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Pension and Employee Benefits: Code, ERISA, & Regulations
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CCH® PENSION — 03/13/10

PPA requires funding improvement or rehabilitation plan

The PPA amended the Code and ERISA to require plans certified to be in endangered or critical status to adopt a funding improvement plan or a rehabilitation plan within 240 days from the required date of the certification. The PPA also added ERISA §502(c)(8), giving the Labor Department the authority to assess civil monetary penalties of up to $1,100 per day against plan sponsors that fail to timely adopt funding improvement or rehabilitation plans and against plan sponsors of certain plans in endangered status that fail to meet applicable benchmarks by the end of the funding improvement period.

Procedures for assessing penalties

The final regulations set forth the administrative procedures for assessing and contesting the penalties under ERISA §502(c)(8). The final rules generally explain how the maximum penalty amounts are computed, identify the circumstances under which a penalty may be assessed, set out the procedural rules for service by the Labor Department and filing by a plan sponsor, and provide sponsors with the procedures for contesting an assessment by requesting an administrative hearing.

If more than one person is responsible as plan sponsor for the failure to adopt a funding improvement or rehabilitation plan, or to meet applicable benchmarks as required by ERISA §305, the parties will be jointly and severally liable for the failure. Thus, the entire joint board of trustees will be jointly and severally liable for the failure. Also, the final regulations make clear that any person against whom a penalty is assessed, pursuant to a final order, is personally liable for the payment of the penalty. The liability is not the liability of the plan.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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