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Catalog of Federal Domestic Assistance

Program Descriptions

86.001:  Pension Plan Termination Insurance (ERISA)

Popular Name:  ERISA

Objectives:  To encourage the establishment and maintenance of voluntary private pension plans for the benefit of their participants, to protect pension benefits in ongoing plans, to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries in plans covered by the PBGC, and to maintain premiums charged by the PBGC at the lowest level consistent with carrying out its obligations.

PROGRAM AND AWARD	FINANCIAL AND INFORMATION CONTACTS
ELIGIBILITY REQUIREMENTS	FINANCIAL AND ADMINISTRATIVE INFO.
APPLICATION AND AWARD PROCESS	INFORMATION CONTACTS
RELATED PROGRAMS	ASSISTANCE CONSIDERATIONS
PROGRAM ACCOMPLISHMENTS	POST ASSISTANCE REQUIREMENTS

86.001 ELIGIBILITY REQUIREMENTS:

Applicant Eligibility:  Private businesses and organizations that maintain defined benefit plans and participants in such plans.

Beneficiary Eligibility:  All participants (and their beneficiaries) in covered single-employer pension plans may be potentially eligible for plan termination insurance payments. All covered multiemployer plans may be eligible for financial assistance needed to ensure payment of guaranteed benefits.

Credentials/Documentation:  In support of a termination notice, information relating to plan asset sufficiency must be furnished by the plan administrator of a single-employer plan. Information relating to financial operations of the plan sponsor and to plan participants must also be furnished for a distress termination.

86.001 APPLICATION AND AWARD PROCESS:

Preapplication Coordination:  None. This program is excluded from coverage under E.O. 12372.

Application Procedure:  As soon as practicable after complying with certain statutory notice requirements, a plan administrator who intends to terminate a covered single-employer plan must submit to the PBGC either a standard termination notice or a distress termination notice depending on the type of termination sought. Applications relating to single-employer pension plan matters should be sent to PBGC, Technical Assistance Branch, 1200 K Street, NW., Suite 930, Washington, DC 20005-4026. Applications for multiemployer plan matters should be made in accordance with applicable PBGC regulations and other published guidelines.

Award Procedure:  The PBGC determines whether the assets of a covered single-employer plan that has notified the PBGC of its intent to terminate in a distress termination, or against which the PBGC has initiated termination proceedings, are sufficient to pay guaranteed benefits. If plan assets are found to be insufficient or the PBGC is unable to determine asset sufficiency, the PBGC will normally have itself named as trustee to administer the plan. The PBGC is liable to pay amounts necessary to ensure that benefits guaranteed or funded by allocations of plan assets and employer liability recoveries under Title IV of the Act are paid to participants or beneficiaries under covered insufficient terminated single-employer plans.

