this paragraph

(c), a person entitled to notice under the spin-off/termination

transaction rules of Secs. 4041.23(c) or 4041.24(f) is treated as an

affected party.

(1) Permissible methods of issuance. The plan administrator shall

issue any notice to an affected party individually--

(i) By hand delivery;

(ii) By first-class mail or commercial delivery service to the

affected party's last known address; or

(iii) By electronic means reasonably calculated to ensure actual

receipt by the affected party.

(2) Date of issuance. Any notice is deemed issued to an affected

party on the date on which it is--

(i) Handed to the affected party;

(ii) Deposited with the mail or a commercial delivery service (as

evidenced by a postmark or written receipt); or

(iii) Transmitted electronically to the affected party.

(3) Omission of affected parties. The failure to issue any notice

to an affected party (other than any employee organization) within the

specified time period will not cause the notice to be untimely if--

(i) After-discovered affected parties. The plan administrator could

not reasonably have been expected to know of the affected party, and

issues the notice promptly after discovering the affected party; or

(ii) De minimis administrative errors. The failure was due to

administrative error involving only a de minimis percentage of affected

parties, and the plan administrator issues the notice to each such

affected party promptly after discovering the error.

(4) Form of notices to affected parties. All notices to affected

parties shall be readable and written in a manner calculated to be

understood by the average plan participant.

(5) Foreign languages. The plan administrator of a plan that (as of

the proposed termination date) covers the numbers or percentages in

Sec. 2520.104b-10(e) of this title of participants literate only in the

same non-English language shall, for any notice to affected parties--

(i) Include a prominent legend in that common non-English language

advising them how to obtain assistance in understanding the notice; or

(ii) Provide the notice in that common non-English language to

those affected parties literate only in that language.

Sec. 4041.4 Disaster relief.

When the President of the United States declares that, under the

Disaster Relief Act (42 U.S.C. 5121, 5122(2), 5141(b)), a major

disaster exists, the Executive Director of the PBGC (or his or her

designee) may, by issuing one or more notices of disaster relief,

extend by up to 180 days any due date under this part.

Sec. 4041.5 Maintenance of plan records.

(a) Retention requirement.

(1) Persons subject to requirement. Each contributing sponsor and

the plan administrator of a plan terminating in a standard termination,

or in a distress termination that closes out in accordance with

Sec. 4041.50, shall maintain all records used to compute benefits with

respect to each individual who is a plan participant or a beneficiary

of a deceased participant as of the termination date. If a contributing

sponsor or the plan administrator complies with part or all of the

requirements of this paragraph (a), the other(s) need not comply with

respect to such information.

(2) Retention period. The records described in paragraph (a)(1)

shall be preserved for six years after the date when the post-

distribution certification under this part is filed with the PBGC.

(b) Availability of records. The contributing sponsor or plan

administrator shall make records related to the termination available

to the PBGC upon request for inspection and photocopying, and shall

submit such records to the PBGC within 30 days after the date of a

written request by the PBGC or by a later date specified therein.

Sec. 4041.6 Effect of failure to provide required information.

If a plan administrator fails to provide any information required

under this part within the specified time limit, the PBGC may assess a

penalty under section 4071 of ERISA of up to $1,000 a day for each day

that the failure continues. The PBGC may also pursue any other

equitable or legal remedies available to it under the law, including,

if appropriate, the issuance of a notice of noncompliance under

Sec. 4041.31.

Sec. 4041.7 Challenges to plan termination under collective bargaining

agreement.

(a) Suspension upon formal challenge to termination.

(1) Notice of formal challenge.

(i) If the PBGC is advised, before its review period under

Sec. 4041.26(a) ends, or before issuance of a notice of inability to

determine sufficiency or a distribution notice under Sec. 4041.47 (b)

or (c), that a formal challenge to the termination has been initiated

as described in paragraph (c), the PBGC shall suspend the termination

proceeding and so advise the plan administrator in writing.

(ii) If the PBGC is advised of a challenge described in paragraph

(a)(1)(i) of this section after the time specified therein, the PBGC

may suspend the termination proceeding and shall so advise the plan

administrator in writing.

(2) Standard terminations. During any period of suspension in a

standard termination--

(i) The running of all time periods specified in ERISA or this part

relevant to the termination shall be suspended; and

(ii) The plan administrator shall comply with the prohibitions in

Sec. 4041.22.

(3) Distress terminations. During any period of suspension in a

distress termination--

(i) The issuance by the PBGC of any notice of inability to

determine sufficiency or distribution notice shall be stayed or, if any

such notice was previously issued, its effectiveness shall be stayed;

[[Page 12512]]

(ii) The plan administrator shall comply with the prohibitions in

Sec. 4041.42; and

(iii) The plan administrator shall file a distress termination

notice with the PBGC pursuant to Sec. 4041.45.

(b) Existing collective bargaining agreement. For purposes of this

section, an existing collective bargaining agreement means a collective

bargaining agreement that has not been made inoperative by a judicial

ruling and, by its terms, either has not expired or is extended beyond

its stated expiration date because neither of the collective bargaining

parties took the required action to terminate it. When a collective

bargaining agreement no longer meets these conditions, it ceases to be

an ``existing collective bargaining agreement,'' whether or not any or

all of its terms may continue to apply by operation of law.

(c) Formal challenge to termination. A formal challenge to a plan

termination asserting that the termination would violate the terms and

conditions of an existing collective bargaining agreement is initiated

when--

(1) Any procedure specified in the collective bargaining agreement

for resolving disputes under the agreement commences; or

(2) Any action before an arbitrator, administrative agency or

board, or court under applicable labor-management relations law

commences.

(d) Resolution of challenge. Immediately upon the final resolution

of the challenge, the plan administrator shall notify the PBGC in

writing of the outcome of the challenge, provide the PBGC with a copy

of any award or order, and, if the validity of the proposed termination

has been upheld, advise the PBGC whether the proposed termination is to

proceed. The final resolution ends the suspension period under

paragraph (a) of this section.

(1) Challenge sustained. If the final resolution is that the

proposed termination violates an existing collective bargaining

agreement, the PBGC shall dismiss the termination proceeding, all

actions taken to effect the plan termination shall be null and void,

and the plan shall be an ongoing plan. In this event, in a distress

termination, Sec. 4041.42(d) shall apply as of the date of the

dismissal by the PBGC.

(2) Termination sustained. If the final resolution is that the

proposed termination does not violate an existing collective bargaining

agreement and the plan administrator has notified the PBGC that the

termination is to proceed, the PBGC shall reactivate the termination

proceeding by sending a written notice thereof to the plan

administrator, and--

(i) The termination proceeding shall continue from the point where

it was suspended;

(ii) All actions taken to effect the termination before the

suspension shall be effective;

(iii) Any time periods that were suspended shall resume running

from the date of the PBGC's notice of the reactivation of the

proceeding;

(iv) Any time periods that had fewer than 15 days remaining shall

be extended to the 15th day after the date of the PBGC's notice, or

such later date as the PBGC may specify; and

(v) In a distress termination, the PBGC shall proceed to issue a

notice of inability to determine sufficiency or a distribution notice

(or reactivate any such notice stayed under paragraph (a)(3) of this

section), either with or without first requesting updated information

from the plan administrator pursuant to Sec. 4041.45(c).

