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PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS
The version below is effective for terminations for which the first notice of intent
to terminate was issued on or after January 1, 1998.
Click here for prior version of termination regulation.
|
Click here
for the November 7, 1997, final rule amending prior version of termination
regulation. |
Certain provisions of the current termination regulation that provide increased
flexibility during the termination process apply to pending terminations initiated
before January 1, 1998.
Click here for details.
Subpart A--General Provisions
Sec.
4041.1 Purpose and scope.
4041.2 Definitions.
4041.3 Computation of time; filing and issuance rules.
4041.4 Disaster relief.
4041.5 Record retention and availability.
4041.6 Effect of failure to provide required information.
4041.7 Challenges to plan termination under collective bargaining
agreement.
4041.8 Post-termination amendments.
Subpart B--Standard Termination Process
4041.21 Requirements for a standard termination.
4041.22 Administration of plan during pendency of termination
process.
4041.23 Notice of intent to terminate.
4041.24 Notices of plan benefits.
4041.25 Standard termination notice.
4041.26 PBGC review of standard termination notice.
4041.27 Notice of annuity information.
4041.28 Closeout of plan.
4041.29 Post-distribution certification.
4041.30 Requests for deadline extensions.
4041.31 Notice of noncompliance.
Subpart C--Distress Termination Process
4041.41 Requirements for a distress termination.
4041.42 Administration of plan during termination process.
4041.43 Notice of intent to terminate.
4041.44 PBGC review of notice of intent to terminate.
4041.45 Distress termination notice.
4041.46 PBGC determination of compliance with requirements for
distress termination.
4041.47 PBGC determination of plan sufficiency/insufficiency.
4041.48 Sufficient plans; notice requirements.
4041.49 Verification of plan sufficiency prior to closeout.
4041.50 Closeout of plan.
Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.
Subpart A--General Provisions
Sec. 4041.1 Purpose and scope.
This part sets forth the rules and procedures for terminating a
single-employer plan in a standard or distress termination under
section 4041 of ERISA, the exclusive means of voluntarily terminating a
plan.
Sec. 4041.2 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
affected party, annuity, benefit liabilities, Code, contributing
sponsor, controlled group, distress termination, distribution date,
EIN, employer, ERISA, guaranteed benefit, insurer, irrevocable
commitment, IRS, mandatory employee contributions, normal retirement
age, notice of intent to terminate, PBGC, person, plan administrator,
plan year, PN, single-employer plan, standard termination, termination
date, and title IV benefit. In addition, for purposes of this part:
Distress termination notice means the notice filed with the PBGC
pursuant to Sec. 4041.45.
Distribution notice means the notice issued to the plan
administrator by the PBGC pursuant to Sec. 4041.47(c) upon the PBGC's
determination that the plan has sufficient assets to pay at least
guaranteed benefits.
Majority owner means, with respect to a contributing sponsor of a
single-employer plan, an individual who owns, directly or indirectly,
50 percent or more (taking into account the constructive ownership
rules of section 414(b) and (c) of the Code) of--
(1) An unincorporated trade or business;
(2) The capital interest or the profits interest in a partnership;
or
(3) Either the voting stock of a corporation or the value of all of
the stock of a corporation.
Notice of noncompliance means a notice issued to a plan
administrator by the PBGC pursuant to Sec. 4041.31 advising the plan
administrator that the requirements for a standard termination have not
been satisfied and that the plan is an ongoing plan.
Notice of plan benefits means the notice to each participant and
beneficiary required by Sec. 4041.24.
Participant means--
(1) Any individual who is currently in employment covered by the
plan and who is earning or retaining credited service under the plan,
including any individual who is considered covered under the plan for
purposes of meeting the minimum participation requirements but who,
because of offset or similar provisions, does not have any accrued
benefits;
(2) Any nonvested individual who is not currently in employment
covered by the plan but who is earning or retaining credited service
under the plan; and
(3) Any individual who is retired or separated from employment
covered by the plan and who is receiving benefits under the plan or is
entitled to begin receiving benefits under the plan in the future,
excluding any such individual to whom an insurer has made an
irrevocable commitment to pay all the
benefits to which the individual is entitled under the plan.
Plan benefits means benefit liabilities determined as of the
termination date (taking into account the rules in Sec. 4041.8(a)).
Proposed termination date means the date specified as such by the
plan administrator in the notice of intent to terminate or, if later,
in the standard or distress termination notice.
Residual assets means the plan assets remaining after all plan
benefits and other liabilities (e.g., PBGC premiums) of the plan have
been satisfied (taking into account the rules in Sec. 4041.8(b)).
Standard termination notice means the notice filed with the PBGC
pursuant to Sec. 4041.25.
State guaranty association means an association of insurers created
by a State, the District of Columbia, or the Commonwealth of Puerto
Rico to pay benefits and to continue coverage, within statutory limits,
under life and health insurance policies and annuity contracts when an
insurer fails.
Sec. 4041.3 Computation of time; filing and issuance rules.
(a) Computation of time. In computing any period of time under this
part, the day of the event from which the period begins is not counted.
The last day of the period is counted. If the last day falls on a
Saturday, Sunday, or Federal holiday, the period runs until the end of
the next regular business day. A proposed termination date may be any
day, including a Saturday, Sunday, or Federal holiday.
(b) Filing with the PBGC. Any document to be filed under this part
must be filed with the PBGC in the manner described in the applicable
forms and instructions package. The document is deemed filed on the
date described in paragraph (b)(1), (b)(2), (b)(3) or (b)(4) of this
section, as applicable, or such earlier date as is provided in the
applicable forms and instructions package. For purposes of this
paragraph (b), information received by the PBGC on a weekend or Federal
holiday or after 5:00 p.m. on a weekday is considered filed on the next
regular business day.
(1) Filing by mail. If the document is mailed with the United
States Postal Service by first class mail postage prepaid to the PBGC,
the document is filed on--
(i) The date of the legible United States Postal Service postmark;
(ii) If there is no legible United States Postal Service postmark,
the date of the legible postmark made by a private postage meter,
provided that the document is received by the PBGC not later than the
date when a document sent by first class mail would ordinarily be
received if it were postmarked at the same point of origin by the
United States Postal Service on the last date prescribed for filing the
document; or
(iii) In any other case, the date that the plan administrator can
establish the document was deposited in the mail before the last
collection of mail from the place of deposit.
(2) Filing by commercial delivery service. If the document is
deposited with a commercial delivery service, the document is filed on
the earlier of--
(i) The date that would be considered the postmark date under
section 7502(f) of the Code; or
(ii) The date it is deposited for delivery with the commercial
delivery service, provided it is received by the PBGC within two
regular business days.
(3) Electronic filings. If the document is filed electronically,
the document is filed on the date on which it is transmitted
electronically to the PBGC, provided that, if there is reason to
believe the document was not delivered, the plan administrator promptly
refiles the document in accordance with the applicable forms and
instructions package.
(4) Other filings. If a filing date is not established under
paragraphs (b)(1) through (b)(3) of this section, the document is filed on the date on which it is received by the PBGC.
(c) Issuance to other parties. The following rules apply to
affected parties (other than the PBGC). For purposes of this paragraph
(c), a person entitled to notice under the spin-off/termination
transaction rules of Secs. 4041.23(c) or 4041.24(f) is treated as an
affected party.
(1) Permissible methods of issuance. The plan administrator must
issue any notice to an affected party individually--
(i) By hand delivery;
(ii) By first-class mail or commercial delivery service to the
affected party's last known address; or
(iii) By electronic means reasonably calculated to ensure actual
receipt by the affected party.
(2) Date of issuance. Any notice is deemed issued to an affected
party on the date on which it is--
(i) Handed to the affected party;
(ii) Deposited in the mail;
(iii) Deposited with a commercial delivery service; or
(iv) Transmitted electronically to the affected party, provided
that, if there is reason to believe the notice was not delivered, the
plan administrator promptly reissues the notice in accordance with the
applicable forms and instructions package.
(3) Omission of affected parties. The failure to issue any notice
to an affected party (other than any employee organization) within the
specified time period will not cause the notice to be untimely if--
(i) After-discovered affected parties. The plan administrator could
not reasonably have been expected to know of the affected party, and
issues the notice promptly after discovering the affected party;
(ii) De minimis administrative errors. The failure was due to
administrative error involving only a de minimis percentage of affected
parties, and the plan administrator issues the notice to each such
affected party promptly after discovering the error; or
(iii) Unlocated participants. The plan administrator could not
locate the affected party after making reasonable efforts, and issues
the notice promptly in the event the affected party is located.