Deadlines:  An annual premium must be paid for each covered plan generally no later than the 15th day of the 9th full calendar month following the month in which the plan year begins (Form 1). Plans with more than 500 participants generally must also file an estimated premium with the PBGC by the last day of the second full calendar month following the close of the prior plan year (Form 1-ES). Premiums must be paid through the plan year in which all plan benefits are distributed in a standard termination or a trustee is appointed under ERISA Section 4042. For further information or copies of forms contact: PBGC, Collection and Compliance Division, Suite 670, 1200 K Street, NW., Washington, DC 20005-4026, Phone (202) 326-4042 or 1-800-736-2444. Standard Termination: Notice of Intent to Terminate (NOIT). The plan administrator of a single-employer plan must issue a notice of intent to terminate the plan, by hand, mail, or electronic means reasonably calculated to ensure actual receipt as of a particular date, to each individual plan participant, beneficiary of a deceased participant, and union representing plan participants (but not to the PBGC) at least 60 days and no more than 90 days in advance of the proposed termination date. PBGC Notice: No later than 180 days after the proposed termination date the administrator must file with the PBGC a notice including, among other items, an enrolled actuary's certification that plan assets will be sufficient to provide all benefit liabilities as of date of final distribution, with the underlying total asset and benefit values (Form 500). Notice of Plan Benefits: No later than the date the PBGC Notice is filed, the administrator must have notified each plan participant and beneficiary in plain language of the amount of that person's benefit, the form of benefit valued, and the factors (such as age, length of service, and actuarial assumptions) used in calculating the benefit. The plan administrator must also notify each plan participant and beneficiary and the PBGC of the identity of the insurer or insurers from whom the plan administrator intends to purchase annuities no later than 45 days before the date of distribution. Asset Distribution: The PBGC has 60 days after receipt of the PBGC Notice to determine whether the plan termination complies with the requirements for a standard termination. If the PBGC does not issue a Notice of Noncompliance and plan assets are sufficient to provide all benefit liabilities, the administrator may distribute the plan assets. The distribution must generally be completed within 180 days after the expiration of the 60-day review period and be done in accordance with plan provisions and PBGC regulations. If the plan administrator requests an IRS determination letter on or before filing Form 500 with PBGC, the asset distribution deadline is extended to 120 days after the plan receives a favorable IRS determination letter. Within 30 days after final distribution of plan assets, the administrator must file with the PBGC a notice certifying that assets have been distributed as required (Form 501). However, PBGC will assess a penalty for a late filing only if it is filed more than 90 days after assets have been distributed. A terminating plan that is unable to locate an individual after a diligent search must either purchase an annuity for the individual and send annuity provider information to the PBGC or send the PBGC funds to pay for the individual's benefit (Schedule MP). Distress Termination Notice Requirements: The notice requirements for a distress termination differ from those for a standard termination in several ways: the 60-day to 90-day advance NOIT must be provided to the PBGC as well as to plan participants and other affected parties; the PBGC Notice (Form 601) must include information to demonstrate that each contributing sponsor and each member of the sponsor's controlled group meet at least one of the distress tests; liquidation, reorganization, business continuation, or pension costs; as of the proposed termination date. A plan administrator must provide Notice of Plan Benefits to plan participants and beneficiaries in a distress termination only if the plan has sufficient assets to provide at least guaranteed benefits.

Range of Approval/Disapproval Time:  Not applicable.

Appeals:  Any person aggrieved by an initial determination made by the PBGC which is covered by the appeals procedures may file an appeal. An appeal or a request for an extension of time to appeal should be submitted to the Appeals Board, Pension Benefit Guaranty Corporation, 1200 K Street, Suite 480, NW, Washington, DC 20005-4026. In addition, the PBGC has the authority to review informally, upon request, determinations that are not covered by the appeals procedures when it determines that it would be appropriate to do so.

Renewals:  Not applicable.

Criteria for Selecting Proposals:  Not applicable.

Examples of Funded Projects:  Not applicable.

Range and Average of Financial Assistance:  Monthly benefit range per retiree of PBGC'S guarantee as of September 30, 1999, in the single employer program: $10 to the maximum guarantee from PBGC funds of $3,221.59; average monthly benefit per retiree, fiscal year 2000 estimate single-employer: $351.

86.001 RELATED PROGRAMS:

• 17.150 Pension and Welfare Benefits Administration.

86.001 PROGRAM ACCOMPLISHMENTS:

86.001 FINANCIAL AND ADMINISTRATIVE INFO:

Federal Agency:  PENSION BENEFIT GUARANTY CORPORATION

Type of Assistance:  Insurance.

Obligations:  (Benefit payments) FY 99 $1,207,432,226; FY 00 est $963,370,000; and FY 01 est $987,609,000. (Financial Assistance to Multiemployer Plans) FY 99 $5,756,171; FY 00 est $94,330,000; and FY 01 est $6,266,000.

Budget Account Number:  16-4204-0-3-601.

Authorization:  Employee Retirement Income Security Act of 1974 (ERISA), Title IV (Plan Termination Insurance), Public Law 93-406, as amended; Public Law 96-364; Multiemployer Pension Plan Amendments Act of 1980; Public Law 99-272; Single-Employer Pension Plan Amendments Act of 1986; Pension Protection Act of 1987, Public Law 100- 203; Omnibus Budget Reconciliation Act of 1989, Public Law 101-239; Retirement Protection Act of 1994, Public Law 103-465.

Regulations, Guidelines, and Literature:  Title 29 CFR, Chapter 40; Form PBGC 1-ES Package; Form PBGC 1 Package; PBGC Form 500 Package; Schedule MP Package; PBGC Form 600 Package; PBGC Form 200; Form 10; Form 10-Advance; PBGC's Home Page on the World Wide Web at www.pbgc.gov.