(e) Final resolution of challenge. A formal challenge to a proposed

termination is finally resolved when--

(1) The parties involved in the challenge enter into a settlement

that resolves the challenge;

(2) A final award, administrative decision, or court order is

issued that is not subject to review or appeal; or

(3) A final award, administrative decision, or court order is

issued that is not appealed, or review or enforcement of which is not

sought, within the time for filing an appeal or requesting review or

enforcement.

(f) Involuntary termination by the PBGC. Notwithstanding any other

provision of this section, the PBGC retains the authority in any case

to initiate a plan termination in accordance with the provisions of

section 4042 of ERISA.

Sec. 4041.8 Post-termination amendments.

Except to the extent necessary to meet a qualification requirement

under section 401 of the Code, a plan amendment that is adopted or

effective after a plan's termination date shall be disregarded with

respect to a participant or beneficiary to the extent the amendment--

(a) Decreases the amount or value of the participant's or

beneficiary's benefits (e.g., by adopting less favorable assumptions

for calculating a lump sum distribution or by eliminating an ancillary

benefit such as a Social Security supplement under section 204(b)(1)(G)

of ERISA); or

(b) Eliminates or restricts an optional form of benefit for the

participant or beneficiary.

Subpart B--Standard Termination Process

Sec. 4041.21 Requirements for a standard termination.

(a) Notice and distribution requirements. A standard termination is

valid if the plan administrator--

(1) Issues a notice of intent to terminate to all affected parties

(other than the PBGC) in accordance with Sec. 4041.23;

(2) Issues notices of plan benefits to all affected parties

entitled to plan benefits in accordance with Sec. 4041.24;

(3) Files a standard termination notice with the PBGC in accordance

with Sec. 4041.25;

(4) Distributes the plan's assets in satisfaction of all of the

plan's benefit liabilities in accordance with Sec. 4041.28(a); and

(5) In the case of a spin-off/termination transaction (as defined

in Sec. 4041.23(c)), provides the notices required by Sec. 4041.23(c),

Sec. 4041.24(f), and Sec. 4041.27(a)(2).

(b) Plan sufficiency.

(1) Commitment to make plan sufficient. A contributing sponsor of a

plan or any other member of the plan's controlled group may make a

commitment to contribute any additional sums necessary to enable the

plan to satisfy benefit liabilities in accordance with Sec. 4041.28(a).

A commitment shall be valid only if--

(i) It is made to the plan;

(ii) It is in writing, signed by the contributing sponsor or

controlled group member(s); and

(iii) In any case in which the person making the commitment is the

subject of a bankruptcy liquidation or reorganization proceeding, as

described in Sec. 4041.41(c) (1) or (c)(2), the commitment is approved

by the court before which the liquidation or reorganization proceeding

is pending or a person not in bankruptcy unconditionally guarantees to

meet the commitment at or before the time distribution of assets is

required.

(2) Alternative treatment of majority owner's benefit. A majority

owner may elect to forego receipt of his or her benefit to the extent

necessary to enable the plan to satisfy all other benefit liabilities

in accordance with Sec. 4041.28(a). Any such alternative treatment of

the majority owner's benefit is valid only if--

(i) The election is in writing;

(ii) In any case in which section 205(g) of ERISA requires spousal

consent to the majority owner's receipt of his or her benefit in a form

other than a qualified joint and survivor annuity, the spouse of the

majority owner

[[Page 12513]]

consents in accordance with such section; and

(iii) The majority owner's election is not inconsistent with a

qualified domestic relations order (as defined in section 206(d)(3) of

ERISA).

Sec. 4041.22 Administration of plan during pendency of termination

process.

(a) In general. A plan administrator may distribute plan assets in

connection with the termination of the plan only in accordance with the

provisions of this part. From the first day the plan administrator

issues a notice of intent to terminate to the last day of the PBGC's

review period under Sec. 4041.26(a), the plan administrator shall

continue to carry out the normal operations of the plan. During that

time period, except as provided in paragraph (b), the plan

administrator shall not--

(1) Purchase irrevocable commitments to provide any plan benefits;

or

(2) Pay benefits attributable to employer contributions, other than

death benefits, in any form other than an annuity.

(b) Exception. The plan administrator may pay benefits attributable

to employer contributions either through the purchase of irrevocable

commitments or in a form other than an annuity if--

(1) The participant has separated from active employment;

(2) The distribution is consistent with prior plan practice; and

(3) The distribution is not reasonably expected to jeopardize the

plan's sufficiency for benefit liabilities.

Sec. 4041.23 Notice of intent to terminate.

(a) Notice requirement.

(1) In general. At least 60 days and no more than 90 days before

the proposed termination date, the plan administrator shall issue a

notice of intent to terminate to each person (other than the PBGC) that

is, as of the proposed termination date, an affected party. (The PBGC's

standard termination forms and instructions package includes a model

notice of intent to terminate.)

(2) Early issuance of NOIT. The PBGC may consider a notice of

intent to terminate to be timely under paragraph (a)(1) if the notice

was early by a de minimis number of days and the PBGC finds that the

early issuance was the result of administrative error.

(b) Contents of notice. The notice of intent to terminate shall

include--

(1) Identifying information. The name and PN of the plan, the name

and EIN of each contributing sponsor, and the name, address, and

telephone number of the person who may be contacted by an affected

party with questions concerning the plan's termination;

(2) Intent to terminate plan. A statement that the plan

administrator intends to terminate the plan in a standard termination

as of a specified proposed termination date and will notify the

affected party if the proposed termination date is changed to a later

date or if the termination does not occur;

(3) Sufficiency requirement. A statement that, in order to

terminate in a standard termination, plan assets must be sufficient to

provide all benefit liabilities under the plan;

(4) Cessation of accruals. A statement (as applicable) informing

affected parties that--

(i) Benefit accruals will cease as of the termination date, but

will continue if the plan does not terminate;

(ii) A plan amendment has been adopted under which benefit accruals

will cease, in accordance with section 204(h) of ERISA, as of the

proposed termination date or a specified date before the proposed

termination date, whether or not the plan is terminated; or

(iii) Benefit accruals ceased, in accordance with section 204(h) of

ERISA, as of a specified date before the notice of intent to terminate

was issued;

(5) Annuity information. If required under Sec. 4041.27, the

annuity information described therein;

(6) Benefit information. A statement that each affected party

entitled to plan benefits will receive a written notification regarding

his or her benefits;

(7) Continuation of monthly benefits. For those persons who are (as

of the proposed termination date) in pay status, a statement that their

monthly (or other periodic) benefit amounts will not be affected by the

plan's termination; and

(8) Extinguishment of guarantee. A statement that after plan assets

have been distributed in full satisfaction of all pension benefits

under the plan with respect to a participant or a beneficiary of a

deceased participant, either by the purchase of irrevocable commitments

(annuity contracts) or by an alternative form of distribution provided

for under the plan, the PBGC no longer guarantees that participant's or

beneficiary's plan benefits.