(4) Deceased participants. In the case of a deceased participant,
the plan administrator need not issue a notice to the participant's
estate if the estate is not entitled to a distribution.
(5) Form of notices to affected parties. All notices to affected
parties must be readable and written in a manner calculated to be
understood by the average plan participant. The plan administrator may
provide additional information with a notice only if the information is
not misleading.
(6) Foreign languages. The plan administrator of a plan that (as of
the proposed termination date) covers the numbers or percentages in
Sec. 2520.104b-10(e) of this title of participants literate only in the
same non-English language must, for any notice to affected parties--
(i) Include a prominent legend in that common non-English language
advising them how to obtain assistance in understanding the notice; or
(ii) Provide the notice in that common non-English language to
those affected parties literate only in that language.
Sec. 4041.4 Disaster relief.
When the President of the United States declares that, under the
Disaster Relief Act (42 U.S.C. 5121, 5122(2), 5141(b)), a major
disaster exists, the Executive Director of the PBGC (or his or her
designee) may, by issuing one or more notices of disaster relief,
extend by up to 180 days any due date under this part.
Sec. 4041.5 Record retention and availability.
(a) Retention requirement. (1) Persons subject to requirement. Each
contributing sponsor and the plan administrator of a plan terminating
in a standard termination, or in a distress termination that closes out in accordance
with Sec. 4041.50, must maintain all records necessary to demonstrate compliance
with section 4041 of ERISA and this part. A record may be maintained in any format
that reasonably ensures the integrity of the original information and
that allows the record to be converted to hardcopy if necessary under
paragraph (b) of this section. If a contributing sponsor or the plan
administrator maintains information in accordance with this paragraph
(a)(1), the other(s) need not maintain that information.
(2) Retention period. The records described in paragraph (a)(1) of
this section must be preserved for six years after the date when the
post-distribution certification under this part is filed with the PBGC.
(b) Availability of records. The contributing sponsor or plan
administrator must make all records needed to determine compliance with
section 4041 of ERISA and this part available to the PBGC upon request
for inspection and photocopying, and must submit such records to the
PBGC within 30 days after the date of a written request by the PBGC or
by a later date specified therein. Unless the PBGC agrees to a
different format, records must be submitted in hardcopy.
Sec. 4041.6 Effect of failure to provide required information.
If a plan administrator fails to provide any information required
under this part within the specified time limit, the PBGC may assess a
penalty under section 4071 of ERISA of up to $1,100 a day for each day
that the failure continues. The PBGC may also pursue any other
equitable or legal remedies available to it under the law, including,
if appropriate, the issuance of a notice of noncompliance under
Sec. 4041.31.
Sec. 4041.7 Challenges to plan termination under collective bargaining
agreement.
(a) Suspension upon formal challenge to termination (1) Notice of
formal challenge. (i) If the PBGC is advised, before its review period
under Sec. 4041.26(a) ends, or before issuance of a notice of inability
to determine sufficiency or a distribution notice under Sec. 4041.47(b)
or (c), that a formal challenge to the termination has been initiated
as described in paragraph (c) of this section, the PBGC will suspend
the termination proceeding and so advise the plan administrator in
writing.
(ii) If the PBGC is advised of a challenge described in paragraph
(a)(1)(i) of this section after the time specified therein, the PBGC
may suspend the termination proceeding and will so advise the plan
administrator in writing.
(2) Standard terminations. During any period of suspension in a
standard termination --
(i) The running of all time periods specified in ERISA or this part
relevant to the termination will be suspended; and
(ii) The plan administrator must comply with the prohibitions in
Sec. 4041.22.
(3) Distress terminations. During any period of suspension in a
distress termination --
(i) The issuance by the PBGC of any notice of inability to
determine sufficiency or distribution notice will be stayed or, if any
such notice was previously issued, its effectiveness will be stayed;
(ii) The plan administrator must comply with the prohibitions in
Sec. 4041.42; and
(iii) The plan administrator must file a distress termination
notice with the PBGC pursuant to Sec. 4041.45.
(b) Existing collective bargaining agreement. For purposes of this
section, an existing collective bargaining agreement means a collective
bargaining agreement that has not been made inoperative by a judicial
ruling and, by its terms, either has not expired or is extended beyond
its stated expiration date because neither of the collective bargaining
parties took the required action to terminate it. When a collective
bargaining agreement no longer meets these conditions, it ceases to be
an ``existing collective bargaining agreement,'' whether or not any or
all of its terms may continue to apply by operation of law.
(c) Formal challenge to termination. A formal challenge to a plan
termination asserting that the termination would violate the terms and
conditions of an existing collective bargaining agreement is initiated
when --
(1) Any procedure specified in the collective bargaining agreement
for resolving disputes under the agreement commences; or
(2) Any action before an arbitrator, administrative agency or
board, or court under applicable labor-management relations law
commences.
(d) Resolution of challenge. Immediately upon the final resolution
of the challenge, the plan administrator must notify the PBGC in
writing of the outcome of the challenge, provide the PBGC with a copy
of any award or order, and, if the validity of the proposed termination
has been upheld, advise the PBGC whether the proposed termination is to
proceed. The final resolution ends the suspension period under
paragraph (a) of this section.
(1) Challenge sustained. If the final resolution is that the
proposed termination violates an existing collective bargaining
agreement, the PBGC will dismiss the termination proceeding, all
actions taken to effect the plan termination will be null and void, and
the plan will be an ongoing plan. In this event, in a distress
termination, Sec. 4041.42(d) will apply as of the date of the dismissal
by the PBGC.
(2) Termination sustained. If the final resolution is that the
proposed termination does not violate an existing collective bargaining
agreement and the plan administrator has notified the PBGC that the
termination is to proceed, the PBGC will reactivate the termination
proceeding by sending a written notice thereof to the plan
administrator, and --
(i) The termination proceeding will continue from the point where
it was suspended;
(ii) All actions taken to effect the termination before the
suspension will be effective;
(iii) Any time periods that were suspended will resume running from
the date of the PBGC's notice of the reactivation of the proceeding;
(iv) Any time periods that had fewer than 15 days remaining will be
extended to the 15th day after the date of the PBGC's notice, or such
later date as the PBGC may specify; and
(v) In a distress termination, the PBGC will proceed to issue a
notice of inability to determine sufficiency or a distribution notice
(or reactivate any such notice stayed under paragraph (a)(3) of this
section), either with or without first requesting updated information
from the plan administrator pursuant to Sec. 4041.45(c).
(e) Final resolution of challenge. A formal challenge to a proposed
termination is finally resolved when--
(1) The parties involved in the challenge enter into a settlement
that resolves the challenge;
(2) A final award, administrative decision, or court order is
issued that is not subject to review or appeal; or
(3) A final award, administrative decision, or court order is
issued that is not appealed, or review or enforcement of which is not
sought, within the time for filing an appeal or requesting review or
enforcement.
(f) Involuntary termination by the PBGC. Notwithstanding any other
provision of this section, the PBGC retains the authority in any case
to initiate a plan termination in accordance with the provisions of
section 4042 of ERISA.
Sec. 4041.8 Post-termination amendments.
(a) Plan benefits. A participant's or beneficiary's plan benefits
are determined under the plan's provisions in effect on the plan's
termination date. Notwithstanding the preceding sentence, an amendment
that is adopted after the plan's termination date is taken into account
with respect to a participant's or beneficiary's plan benefits to the
extent the amendment--
(1) Does not decrease the value of the participant's or
beneficiary's plan benefits under the plan's provisions in effect on
the termination date; and
(2) Does not eliminate or restrict any form of benefit available to
the participant or beneficiary on the plan's termination date.
(b) Residual assets. In a plan in which participants or
beneficiaries will receive some or all of the plan's residual assets
based on an allocation formula, the amount of the plan's residual
assets and each participant's or beneficiary's share thereof is
determined under the plan's provisions in effect on the plan's
termination date. Notwithstanding the preceding sentence, an amendment
adopted after the plan's termination date is taken into account with
respect to a participant's or beneficiary's allocation of residual
assets to the extent the amendment does not decrease the value of the
participant's or beneficiary's allocation of residual assets under the
plan's provisions in effect on the termination date.
