On January 28, 2014, the Pension Benefit Guaranty Corporation (PBGC) issued a proposed rule that would amend multiemployer plan regulations to facilitate plan merger transactions and to generally make providing information to the PBGC and plan participants more efficient and effective (79 Fed. Reg. 4642-01 (Jan. 29, 2014)). Specifically, the rule proposes to reduce burdens by:

Comments on this proposed rule must be submitted on or before March 31, 2014.

When a multiemployer plan terminates, under ERISA Section 4281(b), the plan must perform an annual valuation of the plan's assets and benefits. This valuation allows the terminated plan to determine whether it needs to eliminate benefits that are not eligible for the PBGC's guarantee.

Under the proposed rule, valuations for plans terminated by mass withdrawal may be performed every three years instead of annually, provided that:

To comply with the requirement under ERISA Section 4281(b) that there be a written determination of the value of nonforfeitable benefits each year, the proposed rule provides that these plans may use the most recently performed valuation for the next two plan years. The PBGC noted that as the value of a plan's nonforfeitable benefits changes, the plan could move in and out of the three-year or annual valuation cycle.

However, all other plans would continue to be required to perform valuations annually, subject to two other exceptions from the current regulation that are retained for a plan year:

Under the PBGC's current regulations, a merger or a transfer of assets and liabilities between multiemployer plans must satisfy certain requirements, including a requirement that plan sponsors of all plans involved in a merger or transfer jointly file a notice 120 days before the transaction with the PBGC. The purpose of the notice provision is to confirm to the PBGC that plan sponsors have met four criteria (see 29 U.S.C. § 1411). Many plan sponsors engaged in mergers of multiemployer plans in connection with corporate transactions requested waivers from the PBGC of the 120-day advance notification requirement provided that the plan notice satisfied these criteria.

To reduce this reporting burden, the proposed rule shortens the advance notice period to 45 days for transactions that do not involve a compliance determination from the PBGC under 29 C.F.R. § 4231.9. However, the current reporting requirements would remain in effect either:

The PBGC explained that this change would avoid the need to grant waivers while still allowing the PBGC enough time to review requests.

Terminated multiemployer plans that determine that they will be insolvent for a plan year must provide a series of notices to the PBGC and participants and beneficiaries, including a notice of insolvency and annual updates. The proposed rule eliminates the requirement for a plan sponsor of a terminated multiemployer plan to provide annual updates to the notice of insolvency.

The PBGC explained that the current rule anticipated that a plan's insolvency would be short in duration, thus making annual updates useful for the PBGC and plan participants and beneficiaries. However, the PBGC's experience has been that once a multiemployer plan becomes insolvent, it remains insolvent, limiting the helpfulness of updated insolvency notices.

Under this proposed rule, the current PBGC reporting requirements applicable to plan sponsors of multiemployer plans may be reduced in the event of a plan merger or termination. Employers engaged in corporate transactions involving plan sponsors of small, terminated or insolvent multiemployer plans should review this guidance to determine whether the reduced reporting requirements apply to the plans affected by the transaction.