(c) Spin-off/termination transactions. In the case of a transaction

in which a single defined benefit plan is split into two or more plans

and there is a reversion of residual assets to an employer upon the

termination of one or more but fewer than all of the resulting plans (a

``spin-off/termination transaction''), the plan administrator shall,

within the time period specified in paragraph (a), provide all

participants, beneficiaries of deceased participants, and alternate

payees in the original plan who are (as of the proposed termination

date) covered by an ongoing plan with a notice describing the

transaction.

Sec. 4041.24 Notices of plan benefits.

(a) Notice requirement. The plan administrator shall, no later than

the time the plan administrator files the standard termination notice

with the PBGC, issue a notice of plan benefits to each person (other

than the PBGC and any employee organization) who is, as of the proposed

termination date, an affected party.

(b) Contents of notice. The plan administrator shall include in

each notice of plan benefits--

(1) The name and PN of the plan, the name and EIN of each

contributing sponsor, and the name, address, and telephone number of an

individual who may be contacted to answer questions concerning a

benefit;

(2) The proposed termination date given in the notice of intent to

terminate and any extended proposed termination date under

Sec. 4041.25(b);

(3) If the amount of the plan benefits set forth in the notice is

an estimate, a statement that the amount is an estimate and that

benefits paid may be greater than or less than the estimate;

(4) Except in the case of an affected party in pay status for more

than one year as of the proposed termination date--

(i) The personal data used to calculate the affected party's plan

benefits; and

(ii) A statement requesting that the affected party review the

personal data and notify the plan administrator of any incorrect data;

and

(5) The information in paragraph (c), (d), or (e), as applicable.

(c) Benefits of persons in pay status. For an affected party in pay

status as of the proposed termination date, the plan administrator

shall include in the notice of plan benefits--

(1) The amount and form of the participant's or beneficiary's plan

benefits payable as of the proposed termination date;

(2) The amount and form of benefit, if any, payable to a

beneficiary upon the participant's death and the name of the

beneficiary; and

(3) The amount and date of any increase or decrease in the benefit

scheduled to occur (or that has already occurred) after the proposed

termination date and an explanation of the increase or decrease,

including, where applicable, a reference to the pertinent plan

provision.

[[Page 12514]]

(d) Benefits of persons with valid elections or de minimis

benefits. For an affected party who is not in pay status as of the

proposed termination date, but who has, as of that date, validly

elected a form and starting date, or with respect to whom the plan

administrator has determined that a nonconsensual lump sum distribution

will be made, the plan administrator shall include in the notice of

plan benefits--

(1) The amount and form of the person's plan benefits payable as of

the projected benefit starting date, and what that date is;

(2) The information in paragraphs (c)(2) and (c)(3);

(3) If the plan benefits will be paid in any form other than a lump

sum and the age at which, or form in which, the plan benefits will be

paid differs from the normal retirement benefit--

(i) The age or form stated in the plan; and

(ii) The age or form adjustment factors; and

(4) If the plan benefits will be paid in a lump sum--

(i) An explanation of when a lump sum may be paid without the

consent of the participant or the participant's spouse;

(ii) The interest rate used to convert to the lump sum benefit and

a reference to the pertinent plan provisions;

(iii) An explanation of how the interest rate is used to calculate

the lump sum;

(iv) A statement that the use of a higher interest rate results in

a smaller lump sum amount; and

(v) A statement that the applicable interest rate may change before

the distribution date.

(e) Benefits of all other persons not in pay status. For any other

affected party not described in paragraph (c) or (d), the plan

administrator shall include in the notice of plan benefits--

(1) The amount and form of the person's plan benefits payable at

normal retirement age in any form permitted under the plan;

(2) Any alternative benefit forms, including those payable to a

beneficiary upon the person's death either before or after benefits

commence;

(3) If the person is or may become entitled to a benefit that would

be payable before normal retirement age, the amount and form of benefit

that would be payable at the earliest benefit commencement date (or, if

more than one such form is payable at the earliest benefit commencement

date, any one of those forms) and whether the benefit commencing on

such date would be subject to future reduction; and

(4) If the plan benefits may be paid in a lump sum, the information

in paragraph (d)(4).

(f) Spin-off/termination transactions. In the case of a spin-off/

termination transaction (as defined in Sec. 4041.23(c)), the plan

administrator shall, no later than the time the plan administrator

files the standard termination notice for any terminating plan, provide

all participants, beneficiaries of deceased participants, and alternate

payees in the original plan who are (as of the proposed termination

date) covered by an ongoing plan with a notice of plan benefits

containing the information in paragraphs (b) through (e).

Sec. 4041.25 Standard termination notice.

(a) Notice requirement. The plan administrator shall file with the

PBGC a standard termination notice, consisting of the PBGC Form 500,

completed in accordance with the instructions thereto, on or before the

180th day after the proposed termination date.

(b) Change of proposed termination date. The plan administrator

may, in the standard termination notice, select a proposed termination

date that is later than the date specified in the notice of intent to

terminate, provided it is not later than 90 days after the earliest

date on which a notice of intent to terminate was issued to any

affected party.

(c) Request for IRS determination letter. To qualify for the

distribution deadline in Sec. 4041.28(a)(1)(ii), the plan administrator

shall submit to the IRS a valid request for a determination of the

plan's qualification status upon termination (``determination letter'')

by the time the standard termination notice is filed.

Sec. 4041.26 PBGC review of standard termination notice.

(a) Review period.

(1) In general. The PBGC shall notify the plan administrator in

writing of the date on which it received a complete standard

termination notice at the address provided in the PBGC's standard

termination forms and instructions package. If the PBGC does not issue

a notice of noncompliance during its 60-day review period following

such date, the plan administrator shall proceed to close out the plan

in accordance with Sec. 4041.28.

(2) Extension of review period. The PBGC and the plan administrator

may, before the expiration of the PBGC review period in paragraph

(a)(1), agree in writing to extend that period.

(b) If standard termination notice is incomplete.

(1) For purposes of timely filing. If the standard termination

notice is incomplete, the PBGC may, based on the nature and extent of

the omission, provide the plan administrator an opportunity to complete

the notice. In such a case, the standard termination notice shall be

deemed to have been complete as of the date when originally filed for

purposes of Sec. 4041.25(a), provided the plan administrator provides

the missing information by the later of--

(i) The 180th day after the proposed termination date; or

(ii) The 30th day after the date of the PBGC notice that the filing

was incomplete.

(2) For purposes of PBGC review period. If the standard termination

notice is completed under paragraph (b)(1), the PBGC shall determine

whether the notice shall be deemed to have been complete as of the date

when originally filed for purposes of determining when the PBGC's

review period begins under Sec. 4041.26(a)(1).