(c) Permitted decreases. For purposes of this section, an amendment
shall not be treated as decreasing the value of a participant's or
beneficiary's plan benefits or allocation of residual assets to the
extent--
(1) The decrease is necessary to meet a qualification requirement
under section 401 of the Code;
(2) The participant's or beneficiary's allocation of residual
assets is paid in the form of an increase in the participant's or
beneficiary's plan benefits; or
(3) The decrease is offset by assets that would otherwise revert to
the contributing sponsor or by additional contributions.
(d) Distress terminations. In the case of a distress termination, a
participant's or beneficiary's benefit liabilities are determined as of
the termination date in the same manner as plan benefits under this
section.
Subpart B--Standard Termination Process
Sec. 4041.21 Requirements for a standard termination.
(a) Notice and distribution requirements. A standard termination is
valid if the plan administrator--
(1) Issues a notice of intent to terminate to all affected parties
(other than the PBGC) in accordance with Sec. 4041.23;
(2) Issues notices of plan benefits to all affected parties
entitled to plan benefits in accordance with Sec. 4041.24;
(3) Files a standard termination notice with the PBGC in accordance
with Sec. 4041.25;
(4) Distributes the plan's assets in satisfaction of plan benefits
in accordance with Sec. 4041.28(a) and (c); and
(5) In the case of a spin-off/termination transaction (as defined
in Sec. 4041.23(c)), issues the notices required by Sec. 4041.23(c),
Sec. 4041.24(f), and Sec. 4041.27(a)(2) in accordance with such
sections.
(b) Plan sufficiency. (1) Commitment to make plan sufficient. A
contributing sponsor of a plan or any other member of the plan's
controlled group may make a commitment to contribute any additional
sums necessary to enable the plan to satisfy plan benefits in
accordance with Sec. 4041.28. A commitment will be valid only if--
(i) It is made to the plan;
(ii) It is in writing, signed by the contributing sponsor or
controlled group member(s); and
(iii) In any case in which the person making the commitment is the
subject of a bankruptcy liquidation or reorganization proceeding, as
described in Sec. 4041.41(c)(1) or (c)(2), the commitment is approved
by the court before which the liquidation or reorganization proceeding
is pending or a person not in bankruptcy unconditionally guarantees to
meet the commitment at or before the time distribution of assets is
required.
(2) Alternative treatment of majority owner's benefit. A majority
owner may elect to forgo receipt of his or her plan benefits to the
extent necessary to enable the plan to satisfy all other plan benefits
in accordance with Sec. 4041.28. Any such alternative treatment of the
majority owner's plan benefits is valid only if--
(i) The majority owner's election is in writing;
(ii) In any case in which the plan would require the spouse of the
majority owner to consent to distribution of the majority owner's
receipt of his or her plan benefits in a form other than a qualified
joint and survivor annuity, the spouse consents in writing to the
election;
(iii) The majority owner makes the election and the spouse consents
during the time period beginning with the date of issuance of the first
notice of intent to terminate and ending with the date of the last
distribution; and
(iv) Neither the majority owner's election nor the spouse's consent
is inconsistent with a qualified domestic relations order (as defined
in section 206(d)(3) of ERISA).
Sec. 4041.22 Administration of plan during pendency of termination
process.
(a) In general. A plan administrator may distribute plan assets in
connection with the termination of the plan only in accordance with the
provisions of this part. From the first day the plan administrator
issues a notice of intent to terminate to the last day of the PBGC's
review period under Sec. 4041.26(a), the plan administrator must
continue to carry out the normal operations of the plan. During that
time period, except as provided in paragraph (b) of this section, the
plan administrator may not--
(1) Purchase irrevocable commitments to provide any plan benefits;
or
(2) Pay benefits attributable to employer contributions, other than
death benefits, in any form other than an annuity.
(b) Exception. The plan administrator may pay benefits attributable
to employer contributions either through the purchase of irrevocable
commitments or in a form other than an annuity if--
(1) The participant has separated from active employment or is
otherwise permitted under the Code to receive the distribution;
(2) The distribution is consistent with prior plan practice; and
(3) The distribution is not reasonably expected to jeopardize the
plan's sufficiency for plan benefits.
Sec. 4041.23 Notice of intent to terminate.
(a) Notice requirement. (1) In general. At least 60 days and no
more than 90 days before the proposed termination date, the plan
administrator must issue a notice of intent to terminate to each person
(other than the PBGC) that is an affected party as of the proposed
termination date. In the case of a beneficiary of a deceased
participant or an alternate payee, the plan administrator must issue a
notice of intent to terminate promptly to any person that becomes an
affected party after the proposed termination date and on or before the
distribution date.
(2) Early issuance of NOIT. The PBGC may consider a notice of
intent to terminate to be timely under paragraph (a)(1) of this section
if the notice was early by a de minimis number of days and the PBGC
finds that the early issuance was the result of administrative error.
(b) Contents of notice. The PBGC's standard termination forms and
instructions package includes a model notice of intent to terminate.
The notice of intent to terminate must include --
(1) Identifying information. The name and PN of the plan, the name
and EIN of each contributing sponsor, and the name, address, and
telephone number of the person who may be contacted by an affected
party with questions concerning the plan's termination;
(2) Intent to terminate plan. A statement that the plan
administrator intends to terminate the plan in a standard termination
as of a specified proposed termination date and will notify the
affected party if the proposed termination date is changed to a later
date or if the termination does not occur;
(3) Sufficiency requirement. A statement that, in order to
terminate in a standard termination, plan assets must be sufficient to
provide all plan benefits under the plan;
(4) Cessation of accruals. A statement (as applicable) that--
(i) Benefit accruals will cease as of the termination date, but
will continue if the plan does not terminate;
(ii) A plan amendment has been adopted under which benefit accruals
will cease, in accordance with section 204(h) of ERISA, as of the
proposed termination date or a specified date before the proposed
termination date, whether or not the plan is terminated; or
(iii) Benefit accruals ceased, in accordance with section 204(h) of
ERISA, as of a specified date before the notice of intent to terminate
was issued;
(5) Annuity information. If required under Sec. 4041.27, the
annuity information described therein;
(6) Benefit information. A statement that each affected party
entitled to plan benefits will receive a written notification regarding
his or her plan benefits;
(7) Summary plan description. A statement as to how an affected
party entitled to receive the latest updated summary plan description
under section 104(b) of ERISA can obtain it.
(8) Continuation of monthly benefits. For persons who are, as of
the proposed termination date, in pay status, a statement (as
applicable) --
(i) That their monthly (or other periodic) benefit amounts will not
be affected by the plan's termination; or
(ii) Explaining how their monthly (or other periodic) benefit
amounts will be affected under plan provisions); and
(9) Extinguishment of guarantee. A statement that after plan assets
have been distributed in full satisfaction of all plan benefits under
the plan with respect to a participant or a beneficiary of a deceased
participant, either by the purchase of irrevocable commitments (annuity
contracts) or by an alternative form of distribution provided for under
the plan, the PBGC no longer guarantees that participant's or
beneficiary's plan benefits.
(c) Spin-off/termination transactions. In the case of a transaction
in which a single defined benefit plan is split into two or more plans
and there is a reversion of residual assets to an employer upon the
termination of one or more but fewer than all of the resulting plans (a
``spin-off/termination transaction''), the plan administrator must,
within the time period specified in paragraph (a) of this section,
provide a notice describing the transaction to all participants,
beneficiaries of deceased participants, and alternate payees in the
original plan who are, as of the proposed termination date, covered by
an ongoing plan.
Sec. 4041.24 Notices of plan benefits.
(a) Notice requirement. The plan administrator must, no later than
the time the plan administrator files the standard termination notice
with the PBGC, issue a notice of plan benefits to each person (other
than the PBGC and any employee organization) who is an affected party
as of the proposed termination date. In the case of a beneficiary of a
deceased participant or an alternate payee, the plan administrator must
issue a notice of plan benefits promptly to any person that becomes an
affected party after the proposed termination date and on or before the
distribution date.