86.001 INFO CONTACTS:

Regional or Local Office:  Contact the nearest Department of Labor, Pension Welfare Benefits Administration Field Office listed in Appendix IV of the Catalog.

Headquarters Office:  Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026. Phone: (202) 326-4000.

(See Appendix IV for more contact info.)

86.001 ASSISTANCE CONSIDERATIONS:

Formula and Matching Requirements:  Not applicable.

Length and Time Phasing of Assistance:  Not applicable, except as noted in USES AND USE RESTRICTIONS section of this program.

Uses and Use Restrictions:  Insurance coverage is mandatory for most private, defined benefit pension plans. A single-employer plan may terminate in a standard termination only if it has sufficient assets to provide all benefits, and in a voluntary distress termination only if the employer sponsoring the plan can satisfy specified distress criteria. Upon a voluntary distress termination or a termination initiated by the PBGC, the PBGC guarantees payment of nonforfeitable benefits under the terms of the plan within limits specified in the law. The guaranteed basic benefits payable to a participant or beneficiary under a covered single-employer plan may not exceed the actuarial value at the time of termination of a monthly benefit in the form of a life annuity commencing at age 65 equal to the lesser of: (1) $750, adjusted annually to reflect changes in the Social Security contribution and benefit base since 1974, or (2) a participant's high consecutive five-year average monthly gross income. When covered plans or amendments to them are less than 5 years old at termination, basic benefits are guaranteed on a graduated basis. Benefits of persons defined as "substantial owners" are guaranteed on a 30-year graduated basis, subject to certain additional limits in the case of increased benefits due to plan amendment. For multiemployer plans there is a program of reorganization for plans with funding problems. The PBGC is required to extend financial assistance to insolvent multiemployer plans in order that they may be able to meet plan obligations for guaranteed benefits. Insurance coverage is mandatory for any plan that is an employee pension plan benefit established or maintained by: (1) an employer engaged in or affecting commerce; (2) an employee organization engaged in or affecting commerce; or (3) both, if certain requirements of the Internal Revenue Code are met. However, insurance coverage does not extend to any plan that is: (1) an individual account plan; (2) established and maintained for Federal, State or local government employees; (3) a church plan, unless a plan has made an election under 26 U.S.C. 410(d) and has notified PBGC of such election; (4) not provided for employer contributions after September 2, 1974; (5) unfunded and maintained by an employer primarily to provide deferred compensation for a select group of management or highly compensated employees; (6) established and maintained outside of the U.S. primarily for the benefit of non-resident aliens; (7) maintained by an employer solely for the purpose of providing benefits for certain employees in excess of the limitations on contributions and benefits imposed by the Internal Revenue Code; (8) established and maintained exclusively for substantial owners; (9) that of an international organization that is exempt from taxation; (10) maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws; or (11) established and maintained by a professional service employer which does not have more than 25 participants.

86.001 POST ASSISTANCE REQUIREMENTS:

Reports:  An annual report (Form 5500 series) must be filed by the plan administrator with the Department of Labor no later than the last day of the seventh month after the close of the prior plan year. Certain events that may indicate serious problems within a plan also must be reported to the PBGC, normally within 30 days after the plan administrator or contributing sponsor learns of them. Such reportable events include failure to meet minimum funding standards; bankruptcy, insolvency or similar settlements; liquidation or dissolution; or transactions involving a change of employer. In the case of certain privately held companies, the PBGC must be given 30 days advance notice of certain corporate or plan events. Controlled groups that have more than $50 million in unfunded vested benefits are required to provide plan actuarial and company financial information to the PBGC annually. Certain plans are required to provide participants annually with plan underfunding information, and to certify in the premium filing to the PBGC that they have provided the information.

Audits:  The PBGC determines whether the assets of a covered single-employer plan (that has either notified the Corporation of its intent to terminate in a distress termination, or against which the Corporation has initiated termination proceedings) are sufficient to pay plan benefit liabilities. Title IV imposes liability on an employer that terminates an insufficient single-employer plan for the amount of unfunded benefit liabilities. The PBGC also may contact participants or sponsors of single-employer plans terminated in a standard termination to ensure that assets were distributed in full satisfaction of all benefit liabilities. In addition, the PBGC audits premium filings.

Records:  Records maintenance requirements for pension plans are specified by the Pension and Welfare Benefits Administration, Department of Labor. Records to support or validate premium payments must be kept for 6 years from the premium due date.