(c) Additional information.

(1) Deadline for providing additional information. The PBGC may in

any case require the submission of additional information relevant to

the termination proceeding. Any such additional information becomes

part of the standard termination notice and shall be submitted within

30 days after the date of a written request by the PBGC, or within a

different time period specified therein. The PBGC may in its discretion

shorten the time period where it determines that the interests of the

PBGC or participants may be prejudiced by a delay in receipt of the

information.

(2) Effect on termination proceeding. A request for additional

information shall suspend the running of the PBGC's 60-day review

period. The review period shall begin running again on the day the

required information is received and continue for the greater of--

(i) The number of days remaining in the review period; or

(ii) Five regular business days.

Sec. 4041.27 Notice of annuity information.

(a) Notice requirement.

(1) In general. The plan administrator shall provide notices in

accordance with this section to each affected party other than--

(i) An affected party whose plan benefits will be distributed in

the form of a nonconsensual lump sum; and

(ii) The PBGC.

(2) Spin-off/termination transactions. The plan administrator shall

provide the information in paragraph (d) to a person entitled to notice

under Secs. 4041.23(c) or 4041.24(f), at the same time and in the same

manner as required for an affected party other than the PBGC.

[[Page 12515]]

(b) Content of notice. The plan administrator shall include, as

part of the notice of intent to terminate--

(1) Identity of insurers. The name and address of the insurer or

insurers from whom (if known), or (if not) from among whom, the plan

administrator intends to purchase irrevocable commitments (annuity

contracts);

(2) Change in identity of insurers. A statement that if the plan

administrator later decides to select a different insurer, affected

parties will receive a supplemental notice no later than 45 days before

the distribution date; and

(3) State guaranty association coverage information. The

information on state guaranty association coverage of annuities

described in paragraphs (a)(3) (i) and (ii) of this section:

(i) The following notice:

Under your pension plan, your benefits may be paid in the form

of an annuity purchased from a licensed insurance company. If we

purchase an annuity for you to provide all your pension benefits

under the plan, the insurance company will be responsible for paying

your benefits.

All states, the District of Columbia, and the Commonwealth of

Puerto Rico have established ``guaranty associations'' to protect

policyholders in the event of an insurance company's financial

failure. All insurance companies licensed to sell insurance in a

state are required to be members of that state's guaranty

association. If a member insurance company fails, the association

collects money from the other member insurance companies to continue

coverage up to statutory limits, as specified by law, for its

policyholders.

State guaranty association coverage of your annuity means that

the guaranty association may pay part or all of your annuity if the

insurance company responsible for the annuity cannot pay. How much

of your annuity the fund would pay, if any, may depend on factors

such as the amount of your annuity, the state in which you reside at

the time the insurance company fails to pay, and the state in which

the insurance company is located. Since state laws vary, you will

need to see what the law in your state says at the relevant time.

State guaranty association coverage is limited by statute in

total dollar amount. In most states, the maximum amount of annuity

coverage is stated in terms of the present value of the annuity. The

maximum amount and how it is stated varies from state to state and

may change over time.

This notice is intended to help you understand the general

nature of state guaranty association protection of the annuity you

may receive. It is only a summary. Listings of state guaranty

associations and their addresses and telephone numbers, and of their

general coverage limits are attached.

(ii) Listings of the addresses and telephone numbers of the state

guaranty association offices in all 50 states, the District of

Columbia, and the Commonwealth of Puerto Rico, and of the dollar

coverage limitations applicable to each state, along with the date as

of which the listings were prepared. The plan administrator shall use

listings that are at least as current as those included as sample

listings in the standard termination forms and instructions package

applicable to the plan termination proceeding.

(c) Where insurer(s) not known.

(1) Extension of deadline for notice. If the identity-of-insurer

information in paragraph (b)(1) is not known at the time the plan

administrator is required to provide it to an affected party as part of

a notice of intent to terminate, the plan administrator shall instead

provide it in a supplemental notice under paragraph (d).

(2) Alternative NOIT information. A plan administrator that

qualifies for the extension in paragraph (c)(1) with respect to a

notice of intent to terminate shall include therein (in lieu of the

information in paragraph (b)) a statement that--

(i) Irrevocable commitments (annuity contracts) may be purchased

from an insurer to provide some or all of the benefits under the plan;

(ii) The insurer or insurers have not yet been identified; and

(iii) Affected parties will be notified at a later date (but no

later than 45 days before the distribution date) of the name and

address of the insurer or insurers from whom (if known), or (if not)

from among whom, the plan administrator intends to purchase irrevocable

commitments (annuity contracts).

(d) Supplemental notice. The plan administrator shall provide a

supplemental notice to an affected party in accordance with this

paragraph (d) if the plan administrator did not previously notify the

affected party of the identity of insurer(s) or, after having

previously notified the affected party of the identity of insurer(s),

decides to select a different insurer. A failure to provide a required

supplemental notice to an affected party shall be deemed to be a

failure to comply with the notice of intent to terminate requirements.

(1) Deadline for supplemental notice. The deadline for issuing the

supplemental notice is 45 days before the affected party's distribution

date (or, in the case of an employee organization, 45 days before the

earliest distribution date for any affected party that it represents).

(2) Content of supplemental notice. The supplemental notice shall

include--

(i) The identity-of-insurer information in paragraph (b)(1);

(ii) The information regarding change of identity of insurer(s) in

paragraph (b)(2); and

(iii) Unless the state guaranty association coverage information in

paragraph (b)(3) was previously provided to the affected party, such

information and the extinguishment-of-guarantee information in

Sec. 4041.23(b)(8).

Sec. 4041.28 Closeout of plan.

(a) Distribution deadline.

(1) In general. Unless a notice of noncompliance is issued under

Sec. 4041.31(a), the plan administrator shall complete the distribution

of plan assets in accordance with paragraph (c) by the later of--

(i) 180 days after the expiration of the PBGC's 60-day (or

extended) review period under Sec. 4041.26(a); or

(ii) If the plan administrator meets the requirements of

Sec. 4041.25(c), 120 days after receipt of a favorable determination

from the IRS.

(2) Revocation of notice of noncompliance. If the PBGC revokes a

notice of noncompliance issued under Sec. 4041.31(a), the distribution

deadline is extended until the 180th day after the date of the

revocation.

(b) Assets insufficient to satisfy benefit liabilities. If the plan

administrator determines that plan assets are not sufficient to satisfy

all benefit liabilities at the time of any distribution (with assets

determined net of other liabilities, including PBGC premiums), the plan

administrator shall not make any further distribution of assets to

effect the plan's termination and shall promptly notify the PBGC.

(c) Method of distribution.

(1) In general. The plan administrator shall, in accordance with

all applicable requirements under the Code and ERISA, distribute plan

assets in satisfaction of all benefit liabilities (determined as of the

termination date). In the case of benefit liabilities that must be

provided in annuity form, the distribution shall be made by purchasing

irrevocable commitments from an insurer selected in accordance with the

fiduciary standards of Title I of ERISA.