(b) Contents of notice. The plan administrator must include in each
notice of plan benefits--
(1) The name and PN of the plan, the name and EIN of each
contributing sponsor, and the name, address, and telephone number of an
individual who may be contacted to answer questions concerning plan
benefits;
(2) The proposed termination date given in the notice of intent to
terminate and any extended proposed termination date under
Sec. 4041.25(b);
(3) If the amount of plan benefits set forth in the notice is an
estimate, a statement that the amount is an estimate and that plan
benefits paid may be greater than or less than the estimate;
(4) Except in the case of an affected party in pay status for more
than one year as of the proposed termination date--
(i) The personal data (if available) needed to calculate the
affected party's plan benefits, along with a statement requesting that
the affected party promptly correct any information he or she believes
to be incorrect; and
(ii) If any of the personal data needed to calculate the affected
party's plan benefits is not available, the best available data, along
with a statement informing the affected party of the data not available
and affording him or her the opportunity to provide it; and
(5) The information in paragraphs (c) through (e) of this section,
as applicable.
(c) Benefits of persons in pay status. For an affected party in pay
status as of the proposed termination date, the plan administrator must
include in the notice of plan benefits --
(1) The amount and form of the participant's or beneficiary's plan
benefits payable as of the proposed termination date;
(2) The amount and form of plan benefits, if any, payable to a
beneficiary upon the participant's death and the name of the
beneficiary; and
(3) The amount and date of any increase or decrease in the benefit
scheduled to occur (or that has already occurred) after the proposed
termination date and an explanation of the increase or decrease,
including, where applicable, a reference to the pertinent plan
provision.
(d) Benefits of persons with valid elections or de minimis
benefits. For an affected party who, as of the proposed termination
date, has validly elected a form and starting date with respect to plan
benefits not yet in pay status, or with respect to whom the plan
administrator has determined that a nonconsensual lump sum distribution
will be made, the plan administrator must include in the notice of plan
benefits--
(1) The amount and form of the person's plan benefits payable as of
the projected benefit starting date, and what that date is;
(2) The information in paragraphs (c)(2) and (c)(3) of this
section;
(3) If the plan benefits will be paid in any form other than a lump
sum and the age at which, or form in which, the plan benefits will be
paid differs from the normal retirement benefit--
(i) The age or form stated in the plan; and
(ii) The age or form adjustment factors; and
(4) If the plan benefits will be paid in a lump sum --
(i) An explanation of when a lump sum may be paid without the
consent of the participant or the participant's spouse;
(ii) A description of the mortality table used to convert to the
lump sum benefit (e.g., the mortality table published by the IRS in
Revenue Ruling 95-6, 1995-1 C.B. 80) and a reference to the pertinent
plan provisions;
(iii) A description of the interest rate to be used to convert to
the lump sum benefit (e.g., the 30-year Treasury rate for the third
month before the month in which the lump sum is distributed), a
reference to the pertinent plan provision, and (if known) the
applicable interest rate;
(iv) An explanation of how interest rates are used to calculate
lump sums;
(v) A statement that the use of a higher interest rate results in a
smaller lump sum amount; and
(vi) A statement that the applicable interest rate may change
before the distribution date.
(e) Benefits of all other persons not in pay status. For any other
affected party not described in paragraph (c) or (d) of this section
(or described therein only with respect to a portion of the affected
party's plan benefits), the plan administrator must include in the
notice of plan benefits--
(1) The amount and form of the person's plan benefits payable at
normal retirement age in any one form permitted under the plan;
(2) Any alternative benefit forms, including those payable to a
beneficiary upon the person's death either before or after benefits
commence;
(3) If the person is or may become entitled to a benefit that would
be payable before normal retirement age, the amount and form of benefit
that would be payable at the earliest benefit commencement date (or, if
more than one such form is payable at the earliest benefit commencement
date, any one of those forms) and whether the benefit commencing on
such date would be subject to future reduction; and
(4) If the plan benefits may be paid in a lump sum, the information
in paragraph (d)(4) of this section.
(f) Spin-off/termination transactions. In the case of a spin-off/
termination transaction (as defined in Sec. 4041.23(c)), the plan
administrator must, no later than the time the plan administrator files
the standard termination notice for any terminating plan, provide all
participants, beneficiaries of deceased participants, and alternate
payees in the original plan who are (as of the proposed termination
date) covered by an ongoing plan with a notice of plan benefits
containing the information in paragraphs (b) through (e) of this
section.
Sec. 4041.25 Standard termination notice.
(a) Notice requirement. The plan administrator must file with the
PBGC a standard termination notice, consisting of the PBGC Form 500,
completed in accordance with the instructions thereto, on or before the
180th day after the proposed termination date.
(b) Change of proposed termination date. The plan administrator
may, in the standard termination notice, select a proposed termination
date that is later than the date specified in the notice of intent to
terminate, provided it is not later than 90 days after the earliest
date on which a notice of intent to terminate was issued to any
affected party.
(c) Request for IRS determination letter. To qualify for the
distribution deadline in Sec. 4041.28(a)(1)(ii), the plan administrator
must submit to the IRS a valid request for a determination of the
plan's qualification status upon termination (``determination letter'')
by the time the standard termination notice is filed.
Sec. 4041.26 PBGC review of standard termination notice.
(a) Review period. (1) In general. The PBGC will notify the plan
administrator in writing of the date on which it received a complete
standard termination notice at the address provided in the PBGC's
standard termination forms and instructions package. If the PBGC does
not issue a notice of noncompliance under Sec. 4041.31 during its 60-
day review period following such date, the plan administrator must
proceed to close out the plan in accordance with Sec. 4041.28.
(2) Extension of review period. The PBGC and the plan administrator
may, before the expiration of the PBGC review period in paragraph
(a)(1) of this section, agree in writing to extend that period.
(b) If standard termination notice is incomplete. (1) For purposes
of timely filing. If the standard termination notice is incomplete, the
PBGC may, based on the nature and extent of the omission, provide the
plan administrator an opportunity to complete the notice. In such a
case, the standard termination notice will be deemed to have been
complete as of the date when originally filed for purposes of
Sec. 4041.25(a), provided the plan administrator provides the missing
information by the later of--
(i) The 180th day after the proposed termination date; or
(ii) The 30th day after the date of the PBGC notice that the filing
was incomplete.
(2) For purposes of PBGC review period. If the standard termination
notice is completed under paragraph (b)(1) of this section, the PBGC
will determine whether the notice will be deemed to have been complete
as of the date when originally filed for purposes of determining when
the PBGC's review period begins under Sec. 4041.26(a)(1).
(c) Additional information. (1) Deadline for providing additional
information. The PBGC may in any case require the submission of
additional information relevant to the termination proceeding. Any such
additional information becomes part of the standard termination notice
and must be submitted within 30 days after the date of a written request by the PBGC, or within a different time period specified
therein. The PBGC may in its discretion shorten the time period where
it determines that the interests of the PBGC or participants may be
prejudiced by a delay in receipt of the information.
(2) Effect on termination proceeding. A request for additional
information will suspend the running of the PBGC's 60-day review
period. The review period will begin running again on the day the
required information is received and continue for the greater of--
(i) The number of days remaining in the review period; or
(ii) Five regular business days.
Sec. 4041.27 Notice of annuity information.
(a) Notice requirement. (1) In general. The plan administrator must
provide notices in accordance with this section to each affected party
entitled to plan benefits other than an affected party whose plan
benefits will be distributed in the form of a nonconsensual lump sum.
(2) Spin-off/termination transactions. The plan administrator must
provide the information in paragraph (d) of this section to a person
entitled to notice under Secs. 4041.23(c) or 4041.24(f), at the same
time and in the same manner as required for an affected party.
(b) Content of notice. The plan administrator must include, as part
of the notice of intent to terminate--
(1) Identity of insurers. The name and address of the insurer or
insurers from whom (if known), or (if not) from among whom, the plan
administrator intends to purchase irrevocable commitments (annuity
contracts);
(2) Change in identity of insurers. A statement that if the plan
administrator later decides to select a different insurer, affected parties
will receive a supplemental notice no later than 45 days before the
distribution date; and
(3) State guaranty association coverage information. A statement
informing the affected party--
(i) That once the plan distributes a benefit in the form of an
annuity purchased from an insurance company, the insurance company
takes over the responsibility for paying that benefit;
(ii) That all states, the District of Columbia, and the
Commonwealth of Puerto Rico have established ``guaranty associations''
to protect policy holders in the event of an insurance company's
financial failure;
(iii) That a guaranty association is responsible for all, part, or
none of the annuity if the insurance company cannot pay;
(iv) That each guaranty association has dollar limits on the extent
of its guaranty coverage, along with a general description of the
applicable dollar coverage limits;
(v) That in most cases the policy holder is covered by the guaranty
association for the state where he or she lives at the time the
insurance company fails to pay; and
(vi) How to obtain the addresses and telephone numbers of guaranty
association offices from the PBGC (as described in the applicable forms
and instructions package).
