| Test Your Human Resources Knowledge | ||
|
| Labor Law Journal Submissions | ||
|
| Labor Arbitrators' Awards and Biographies | ||
5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The Pension Benefit Guaranty Corporation (PBGC) has issued fi nal regulations implementing provisions of the Pension Protection Act of 2006 (P.L. 109-280; PPA) to change the allocation of unfunded vested benefits to withdrawing employers from a multiemployer pension plan and make adjustments in determining an employer’s withdrawal liability when a multiemployer plan is in critical status. The final regulations are substantially the same as proposed rules issued in March 2008.
Allocating withdrawal liability
Generally, ERISA §4211 provides four methods of allocating withdrawal liability: the presumptive, the modified presumptive, the rolling-five, and the direct attribution methods. These methods were modified, in part, by various changes the PPA made to ERISA’s withdrawal liability provisions. For example, the PPA added ERISA §4211(c)(5)(E) , which permits a plan, including a construction industry plan, to adopt an amendment that applies the presumptive method by substituting a different plan year (for which the plan has no unfunded vested benefits) for a plan year ending before September 26, 1980. Such an amendment would enable a plan to erase a large part of the plan’s unfunded vested benefits attributable to plan years before the end of the designated plan year, and to start fresh with liabilities that arise in plan years after the designated plan year.
Accordingly, the PBGC will expand ERISA Reg. §4211.12 to permit plans to substitute a new plan year for the plan year ending before September 26, 1980, without regard to the amount of a plan’s unfunded vested benefits at the end of the newly designated plan year. This change will allow plans using the presumptive method to aggregate the multiple liability pools attributable to prior plan years and the designated plan year. It thus allows such plans to allocate the plan’s unfunded vested benefits as of the end of the designated plan year among the employers who have an obligation to contribute under the plan for the first plan year ending on or after such date. The plan will allocate unfunded vested benefits based on the employer’s share of the plan’s contributions for the five-year period ending before the designated plan year. Thereafter, the plan would apply the regular rules under the presumptive method to segregate changes in the plan’s unfunded vested benefits by plan year and to allocate individual plan year liabilities among the employers obligated to contribute under the plan in that plan year.
Plans in critical status
In addition, the PPA created new funding rules for multiemployer plans in “critical” status, allowing these plans to reduce benefits and making the plans’ contributing employers subject to surcharges. ERISA §305(e)(9) and Code Sec. 432(e)(9) provide that such benefit adjustments and employer surcharges are disregarded in determining a plan’s unfunded vested benefits and allocation fraction for purposes of determining an employer’s withdrawal liability and direct the PBGC to prescribe simplified methods for the application of these provisions in determining withdrawal liability.
The final regulations add a new ERISA Reg. §4211.4 that excludes amounts attributable to the employer surcharge from the contributions that are otherwise includible under the allocation fraction under the presumptive, modified presumptive, and rolling-5 methods. A simplified method for the application of this principle is provided in an example contained in the regulatory preamble.
Visit our News Library to read more news stories.
©2005-2024 CCH Incorporated or its affiliates