(2) Participating annuity contracts. In the case of a plan in which

any residual assets are to be distributed to participants, a

participating annuity contract may be purchased to satisfy the

requirement that annuities be provided by the purchase of irrevocable

commitments only if the portion of the price of the contract that is

attributable to the participation feature--

[[Page 12516]]

(i) Is not taken into account in determining the amount of residual

assets; and

(ii) Is not paid from residual assets allocable to participants.

(3) Missing participants. The plan administrator shall distribute

benefits to missing participants in accordance with part 4050.

(d) Notice of annuity contract. If benefit liabilities are provided

through the purchase of irrevocable commitments--

(1) Either the plan administrator or the insurer shall, within 30

days after it is available, provide each participant and beneficiary

with a copy of the annuity contract or certificate showing the

insurer's name and address and clearly reflecting the insurer's

obligation to provide the participant's or beneficiary's benefit; and

(2) If such a contract or certificate is not available on or before

the date on which the post-distribution certificate is required to be

filed in order to avoid the assessment of penalties under

Sec. 4041.29(b), the plan administrator shall, no later than such date,

provide each participant and beneficiary with a written notice

stating--

(i) That the obligation for providing the participant's or

beneficiary's plan benefits has transferred to the insurer;

(ii) The name and address of the insurer;

(iii) The name, address, and telephone number of the person

designated by the insurer to answer questions concerning the annuity;

and

(iv) That the participant or beneficiary will receive from the plan

administrator or insurer a copy of the annuity contract or a

certificate showing the insurer's name and address and clearly

reflecting the insurer's obligation to provide the participant's or

beneficiary's benefit.

Sec. 4041.29 Post-distribution certification.

(a) Deadline. Within 30 days after the last distribution date for

any affected party, the plan administrator shall file with the PBGC a

post-distribution certification consisting of the PBGC Form 501,

completed in accordance with the instructions thereto.

(b) Assessment of penalties. The PBGC will assess a penalty for

late filing of a post-distribution certification only to the extent the

certification is filed more than 90 days after the distribution

deadline (including extensions) under Sec. 4041.28(a).

Sec. 4041.30 Requests for deadline extensions.

(a) In general. In narrow circumstances, the PBGC may in its

discretion extend a deadline for taking action under this subpart to a

later date. The PBGC will grant such an extension where it finds

compelling reasons why it is not administratively feasible for the plan

administrator (or other persons acting on behalf of the plan

administrator) to take the action until the later date and the delay is

brief. The PBGC shall consider--

(1) The length of the delay; and

(2) Whether ordinary business care and prudence in attempting to

meet the deadline is exercised.

(b) Time of extension request. Any request for an extension under

paragraph (a) that is filed later than the 15th day before the

applicable deadline shall include a justification for not filing the

request earlier.

(c) IRS determination letter requests. Any request for an extension

under paragraph (a) of the deadline in Sec. 4041.25(c) for submitting a

determination letter request to the IRS (in order to qualify for the

distribution deadline in Sec. 4041.28(a)(1)(ii)) shall be deemed to be

granted unless the PBGC notifies the plan administrator otherwise

within 60 days after receipt of the request (or, if later, by the end

of the PBGC's review period under Sec. 4041.26(a)). The PBGC shall

notify the plan administrator in writing of the date on which it

receives such request.

(d) Statutory deadlines not extendable. The PBGC may not--

(1) Extend the 60-day time limit under Sec. 4041.23(a) for issuing

the notice of intent to terminate;

(2) Waive the requirement in Sec. 4041.24(a) that the notice of

plan benefits be issued by the time the plan administrator files the

standard termination notice with the PBGC; or

(3) Extend the deadline under Sec. 4041.29(a) for filing the post-

distribution certification. However, the PBGC will assess a penalty for

late filing of a post-distribution certification only under the

circumstances described in Sec. 4041.29(b).

Sec. 4041.31 Notice of noncompliance.

(a) Failure to meet pre-distribution requirements.

(1) In general. Except as provided in paragraphs (a)(2) and (c),

the PBGC shall issue a notice of noncompliance within the 60-day (or

extended) time period prescribed by Sec. 4041.26(a) whenever it

determines that--

(i) The plan administrator failed to issue the notice of intent to

terminate to all affected parties (other than the PBGC) in accordance

with Secs. 4041.23;

(ii) The plan administrator failed to issue notices of plan

benefits to all affected parties entitled to plan benefits in

accordance with Sec. 4041.24;

(iii) The plan administrator failed to file the standard

termination notice in accordance with Sec. 4041.25;

(iv) As of the distribution date proposed in the standard

termination notice, plan assets will not be sufficient to satisfy all

benefit liabilities under the plan; or

(v) In the case of a spin-off/termination transaction (as described

in Sec. 4041.23(c)), the plan administrator failed to issue the notices

required by Sec. 4041.23(c), Sec. 4041.24(f), and Sec. 4041.27(a)(2).

(2) Interests of participants. The PBGC may decide not to issue a

notice of noncompliance based on a failure to meet a requirement under

paragraphs (a)(1)(i) through (a)(1)(iii) or (a)(1)(v) of this section

if it determines that issuance of the notice would be inconsistent with

the interests of participants and beneficiaries.

(3) Continuing authority. The PBGC may issue a notice of

noncompliance or suspend the termination proceeding based on a failure

to meet a requirement under paragraphs (a)(1)(i) through (a)(1)(v) of

this section after expiration of the 60-day (or extended) time period

prescribed by Sec. 4041.26(a) (including upon audit) if the PBGC

determines such action is necessary to carry out the purposes of Title

IV.

(b) Failure to meet distribution requirements.

(1) In general. If the PBGC determines, as part of an audit or

otherwise, that the plan administrator has not satisfied any

distribution requirement of Sec. 4041.28(a), it may issue a notice of

noncompliance.

(2) Criteria. In deciding whether to issue a notice of

noncompliance under paragraph (b)(1) of this section, the PBGC may

consider--

(i) The nature and extent of the failure to satisfy a requirement

of Sec. 4041.28(a);

(ii) Any corrective action taken by the plan administrator; and

(iii) The interests of participants and beneficiaries.

(3) Late distributions. The PBGC shall not issue a notice of

noncompliance for failure to distribute timely based on any facts

disclosed in the post-distribution certification if 60 or more days

have passed from the PBGC's receipt of the post-distribution

certification.

(c) Correction of errors. The PBGC shall not issue a notice of

noncompliance based solely on the plan administrator's inclusion of

erroneous information (or omission of correct information) in a notice

required to be provided to any person under this part if--

(1) The PBGC determines that the plan administrator acted in good

faith in connection with the error;

[[Page 12517]]

(2) The plan administrator corrects the error no later than--

(i) In the case of an error in the notice of plan benefits under

Sec. 4041.24, the latest date an election notice may be provided to the

person; or

(ii) In any other case, as soon as practicable after the plan

administrator knows or should know of the error, or by any later date

specified by the PBGC; and

(3) The PBGC determines that the delay in providing the correct

information will not substantially harm any person.