(c) Where insurer(s) not known. (1) Extension of deadline for
notice. If the identity-of-insurer information in paragraph (b)(1) of
this section is not known at the time the plan administrator is
required to provide it to an affected party as part of a notice of
intent to terminate, the plan administrator must instead provide it in
a supplemental notice under paragraph (d) of this section.
(2) Alternative NOIT information. A plan administrator that
qualifies for the extension in paragraph (c)(1) of this section with
respect to a notice of intent to terminate must include therein (in
lieu of the information in paragraph (b) of this section) a statement
that--
(i) Irrevocable commitments (annuity contracts) may be purchased
from an insurer to provide some or all of the benefits under the plan;
(ii) The insurer or insurers have not yet been identified; and
(iii) Affected parties will be notified at a later date (but no
later than 45 days before the distribution date) of the name and
address of the insurer or insurers from whom (if known), or (if not)
from among whom, the plan administrator intends to purchase irrevocable
commitments (annuity contracts).
(d) Supplemental notice. The plan administrator must provide a
supplemental notice to an affected party in accordance with this
paragraph (d) if the plan administrator did not previously notify the
affected party of the identity of insurer(s) or, after having
previously notified the affected party of the identity of insurer(s),
decides to select a different insurer. A failure to provide a required
supplemental notice to an affected party will be deemed to be a failure
to comply with the notice of intent to terminate requirements.
(1) Deadline for supplemental notice. The deadline for issuing the
supplemental notice is 45 days before the affected party's distribution
date (or, in the case of an employee organization, 45 days before the
earliest distribution date for any affected party that it represents).
(2) Content of supplemental notice. The supplemental notice must
include--
(i) The identity-of-insurer information in paragraph (b)(1) of this
section;
(ii) The information regarding change of identity of insurer(s) in
paragraph (b)(2) of this section; and
(iii) Unless the state guaranty association coverage information in
paragraph (b)(3) of this section was previously provided to the
affected party, such information and the extinguishment-of-guarantee
information in Sec. 4041.23(b)(9).
Sec. 4041.28 Closeout of plan.
(a) Distribution deadline. (1) In general. Unless a notice of
noncompliance is issued under Sec. 4041.31(a), the plan administrator
must complete the distribution of plan assets in satisfaction of plan
benefits (through priority category 6 under section 4044 of ERISA and
part 4044 of this chapter) by the later of--
(i) 180 days after the expiration of the PBGC's 60-day (or
extended) review period under Sec. 4041.26(a); or
(ii) If the plan administrator meets the requirements of
Sec. 4041.25(c), 120 days after receipt of a favorable determination
from the IRS.
(2) Revocation of notice of noncompliance. If the PBGC revokes a
notice of noncompliance issued under Sec. 4041.31(a), the distribution
deadline is extended until the 180th day after the date of the
revocation.
(b) Assets insufficient to satisfy plan benefits. If, at the time
of any distribution, the plan administrator determines that plan assets
are not sufficient to satisfy all plan benefits (with assets determined
net of other liabilities, including PBGC premiums), the plan
administrator may not make any further distribution of assets to effect
the plan's termination and must promptly notify the PBGC.
(c) Method of distribution. (1) In general. The plan administrator
must, in accordance with all applicable requirements under the Code and
ERISA, distribute plan assets in satisfaction of all plan benefits by
purchase of an irrevocable commitment from an insurer or in another
permitted form.
(2) Lump sum calculations. In the absence of evidence establishing
that another date is the ``annuity starting date'' under the Code, the
distribution date is the ``annuity starting date'' for purposes of--
(i) Calculating the present value of plan benefits that may be
provided in a form other than by purchase of an irrevocable commitment
from an insurer (e.g., in selecting the interest rate(s) to be used to
value a lump sum distribution); and
(ii) Determining whether plan benefits will be paid in such other
form.
(3) Selection of insurer. In the case of plan benefits that will be
provided by purchase of an irrevocable commitment from an insurer, the
plan administrator must select the insurer in accordance with the
fiduciary standards of Title I of ERISA.
(4) Participating annuity contracts. In the case of a plan in which
any residual assets will be distributed to participants, a
participating annuity contract may be purchased to satisfy the
requirement that annuities be provided by the purchase of irrevocable
commitments only if the portion of the price of the contract that is
attributable to the participation feature--
(i) Is not taken into account in determining the amount of residual
assets; and
(ii) Is not paid from residual assets allocable to participants.
(5) Missing participants. The plan administrator must distribute
plan benefits to missing participants in accordance with part 4050.
(d) Provision of annuity contract. If plan benefits are provided
through the purchase of irrevocable commitments--
(1) Either the plan administrator or the insurer must, within 30
days after it is available, provide each participant and beneficiary
with a copy of the annuity contract or certificate showing the
insurer's name and address and clearly reflecting the insurer's
obligation to provide the participant's or beneficiary's plan benefits;
and
(2) If such a contract or certificate is not provided to the
participant or beneficiary by the date on which the post-distribution
certification is required to be filed in order to avoid the assessment of penalties
under Sec. 4041.29(b), the plan administrator must, no later than that
date, provide the participant and beneficiary with a notice that
includes--
(i) A statement that the obligation for providing the participant's
or beneficiary's plan benefits has transferred to the insurer;
(ii) The name and address of the insurer;
(iii) The name, address, and telephone number of the person
designated by the insurer to answer questions concerning the annuity;
and
(iv) A statement that the participant or beneficiary will receive
from the plan administrator or insurer a copy of the annuity contract
or a certificate showing the insurer's name and address and clearly
reflecting the insurer's obligation to provide the participant's or
beneficiary's plan benefits.
Sec. 4041.29 Post-distribution certification.
(a) Deadline. Within 30 days after the last distribution date for
any affected party, the plan administrator must file with the PBGC a
post-distribution certification consisting of the PBGC Form 501,
completed in accordance with the instructions thereto.
(b) Assessment of penalties. The PBGC will assess a penalty for
late filing of a post-distribution certification only to the extent the
certification is filed more than 90 days after the distribution
deadline (including extensions) under Sec. 4041.28(a).
Sec. 4041.30 Requests for deadline extensions.
(a) In general. The PBGC may in its discretion extend a deadline
for taking action under this subpart to a later date. The PBGC will
grant such an extension where it finds compelling reasons why it is not
administratively feasible for the plan administrator (or other persons
acting on behalf of the plan administrator) to take the action until
the later date and the delay is brief. The PBGC will consider--
(1) The length of the delay; and
(2) Whether ordinary business care and prudence in attempting to
meet the deadline is exercised.
(b) Time of extension request. Any request for an extension under
paragraph (a) of this section that is filed later than the 15th day
before the applicable deadline must include a justification for not
filing the request earlier.
(c) IRS determination letter requests. Any request for an extension
under paragraph (a) of this section of the deadline in Sec. 4041.25(c)
for submitting a determination letter request to the IRS (in order to
qualify for the distribution deadline in Sec. 4041.28(a)(1)(ii)) will
be deemed to be granted unless the PBGC notifies the plan administrator
otherwise within 60 days after receipt of the request (or, if later, by
the end of the PBGC's review period under Sec. 4041.26(a)). The PBGC
will notify the plan administrator in writing of the date on which it
receives such request.
(d) Statutory deadlines not extendable. The PBGC will not--
(1) Pre-distribution deadlines. (i) Extend the 60-day time limit
under Sec. 4041.23(a) for issuing the notice of intent to terminate; or
(ii) Waive the requirement in Sec. 4041.24(a) that the notice of
plan benefits be issued by the time the plan administrator files the
standard termination notice with the PBGC; or
(2) Post-distribution deadlines. Extend the deadline under
Sec. 4041.29(a) for filing the post-distribution certification.
However, the PBGC will assess a penalty for late filing of a post-
distribution certification only under the circumstances described in
Sec. 4041.29(b).
Sec. 4041.31 Notice of noncompliance.
(a) Failure to meet pre-distribution requirements. (1) In general.
