| 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 proposed 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.
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.
Similarly, the PBGC proposes to 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 would allow plans using the presumptive method to aggregate the multiple liability pools attributable to prior plan years and the designated plan year. It would thus allow 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, 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.
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. New 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.
The proposed regulations clarify that for each modification to the withdrawal liability method discussed in the rule, a plan’s unfunded vested benefits, determined with respect to plan years ending after the plan year designated in the plan amendment, are reduced by the value of the outstanding claims for withdrawal liability that can reasonably be expected to be collected for employers who withdrew from the plan on or before the designated plan year.
©2005-2024 CCH Incorporated or its affiliates