(d) Reconsideration. A plan administrator may request

reconsideration of a notice of noncompliance in accordance with the

rules prescribed in part 4003, subpart C.

(e) Consequences of notice of noncompliance.

(1) Effect on termination. A notice of noncompliance ends the

standard termination proceeding, nullifies all actions taken to

terminate the plan, and renders the plan an ongoing plan. A notice of

noncompliance is effective upon the expiration of the period within

which the plan administrator may request reconsideration under

paragraph (d) of this section or, if reconsideration is requested, a

decision by the PBGC upholding the notice. However, once a notice is

issued, the plan administrator shall take no further action to

terminate the plan (except by initiation of a new termination) unless

and until the notice is revoked pursuant to a decision by the PBGC on

reconsideration. A plan administrator that still desires to terminate a

plan shall initiate the termination process again, starting with the

issuance of a new notice of intent to terminate.

(2) Effect on plan administration. If the PBGC issues a notice of

noncompliance, the prohibitions in Sec. 4041.22(a) shall cease to

apply--

(i) Upon expiration of the period during which reconsideration may

be requested or, if earlier, at the time the plan administrator decides

not to request reconsideration; or

(ii) If reconsideration is requested, upon PBGC issuance of

decision on reconsideration upholding the notice of noncompliance.

(f) If no notice of noncompliance is issued. A standard termination

is deemed to be valid if--

(1) The plan administrator files a standard termination notice

under Sec. 4041.25 and the PBGC does not issue a notice of

noncompliance pursuant to Sec. 4041.31(a); and

(2) The plan administrator files a post-distribution certification

under Sec. 4041.29 and the PBGC does not issue a notice of

noncompliance pursuant to Sec. 4041.31(b).

(g) Notice to affected parties. Upon a decision by the PBGC on

reconsideration affirming the issuance of a notice of noncompliance or,

if earlier, upon the plan administrator's decision not to request

reconsideration, the plan administrator shall notify the affected

parties (other than the PBGC), and any persons who were provided notice

under Sec. 4041.23(c), in writing that the plan is not going to

terminate or, if applicable, that the termination was invalid but that

a new notice of intent to terminate is being issued.

Sec. 4041.41 [Amended]

7. Paragraph (a) of redesignated Sec. 4041.41 is amended by

removing the words ``Requirements for a distress termination'' and

adding in their place, ``Distress requirements'' in the title.

8. Paragraph (a)(1) of redesignated Sec. 4041.41 is amended by

removing ``4041.41'' and adding in its place ``4041.43'' and by adding

the words ``(except with PBGC approval)'' after ``and'' and before

``not''.

9. Paragraph (a)(2) of redesignated Sec. 4041.41 is amended by

removing ``4041.43'' and adding in its place ``4041.45'' and by

removing the words ``or, if applicable, no later than the due date

established in an extension notice issued under Sec. 4041.8''.

10. Paragraphs (a)(3) and (e) of redesignated Sec. 4041.41 are

amended by removing ``paragraph (e)'' and adding in its place

``paragraph (c)''.

11. Paragraph (b)(1) of redesignated Sec. 4041.41 is amended by

removing the word ``If'' and adding in its place ``Except as provided

in paragraph (b)(2)(i) of this section, if''; and by removing the words

``of paragraph (b) of this section for a standard termination or,

except as provided in paragraph (d)(2)(i) of this section, all of the

requirements of paragraph (c) of this section''

12. Paragraph (b)(2)(i) of redesignated Sec. 4041.41 is amended by

removing ``(c)(1)'' and adding in its place ``(a)(1)''; and by removing

``(c)(2)'' and adding in its place ``(a)(2)''.

13. Paragraphs (d)(1) and (d)(2) of redesignated Sec. 4041.41 are

amended by removing ``(e)(2)'' and adding in its place ``(c)(2)''.

14. Paragraphs(d)(1)(i), (d)(1)(iii), and (d)(2) of redesignated

Sec. 4041.41 are amended by removing ``(e)(3)'' and adding in its place

``(c)(3)''.

Sec. 4041.42 [Amended]

15. Redesignated Sec. 4041.42 is amended by removing the words

``pendency of termination proceedings'' and adding in their place

``termination process'' in the title.

16. Paragraph (a) of redesignated Sec. 4041.42 is amended by adding

the word ``and'' after ``due the plan,''; and by removing the words

``and, during the pendency of a standard termination, making loans to

participants,''.

17. Paragraph (b) of redesignated Sec. 4041.42 is amended by

removing the words ``in a distress termination'' in the title; and by

removing ``4041.48'' and adding in its place ``4041.50''.

18. Paragraph (c) of redesignated Sec. 4041.42 is amended by

removing the words ``in a distress termination'' in the title.

19. Paragraph (d) of redesignated Sec. 4041.42 is amended by

removing ``4041.42(c)'' and adding in its place ``4041.44(c)''; and by

removing ``4041.44(c)(1)'' and adding in its place ``4041.46(c)(1)''.

20. Paragraph (d)(1) of redesignated Sec. 4041.42 is amended by

removing ``(c)'' and adding in its place ``(b)''; and by removing

``(c)(1)'' and adding in its place ``(b)(1)''.

21. Paragraph (d)(1)(i) of redesignated Sec. 4041.42 is amended by

removing ``4041.42(e) and 4041.44(d)'' and adding in its place

``4041.44(e) and 4041.46(e)''.

22. Paragraph (d)(2) of redesignated Sec. 4041.42 is amended by

removing ``(f)'' and adding in its place ``(c)''.

23. Paragraph (e) of redesignated Sec. 4041.42 is amended by

removing ``4041.47(b)'' and adding in its place ``4041.49(b)''; by

removing ``4041.47(d)'' and adding in its place ``4041.49(d)''; by

removing ``(c)'' and adding in its place ``(b)''; and by removing

``4041.47(e)'' and adding in its place ``4041.49(e)''.

Sec. 4041.43 [Amended]

24. Paragraph (a)(3) of redesignated Sec. 4041.43 is amended by

removing ``(d)'' and adding in its place ``(b)''.

25. Paragraphs (b) and (c) of redesignated Sec. 4041.43 are

removed.

26. Paragraph (d) of redesignated Sec. 4041.43 is redesignated as

paragraph (b), and as so redesignated is amended by removing the words

``employer identification number (``EIN')'' and adding in their place

``EIN''; and by removing the words ``plan number (`PN')'' and adding in

their place ``PN'' in paragraph (d)(2); by removing ``.'' and adding in

its place ``;'' in paragraph (d)(4); and by removing the words ``A

statement that benefit and service accruals will continue until the

termination date or, if applicable, that benefit accruals were or will

be frozen as of a specific date in accordance with section 204(h) of

ERISA'' and by adding in their place ``The cessation of accruals

[[Page 12518]]

information in Sec. 4041.23(b)(4)'' in paragraph (d)(5).