Except as provided in paragraphs (a)(2) and (c) of this section, the
PBGC will issue a notice of noncompliance within the 60-day (or
extended) time period prescribed by Sec. 4041.26(a) whenever it
determines that--
(i) The plan administrator failed to issue the notice of intent to
terminate to all affected parties (other than the PBGC) in accordance
with Sec. 4041.23;
(ii) The plan administrator failed to issue notices of plan
benefits to all affected parties entitled to plan benefits in
accordance with Sec. 4041.24;
(iii) The plan administrator failed to file the standard
termination notice in accordance with Sec. 4041.25;
(iv) As of the distribution date proposed in the standard
termination notice, plan assets will not be sufficient to satisfy all
plan benefits under the plan; or
(v) In the case of a spin-off/termination transaction (as described
in Sec. 4041.23(c)), the plan administrator failed to issue any notice
required by Sec. 4041.23(c), Sec. 4041.24(f), or Sec. 4041.27(a)(2) in
accordance with such section.
(2) Interests of participants. The PBGC may decide not to issue a
notice of noncompliance based on a failure to meet a requirement under
paragraphs (a)(1)(i) through (a)(1)(iii) or (a)(1)(v) of this section
if it determines that issuance of the notice would be inconsistent with
the interests of participants and beneficiaries.
(3) Continuing authority. The PBGC may issue a notice of
noncompliance or suspend the termination proceeding based on a failure
to meet a requirement under paragraphs (a)(1)(i) through (a)(1)(v) of
this section after expiration of the 60-day (or extended) time period
prescribed by Sec. 4041.26(a) (including upon audit) if the PBGC
determines such action is necessary to carry out the purposes of Title
IV.
(b) Failure to meet distribution requirements. (1) In general. If
the PBGC determines, as part of an audit or otherwise, that the plan
administrator has not satisfied any distribution requirement of
Sec. 4041.28(a) or (c), it may issue a notice of noncompliance.
(2) Criteria. In deciding whether to issue a notice of
noncompliance under paragraph (b)(1) of this section, the PBGC may
consider--
(i) The nature and extent of the failure to satisfy a requirement
of Sec. 4041.28(a) or (c);
(ii) Any corrective action taken by the plan administrator; and
(iii) The interests of participants and beneficiaries.
(3) Late distributions. The PBGC will not issue a notice of
noncompliance for failure to distribute timely based on any facts
disclosed in the post-distribution certification if 60 or more days
have passed from the PBGC's receipt of the post-distribution
certification. The 60-day period may be extended by agreement between
the plan administrator and the PBGC.
(c) Correction of errors. The PBGC will not issue a notice of
noncompliance based solely on the plan administrator's inclusion of
erroneous information (or omission of correct information) in a notice
required to be provided to any person under this part if --
(1) The PBGC determines that the plan administrator acted in good
faith in connection with the error;
(2) The plan administrator corrects the error no later than --
(i) In the case of an error in the notice of plan benefits under
Sec. 4041.24, the latest date an election notice may be provided to the
person; or
(ii) In any other case, as soon as practicable after the plan
administrator knows or should know of the error, or by any later date
specified by the PBGC; and
(3) The PBGC determines that the delay in providing the correct
information will not substantially harm any person.
(d) Reconsideration. A plan administrator may request
reconsideration of a notice of noncompliance in accordance with
the rules prescribed in part 4003, subpart C.
(e) Consequences of notice of noncompliance. (1) Effect on
termination. A notice of noncompliance ends the standard termination proceeding, nullifies all actions taken to terminate the plan, and
renders the plan an ongoing plan. A notice of noncompliance is
effective upon the expiration of the period within which the plan
administrator may request reconsideration under paragraph (d) of this
section or, if reconsideration is requested, a decision by the PBGC
upholding the notice. However, once a notice is issued, the running of
all time periods specified in ERISA or this part relevant to the
termination will be suspended, and the plan administrator may take no
further action to terminate the plan (except by initiation of a new
termination) unless and until the notice is revoked. A plan
administrator that still desires to terminate a plan must initiate the
termination process again, starting with the issuance of a new notice
of intent to terminate.
(2) Effect on plan administration. If the PBGC issues a notice of
noncompliance, the prohibitions in Sec. 4041.22(a)(1) and (a)(2) will
cease to apply--
(i) Upon expiration of the period during which reconsideration may
be requested or, if earlier, at the time the plan administrator decides
not to request reconsideration; or
(ii) If reconsideration is requested, upon PBGC issuance of a
decision on reconsideration upholding the notice of noncompliance.
(3) Revocation of notice of noncompliance. If a notice of
noncompliance is revoked, unless the PBGC provides otherwise, any time
period suspended by the issuance of the notice will resume running from
the date of the revocation. In no case will the review period under
Sec. 4041.26(a) end less than 60 days from the date the PBGC received
the standard termination notice.
(f) If no notice of noncompliance is issued. A standard termination
is deemed to be valid if--
(1) The plan administrator files a standard termination notice
under Sec. 4041.25 and the PBGC does not issue a notice of
noncompliance pursuant to Sec. 4041.31(a); and
(2) The plan administrator files a post-distribution certification
under Sec. 4041.29 and the PBGC does not issue a notice of
noncompliance pursuant to Sec. 4041.31(b).
(g) Notice to affected parties. Upon a decision by the PBGC on
reconsideration affirming the issuance of a notice of noncompliance or,
if earlier, upon the plan administrator's decision not to request
reconsideration, the plan administrator must notify the affected
parties (other than the PBGC), and any persons who were provided notice
under Sec. 4041.23(c), in writing that the plan is not going to
terminate or, if applicable, that the termination was invalid but that
a new notice of intent to terminate is being issued.
Subpart C--Distress Termination Process
Sec. 4041.41 Requirements for a distress termination.
(a) Distress requirements. A plan may be terminated in a distress
termination only if--
(1) The plan administrator issues a notice of intent to terminate
to each affected party in accordance with Sec. 4041.43 at least 60 days
and (except with PBGC approval) not more than 90 days before the
proposed termination date;
(2) The plan administrator files a distress termination notice with
the PBGC in accordance with Sec. 4041.45 no later than 120 days after
the proposed termination date; and
(3) The PBGC determines that each contributing sponsor and each
member of its controlled group satisfy one of the distress criteria set
forth in paragraph (c) of this section.
(b) Effect of failure to satisfy requirements. (1) Except as
provided in paragraph (b)(2)(i) of this section, if the plan
administrator does not satisfy all of the requirements for a distress
termination, any action taken to effect the plan termination is null
and void, and the plan is an ongoing plan. A plan administrator who
still desires to terminate the plan must initiate the termination
process again, starting with the issuance of a new notice of intent to
terminate.
(2)(i) The PBGC may, upon its own motion, waive any requirement
with respect to notices to be filed with the PBGC under paragraph
(a)(1) or (a)(2) of this section if the PBGC believes that it will be
less costly or administratively burdensome to the PBGC to do so. The
PBGC will not entertain requests for waivers under this paragraph.
(ii) Notwithstanding any other provision of this part, the PBGC
retains the authority in any case to initiate a plan termination in
accordance with the provisions of section 4042 of ERISA.
(c) Distress criteria. In a distress termination, each contributing
sponsor and each member of its controlled group must satisfy at least
one (but not necessarily the same one) of the following criteria in
order for a distress termination to occur:
(1) Liquidation. This criterion is met if, as of the proposed
termination date--
(i) A person has filed or had filed against it a petition seeking
liquidation in a case under title 11, United States Code, or under a
similar federal law or law of a State or political subdivision of a
State, or a case described in paragraph (e)(2) of this section has been
converted to such a case; and
(ii) The case has not been dismissed.
(2) Reorganization. This criterion is met if--
(i) As of the proposed termination date, a person has filed or had
filed against it a petition seeking reorganization in a case under
title 11, United States Code, or under a similar law of a state or a
political subdivision of a state, or a case described in paragraph
(e)(1) of this section has been converted to such a case;
(ii) As of the proposed termination date, the case has not been
dismissed;
(iii) The person notifies the PBGC of any request to the bankruptcy
court (or other appropriate court in a case under such similar law of a
state or a political subdivision of a state) for approval of the plan
termination by concurrently filing with the PBGC a copy of the motion
requesting court approval, including any documents submitted in support
of the request; and
(iv) The bankruptcy court or other appropriate court determines
that, unless the plan is terminated, such person will be unable to pay
all its debts pursuant to a plan of reorganization and will be unable
to continue in business outside the reorganization process and approves
the plan termination.
