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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 PBGC has issued proposed regulations that would harmonize the ERISA requirement that guaranteed benefits be nonforfeitable on the plan termination date with the reemployment rights provided to service members under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). The proposed rules would apply to reemployments under USERRA initiated on or after December 12, 1994.
Guaranteed benefits for reemployed veterans
As part of its responsibilities under ERISA's termination insurance provisions, the PBGC must guarantee a certain amount of benefits for participants of terminating plans that are underfunded. Under PBGC Reg. §4022.3, a benefit is only guaranteed if the participant satisfies the conditions for entitlement to the benefit as of the plan's termination date. USERRA provides that an individual who leaves a job to serve in the uniformed services is generally entitled to reemployment by the previous employer and, upon reemployment, to receive credit for benefits, including employee pension plan benefits, that would have accrued but for the employee's absence due to the military service.
The PBGC is proposing to amend its regulations to provide that a participant would be deemed to have satisfied the reemployment condition for entitlement to benefits as of the plan's termination date, for purposes of the PBGC's guarantee, even if the reemployment occurred after the plan's termination date. For instance, if a participant had 14 years of pension service at the time he or she entered military service, and had spent one year in the military as of the plan's termination date, the participant would be considered to have 15 years of service, for guarantee purposes, so long as he or she returns to his or her former employment within the limits set by USERRA.
On its website, the PBGC stated that it will immediately take the proposed rule provisions into account in paying estimated benefits to participants who enter pay status and in making new benefit determinations, dependent on the PBGC having the necessary information. Once the final regulations are effective (30 days after publication in the Federal Register), the PBGC will begin adjusting the final benefit determinations of affected participants and make back payments with interest.
Termination occurring during bankruptcy of plan sponsor
When a plan termination occurs during the bankruptcy of the plan sponsor, the PBGC treats the bankruptcy filing date as the plan's termination date for certain purposes. The proposed regulations include a provision that applies this concept to USERRA benefits. Thus, if a participant is performing military service as of the bankruptcy filing date, any benefit relating to the period of military service that is accrued and vested through the bankruptcy filing date would be considered nonforfeitable if the participant becomes reemployed pursuant to USERRA after the bankruptcy filing date.
The PBGC intends to provide guidance on how individuals can establish, for purposes of their Title IV benefits, their entitlement to benefits under USERRA. Persons with questions about these benefits are invited to contact the PBGC's Benefits Administration and Payment Department.
Proposed regs have narrow application
In the preamble to the proposed regulations, the PBGC emphasized that changes made by the proposed rules would have a "very narrow" application. They would apply "only to the unique circumstances presented by federal statutes affording special protection to the men and women serving the nation in the uniformed services."
Comments due by September 28
Comments must be received on or before September 28, 2009 and may be submitted by any of the following methods: by using the Federal eRulemaking Portal at http://www.regulations.gov; by email at reg.comments@pbgc.gov; by fax at 202-326-4224; or by mail or hand delivery at Legislative and Regulatory Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026. All submissions must include the Regulatory Information Number for this rulemaking (RIN 1212-AB19).
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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