27. Paragraph (e) of redesignated Sec. 4041.43 is redesignated as

paragraph (c) and as so redesignated is amended by removing

``4041.21(f)'' and adding in its place ``4041.23(c)''.

Sec. 4041.44 [Amended]

28. In redesignated Sec. 4041.44, paragraphs (a)(1), (b), and (c)

are amended by removing ``4041.41'' and adding in its place

``4041.43''.

29. Paragraph (b)(3) of redesignated Sec. 4041.44 is amended by

removing ``4041.43'' and adding in its place ``4041.45''.

30. Paragraph (c) of redesignated Sec. 4041.44 is amended by

removing ``4041.3(d)(2)(i)'' and adding in its place

``4041.41(b)(2)(i)''.

31. Paragraph (f) of redesignated Sec. 4041.44 is amended by

removing ``4041.41(e))'' and adding in its place ``4041.43(e))''; and

by removing the sentence ``The notice required by this paragraph shall

be provided in the manner described in Sec. 4041.26(d)(2).''.

Sec. 4041.45 [Amended]

32. Paragraph (b)(1)(ii) of redesignated Sec. 4041.45 is amended by

removing ``4041.44(b)'' and adding in its place ``4041.46(b)''.

33. Redesignated Sec. 4041.45(d) is removed.

Sec. 4041.46 [Amended]

34. Paragraphs (a) and (b) of redesignated Sec. 4041.46 are amended

by removing ``4041.3(c)'' and adding in its place ``4041.41(c)''.

35. Paragraph (b) of redesignated Sec. 4041.46 is amended by

removing ``4041.43(b)'' and adding in its place ``4041.45(b)''.

36. Paragraph (c)(1) of redesignated Sec. 4041.46 is amended by

removing ``4041.3(c)'' and adding in its place ``4041.41''; and by

removing ``4041.3(d)'' and adding in its place ``4041.41(b)''.

37. Paragraph (c)(2) of redesignated Sec. 4041.46 is amended by

removing the words ``, or, if applicable, no later than the due date

established in an extension notice issued under Sec. 4041.8''.

38. Paragraph (e) of redesignated Sec. 4041.46 is amended by

removing ``4041.41(e)'' and adding in its place ``4041.43(e)''; and by

removing the sentence ``The notice required by this paragraph shall be

provided in the manner described in Sec. 4041.26(d)(2).''

Sec. 4041.47 [Amended]

39. Paragraph (a) of redesignated Sec. 4041.47 is amended by

removing ``4041.43(b)(1)'' and adding in its place ``4041.45(b)(1)''.

40. Paragraph (b)(1) of redesignated Sec. 4041.47 is amended by

removing ``4041.4'' and adding in its place ``4041.42''.

41. Paragraph (c)(1) of redesignated Sec. 4041.47 is amended by

removing ``4041.46'' and adding in its place ``4041.48''.

42. Paragraph (c)(2) of redesignated Sec. 4041.47 is amended by

removing ``4041.48'' and adding in its place ``4041.50''.

43. Paragraph (c)(3) of redesignated Sec. 4041.47 is amended by

removing ``4041.48(b)'' and adding in its place ``4041.50(b)''.

44. Paragraph (c)(4) of redesignated Sec. 4041.47 is amended by

removing ``4041.11'' and adding in its place ``4041.5''.

45. Redesignated Sec. 4041.47 is amended by adding a new paragraph

(d) to read as follows:

Sec. 4041.47 PBGC determination of plan sufficiency/insufficiency.

* * * * *

(d) Alternative treatment of majority owner's benefit. A majority

owner may elect to forego receipt of all or part of his or her benefit

in connection with a distress termination. Any such alternative

treatment--

(1) Is valid only if the conditions in Sec. 4041.21(b)(2)(i)

through (iii) are met; and--

(2) Is subject to the PBGC's approval if the election--

(i) Is made after the termination date; and

(ii) Would result in the PBGC determining that the plan is

sufficient for guaranteed benefits under paragraph (c).

46. Sec. 4041.48 is revised to read as follows:

Sec. 4041.48 Sufficient plans; notice requirements.

(a) Notices of benefit distribution. When a distribution notice is

issued by the PBGC pursuant to Sec. 4041.47, the plan administrator

shall issue notices of benefit distribution in accordance with the

rules regarding notice of plan benefits in Sec. 4041.24, except that--

(1) The deadline for issuing the notices of benefit distribution is

the 60th day after receipt of the distribution notice; and

(2) With respect to the information described in Sec. 4041.24(b),

the terms ``plan benefits'' and ``pension benefits'' are replaced with

``Title IV benefits'' and the term ``proposed termination date'' is

replaced with ``termination date''.

(b) Certification to PBGC. No later than 15 days after the date on

which the plan administrator completes the issuance of the notices of

benefit distribution, the plan administrator shall file with the PBGC a

certification that the notices were so issued in accordance with the

requirements of this section.

(c) Notice of annuity information. (1) In general. Unless all plan

benefits will be distributed in the form of nonconsensual lump sums,

the plan administrator shall provide a notice of annuity information to

each affected party other than--

(i) An affected party whose plan benefits will be distributed in

the form of a nonconsensual lump sum; and

(ii) The PBGC.

(2) Spin-off/termination transactions. The plan administrator shall

provide the information in paragraph (c)(4) of this section to a person

entitled to notice under Sec. 4041.43(c), at the same time and in the

same manner as required for an affected party described in paragraph

(c)(1) of this section.

(3) Selection of different insurer. A plan administrator that

decides to select a different insurer after having previously notified

the affected party of the identity of insurer(s) under this paragraph

shall provide another notice of annuity information.

(4) Content of notice. The notice shall include--

(i) The identity-of-insurer information in Sec. 4041.27(b)(1);

(ii) The information regarding change in identity of insurer(s) in

Sec. 4041.27(b)(2); and

(iii) Unless the state guaranty coverage information in

Sec. 4041.27(b)(3) was previously provided to the affected party, such

information and the extinguishment-of-guaranty information in

Sec. 4041.23(b)(8) (replacing the term ``pension benefits'' with

``Title IV benefits'').

(5) Deadline for notice. The plan administrator shall issue the

notice of annuity information to each affected party by the deadline in

Sec. 4041.27(d)(1).

(d) Request for IRS determination letter. To qualify for the

distribution deadline in Sec. 4041.28(a)(1)(ii) (as modified and made

applicable by Sec. 4041.50(c)), the plan administrator shall submit to

the IRS a valid request for a determination of the plan's qualification

status upon termination (``determination letter'') by the day on which

the plan administrator completes the issuance of the notices of benefit

distribution.

Sec. 4041.49 [Amended]

47. Paragraphs (a) and (c) of redesignated Sec. 4041.49 are amended

by

[[Page 12519]]

removing ``4041.48'' and adding in its place ``4041.50''.