(3) Inability to continue in business. This criterion is met if a
person demonstrates to the satisfaction of the PBGC that, unless a
distress termination occurs, the person will be unable to pay its debts
when due and to continue in business.
(4) Unreasonably burdensome pension costs. This criterion is met if
a person demonstrates to the satisfaction of the PBGC that the person's
costs of providing pension coverage have become unreasonably burdensome
solely as a result of declining covered employment under all single-
employer plans for which that person is a contributing sponsor.
(d) Non-duplicative efforts. (1) If a person requests approval of
the plan termination by a court, as described in paragraph (c)(2) of
this section, the PBGC--
(i) Will normally enter an appearance to request that the court
make specific findings as to whether the contributing sponsor or controlled
group member meets the distress test in paragraph (c)(3) of this section,
or state that it is unable to make such findings;
(ii) Will provide the court with any information it has that may be
germane to the court's ruling;
(iii) Will, if the person has requested, or later requests, a
determination by the PBGC under paragraph (c)(3) of this section, defer
action on the request until the court makes its determination; and
(iv) Will be bound by a final and non-appealable order of the
court.
(2) If a person requests a determination by the PBGC under
paragraph (c)(3) of this section, the PBGC determines that the distress
criterion is not met, and the person thereafter requests approval of
the plan termination by a court, as described in paragraph (c)(2) of
this section, the PBGC will advise the court of its determination and
make its administrative record available to the court.
(e) Non-recognition of certain actions. If the PBGC finds that a
person undertook any action or failed to act for the principal purpose
of satisfying any of the distress criteria contained in paragraph (c)
of this section, rather than for a reasonable business purpose, the
PBGC will disregard such act or failure to act in determining whether
the person has satisfied any of those criteria.
(f) Requests for deadline extensions. The PBGC may extend any
deadline under this subpart in accordance with the rules described in
section Sec. 4041.30, except that the PBGC will not extend--
(1) Pre-distribution deadlines. The 60-day time limit under
Sec. 4041.43(a) for issuing the notice of intent to terminate; or
(2) Post-distribution deadlines. The deadline under Sec. 4041.50
for filing the post-distribution certification.
Sec. 4041.42 Administration of plan during termination process.
(a) General rule. Except to the extent specifically prohibited by
this section, during the pendency of termination proceedings the plan
administrator must continue to carry out the normal operations of the
plan, such as putting participants into pay status, collecting
contributions due the plan, and investing plan assets.
(b) Prohibitions after issuing notice of intent to terminate. The
plan administrator may not make loans to plan participants beginning on
the first day he or she issues a notice of intent to terminate, and
from that date until a distribution is permitted pursuant to
Sec. 4041.50, the plan administrator may not--
(1) Distribute plan assets pursuant to, or (except as required by
this part) take any other actions to implement, the termination of the
plan;
(2) Pay benefits attributable to employer contributions, other than
death benefits, in any form other than as an annuity; or
(3) Purchase irrevocable commitments to provide benefits from an
insurer.
(c) Limitation on benefit payments on or after proposed termination
date. Beginning on the proposed termination date, the plan
administrator must reduce benefits to the level determined under part
4022, subpart D, of this chapter.
(d) Failure to qualify for distress termination. In any case where
the PBGC determines, pursuant to Sec. 4041.44(c) or Sec. 4041.46(c)(1),
that the requirements for a distress termination are not satisfied--
(1) The prohibitions in paragraph (b) of this section, other than
those in paragraph (b)(1), will cease to apply--
(i) Upon expiration of the period during which reconsideration may
be requested under Secs. 4041.44(e) and 4041.46(e) or, if earlier, at
the time the plan administrator decides not to request reconsideration;
or
(ii) If reconsideration is requested, upon PBGC issuance of its
decision on reconsideration.
(2) Any benefits that were not paid pursuant to paragraph (c) of
this section will be due and payable as of the effective date of the
PBGC's determination, together with interest from the date (or dates)
on which the unpaid amounts were originally due until the date on which
they are paid in full at the rate or rates prescribed under
Sec. 4022.81(c)(3) of this chapter.
(e) Effect of subsequent insufficiency. If the plan administrator
makes a finding of subsequent insufficiency for guaranteed benefits
pursuant to Sec. 4041.49(b), or the PBGC notifies the plan
administrator that it has made a finding of subsequent insufficiency
for guaranteed benefits pursuant to Sec. 4041.40(d), the prohibitions
in paragraph (b) of this section will apply in accordance with
Sec. 4041.49(e).
Sec. 4041.43 Notice of intent to terminate.
(a) General rules. (1) At least 60 days and (except with PBGC
approval) no more than 90 days before the proposed termination date,
the plan administrator must issue a written notice of intent to
terminate to each person who is an affected party as of the proposed
termination date.
(2) The plan administrator must issue the notice of intent to
terminate to all affected parties other than the PBGC at or before the
time he or she files the notice with the PBGC.
(3) The notice to affected parties other than the PBGC must contain
all of the information specified in paragraph (b) of this section.
(4) The notice to the PBGC must be filed on PBGC Form 600, Distress
Termination, Notice of Intent to Terminate, completed in accordance
with the instructions thereto.
(5) In the case of a beneficiary of a deceased participant or an
alternate payee, the plan administrator must issue a notice of intent
to terminate promptly to any person that becomes an affected party
after the proposed termination date and on or before the date a trustee
is appointed for the plan pursuant to section 4042(c) of ERISA (or, in
the case of a plan that distributes assets pursuant to Sec. 4041.50,
the distribution date).
(b) Contents of notice to affected parties other than the PBGC. The
plan administrator must include in the notice of intent to terminate to
each affected party other than the PBGC all of the following
information:
(1) The name of the plan and of the contributing sponsor;
(2) The EIN of the contributing sponsor and the PN; if there is no
EIN or PN, the notice must so state;
(3) The name, address, and telephone number of the person who may
be contacted by an affected party with questions concerning the plan's
termination;
(4) A statement that the plan administrator expects to terminate
the plan in a distress termination on a specified proposed termination
date;
(5) The cessation of accruals information in Sec. 4041.23(b)(4);
(6) A statement as to how an affected party entitled to receive the
latest updated summary plan description under section 104(b) of ERISA
can obtain it;
(7) A statement of whether plan assets are sufficient to pay all
guaranteed benefits or all benefit liabilities;
(8) A brief description of what benefits are guaranteed by the PBGC
(e.g., if only a portion of the benefits are guaranteed because of the
phase-in rule, this should be explained), and a statement that
participants and beneficiaries also may receive a portion of the
benefits to which each is entitled under the terms of the plan in
excess of guaranteed benefits; and
(9) A statement, if applicable, that benefits may be subject to
reduction because of the limitations on the amounts guaranteed by the
PBGC or because plan assets are insufficient to pay for full benefits (pursuant
to part 4022, subparts B and D, of this chapter) and that payments in
excess of the amount guaranteed by the PBGC may be recouped by the PBGC
(pursuant to part 4022, subpart E, of this chapter).
(c) Spin-off/termination transactions. In the case of a spin-off/
termination transaction (as described in Sec. 4041.23(c)), the plan
administrator must provide all participants and beneficiaries in the
original plan who are also participants or beneficiaries in the ongoing
plan (as of the proposed termination date) with a notice describing the
transaction no later than the date on which the plan administrator
completes the issuance of notices of intent to terminate under this
section.
Sec. 4041.44 PBGC review of notice of intent to terminate.
(a) General. When a notice of intent to terminate is filed with it,
the PBGC--
(1) Will determine whether the notice was issued in compliance with
Sec. 4041.43; and
(2) Will advise the plan administrator of its determination, in
accordance with paragraph (b) or (c) of this section, no later than the
proposed termination date specified in the notice.
(b) Tentative finding of compliance. If the PBGC determines that
the issuance of the notice of intent to terminate appears to be in
compliance with Sec. 4041.43, it will notify the plan administrator in
writing that--
(1) The PBGC has made a tentative determination of compliance;
(2) The distress termination proceeding may continue; and
(3) After reviewing the distress termination notice filed pursuant
to Sec. 4041.45, the PBGC will make final, or reverse, this tentative
determination.