48. Paragraph (b)(1)(i) of redesignated Sec. 4041.49 is amended by

removing ``4041.45(b)'' and adding in its place ``4041.47(b)''.

49. Paragraph (e) of redesignated Sec. 4041.49 is amended by

removing ``4041.4(c)'' and adding in its place ``4041.42''.

50. Sec. 4041.50 is added to read as follows:

Sec. 4041.50 Closeout of plan.

If a plan administrator receives a distribution notice from the

PBGC pursuant to Sec. 4041.47 and neither the plan administrator nor

the PBGC makes the finding described in Sec. 4041.49(b) or (d), the

plan administrator shall distribute plan assets in accordance with

Sec. 4041.28 and file a post-distribution certification in accordance

with Sec. 4041.29, except that--

(a) The term ``benefit liabilities'' is replaced with ``Title IV

benefits'';

(b) For purposes of applying the distribution deadline in

Sec. 4041.28(a)(1)(i), the phrase ``after the expiration of the PBGC's

60-day (or extended) review period under Sec. 4041.26(a)'' is replaced

with ``the day on which the plan administrator completes the issuance

of the notices of benefit distribution pursuant to Sec. 4041.48(a)'';

and

(c) For purposes of applying the distribution deadline in

Sec. 4041.28(a)(1)(ii), the phrase ``the requirements of

Sec. 4041.25(c)'' is replaced with ``the requirements of

Sec. 4041.48(d)''.

PART 4001--TERMINOLOGY

51. The authority citation for Part 4001 continues to read as

follow:

Authority: 29 U.S.C. 1301, 1302(b)(3).

Sec. 4001.2 [Amended]

52. In Sec. 4001.2, paragraph (2) of the definition of Distribution

date is amended by removing the words ``Other than for purposes of

determining the interest rate to be used in calculating the value of a

benefit to be paid as a lump sum to a late-discovered participant,

the'' and adding in their place ``The''; and by removing the words

``PBGC, a benefit provided after the deemed distribution date to a

late-discovered participant, or an irrevocable commitment purchased

from an insurer after the deemed distribution date for a recently-

missing participant'' and adding in their place the word ``PBGC''.

PART 4006--PREMIUM RATES

53. The authority citation for Part 4006 continues to read as

follow:

Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.

Sec. 4006.5 [Amended]

54. In Sec. 4006.5, paragraph (f)(3) is amended by removing the

words ``or, if later (in the case of a single-employer plan), the date

30 days prior to the date the PBGC receives the plan's post-

distribution certification''.

PART 4050--MISSING PARTICIPANTS

55. The authority citation for Part 4050 is added to read as

follow:

Authority: 29 U.S.C. 1302(b)(3), 1350.

Sec. 4050.1 [Amended]

56. In Sec. 4050.1, the reference ``Sec. 4041.27(c)'' is removed

and the reference ``Sec. 4041.28(c)'' is added in its place.

57. In Sec. 4050.2, the definition of Late-discovered participant

is removed; the definition of Recently-missing participant is removed;

the definition of Post-distribution certification is amended by

removing the words ``Sec. 4041.27(h) or Sec. 4041.48(b)'' and adding in

their place the words ``Sec. 4041.29 or Sec. 4041.50''; and the

definition of Deemed distribution date is revised to read as follows:

Sec. 4050.2 Definitions.

* * * * *

Deemed distribution date ordinarily means the last day of the

period in which distribution may be made (determined without regard to

the provisions of this part) under part 4041 of this chapter. The plan

administrator may select an earlier date, provided that the selected

date is no earlier than the date when all benefit distributions have

been made under the plan except for distributions to missing

participants whose designated benefits are paid to the PBGC.

* * * * *

Sec. 4050.3 [Amended]

58. In Sec. 4050.3, paragraph (a) is amended by removing the words

``Sec. 4041.27(c) or Sec. 4041.48(a)(1)'' and adding in their place the

words ``Sec. 4041.28(c) or Sec. 4041.50''.

59. In Sec. 4050.4, paragraph (b)(1) is amended by removing the

words ``(or, in the case of a recently-missing participant, on or

before the 90th day after the deemed distribution date)''; and

paragraph (a) is revised to read as follows:

Sec. 4050.4 Diligent search.

(a) Search required. A diligent search shall be made for each

missing participant before information about the missing participant or

payment is submitted to the PBGC pursuant to Sec. 4050.6.

* * * * *

60. In Sec. 4050.6, paragraphs (a)(2) and (a)(3) are removed;

paragraph (a)(1) is redesignated as paragraph (a), the heading is

revised as set forth below, and the reference ``Sec. 4041.9'' is

revised to read ``Sec. 4041.3(b)'; paragraph (b) is amended by removing

the words ``If the plan administrator'' and adding in their place the

words ``Except as provided in paragraph (b)(2) of this section, if the

plan administrator'; the heading and text of paragraph (b) (as so

amended) are redesignated as paragraph (b)(1); a new heading is added

to paragraph (b), and new paragraph (b)(2) is added, to read as

follows:

Sec. 4050.6 Payment and required documentation.

(a) Time of payment and filing.

* * * * *

(b) Late charges.

(1) Interest on late payments. * * *

(2) Assessment of interest and penalties. The PBGC will assess

interest for late payment of a designated benefit or a penalty for late

filing of information only to the extent paid or filed beyond the time

provided in Sec. 4041.29(b).

* * * * *

Sec. 4050.7 [Amended]

61. In Sec. 4050.7, paragraph (a) is amended by removing the words

``the insurer and the relevant policy number'' and adding in their

place the words ``the insurer, the relevant policy number, and (to the

extent known) the amount or value of the benefit''.

Sec. 4050.12 [Amended]

62. In Sec. 4050.12, paragraphs (a) and (h) are removed and

paragraphs (b), (c), (d), (e), (f), (g), and (i) are redesignated as

paragraphs (a), (b), (c), (d), (e), (f), and (g) respectively;

redesignated paragraph (a) is amended by removing the words ``treat the

missing participant like a late-discovered participant'' and adding in

their place the words ``make distribution to the individual in such

manner as the PBGC shall direct''; redesignated paragraph (c) is

amended by removing the references ``paragraph (d)(2)'', ``paragraph

(d)(2)(i)'', and ``paragraph (d)(2)(ii)'' and adding in their place the

references ``paragraph (c)(2)'', ``paragraph (c)(2)(i)'', and

``paragraph (c)(2)(ii)'' respectively; and redesignated paragraph (g)

is amended by removing the reference ``paragraph

[[Page 12520]]

(i)'' in both places where it appears and adding in each place the

reference ``paragraph (g)''.

Sec. 4050.13 [Removed]

63. Section 4050.13 is removed.

Issued in Washington, DC, this 11th day of March, 1997.

John Seal,

Acting Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 97-6500 Filed 3-13-97; 8:45 am]

BILLING CODE 7708-01-P