(c) Finding of noncompliance. If the PBGC determines that the
issuance of the notice of intent to terminate was not in compliance
with Sec. 4041.43 (except for requirements that the PBGC elects to
waive under Sec. 4041.41(b)(2)(i) with respect to the notice filed with
the PBGC), the PBGC will notify the plan administrator in writing--
(1) That the PBGC has determined that the notice of intent to
terminate was not properly issued; and
(2) That the proposed distress termination is null and void and the
plan is an ongoing plan.
(d) Information on need to institute section 4042 proceedings. The
PBGC may require the plan administrator to submit, within 20 days after
the plan administrator's receipt of the PBGC's written request (or such
other period as may be specified in such written request), any
information that the PBGC determines it needs in order to decide
whether to institute termination or trusteeship proceedings pursuant to
section 4042 of ERISA, whenever--
(1) A notice of intent to terminate indicates that benefits
currently in pay status (or that should be in pay status) are not being
paid or that this is likely to occur within the 180-day period
following the issuance of the notice of intent to terminate;
(2) The PBGC issues a determination under paragraph (c) of this
section; or
(3) The PBGC has any reason to believe that it may be necessary or
appropriate to institute proceedings under section 4042 of ERISA.
(e) Reconsideration of finding of noncompliance. A plan
administrator may request reconsideration of the PBGC's determination
of noncompliance under paragraph (c) of this section in accordance with
the rules prescribed in part 4003, subpart C, of this chapter. Any
request for reconsideration automatically stays the effectiveness of
the determination until the PBGC issues its decision on
reconsideration, but does not stay the time period within which
information must be submitted to the PBGC in response to a request
under paragraph (d) of this section.
(f) Notice to affected parties. Upon a decision by the PBGC
affirming a finding of noncompliance or upon the expiration of the
period within which the plan administrator may request reconsideration
of a finding of noncompliance (or, if earlier, upon the plan
administrator's decision not to request reconsideration), the plan
administrator must notify the affected parties (and any persons who
were provided notice under Sec. 4041.43(e)) in writing that the plan is
not going to terminate or, if applicable, that the termination is
invalid but that a new notice of intent to terminate is being issued.
Sec. 4041.45 Distress termination notice.
(a) General rule. The plan administrator must file with the PBGC a
PBGC Form 601, Distress Termination Notice, Single-Employer Plan
Termination, with Schedule EA-D, Distress Termination Enrolled Actuary
Certification, that has been completed in accordance with the
instructions thereto, on or before the 120th day after the proposed
termination date.
(b) Participant and benefit information. (1) Plan insufficient for
guaranteed benefits. Unless the enrolled actuary certifies, in the
Schedule EA-D filed in accordance with paragraph (a) of this section,
that the plan is sufficient either for guaranteed benefits or for
benefit liabilities, the plan administrator must file with the PBGC the
participant and benefit information described in PBGC Form 601 and the
instructions thereto by the later of--
(i) 120 days after the proposed termination date, or
(ii) 30 days after receipt of the PBGC's determination, pursuant to
Sec. 4041.46(b), that the requirements for a distress termination have
been satisfied.
(2) Plan sufficient for guaranteed benefits or benefit liabilities.
If the enrolled actuary certifies that the plan is sufficient either
for guaranteed benefits or for benefit liabilities, the plan
administrator need not submit the participant and benefit information
described in PBGC Form 601 and the instructions thereto unless
requested to do so pursuant to paragraph (c) of this section.
(3) Effect of failure to provide information. The PBGC may void the
distress termination if the plan administrator fails to provide
complete participant and benefit information in accordance with this
section.
(c) Additional information. The PBGC may in any case require the
submission of any additional information that it needs to make the
determinations that it is required to make under this part or to pay
benefits pursuant to section 4061 or 4022(c) of ERISA. The plan
administrator must submit any information requested under this
paragraph within 30 days after receiving the PBGC's written request (or
such other period as may be specified in such written request).
Sec. 4041.46 PBGC determination of compliance with requirements for
distress termination.
(a) General. Based on the information contained and submitted with
the PBGC Form 600 and the PBGC Form 601, with Schedule EA-D, and on any
information submitted by an affected party or otherwise obtained by the
PBGC, the PBGC will determine whether the requirements for a distress
termination set forth in Sec. 4041.41(c) have been met and will notify
the plan administrator in writing of its determination, in accordance
with paragraph (b) or (c) of this section.
(b) Qualifying termination. If the PBGC determines that all of the
requirements of Sec. 4041.41(c) have been satisfied, it will so advise
the plan administrator and will also advise the plan administrator of
whether participant and benefit information must be submitted in
accordance with Sec. 4041.45(b).
(c) Non-qualifying termination. (1) Except as provided in paragraph
(c)(2) of this section, if the PBGC determines that any of the
requirements of Sec. 4041.41 have not been met, it will notify the plan
administrator of its determination, the basis therefor, and the effect
thereof (as provided in Sec. 4041.41(b)).
(2) If the only basis for the PBGC's determination described in
paragraph (c)(1) of this section is that the distress termination
notice is incomplete, the PBGC will advise the plan administrator of
the missing item(s) of information and that the information must be
filed with the PBGC no later than the 120th day after the proposed
termination date or the 30th day after the date of the PBGC's notice of
its determination, whichever is later.
(d) Reconsideration of determination of non-qualification. A plan
administrator may request reconsideration of the PBGC's determination
under paragraph (c)(1) of this section in accordance with the rules
prescribed in part 4003, subpart C, of this chapter. The filing of a
request for reconsideration automatically stays the effectiveness of
the determination until the PBGC issues its decision on
reconsideration.
(e) Notice to affected parties. Upon a decision by the PBGC
affirming a determination of non-qualification or upon the expiration of the period within which the plan administrator may request
reconsideration of a determination of non-qualification (or, if
earlier, upon the plan administrator's decision not to request
reconsideration), the plan administrator must notify the affected
parties (and any persons who were provided notice under
Sec. 4041.43(e)) in writing that the plan is not going to terminate or,
if applicable, that the termination is invalid but that a new notice of
intent to terminate is being issued.
Sec. 4041.47 PBGC determination of plan sufficiency/insufficiency.
(a) General. Upon receipt of participant and benefit information
filed pursuant to Sec. 4041.45 (b)(1) or (c), the PBGC will determine
the degree to which the plan is sufficient and notify the plan
administrator in writing of its determination in accordance with
paragraph (b) or (c) of this section.
(b) Insufficiency for guaranteed benefits. If the PBGC finds that
it is unable to determine that a plan is sufficient for guaranteed
benefits, it will issue a ``notice of inability to determine
sufficiency'' notifying the plan administrator of this finding and
advising the plan administrator that--
(1) The plan administrator must continue to administer the plan
under the restrictions imposed by Sec. 4041.42; and
(2) The termination will be completed under section 4042 of ERISA.
(c) Sufficiency for guaranteed benefits or benefit liabilities. If
the PBGC determines that a plan is sufficient for guaranteed benefits
but not for benefit liabilities or is sufficient for benefit
liabilities, the PBGC will issue to the plan administrator a
distribution notice advising the plan administrator--
(1) To issue notices of benefit distribution in accordance with
Sec. 4041.48;
(2) To close out the plan in accordance with Sec. 4041.50;
(3) To file a timely post-distribution certification with the PBGC
in accordance with Sec. 4041.50(b); and
(4) That either the plan administrator or the contributing sponsor
must preserve and maintain plan records in accordance with Sec. 4041.5.
(d) Alternative treatment of majority owner's benefit. A majority
owner may elect to forgo receipt of all or part of his or her plan
benefits in connection with a distress termination. Any such
alternative treatment--
(1) Is valid only if the conditions in Sec. 4041.21(b)(2) (i)
through (iv) are met (except that, in the case of a plan that does not
distribute assets pursuant to Sec. 4041.50, the majority owner may make
the election and the spouse may consent any time on or after the date
of issuance of the first notice of intent to terminate); and--
(2) Is subject to the PBGC's approval if the election--
(i) Is made after the termination date; and
(ii) Would result in the PBGC determining that the plan is
sufficient for guaranteed benefits under paragraph (c).
Sec. 4041.48 Sufficient plans; notice requirements.
(a) Notices of benefit distribution. When a distribution notice is
issued by the PBGC pursuant to Sec. 4041.47, the plan administrator
must issue notices of benefit distribution in accordance with the rules
regarding notices of plan benefits in Sec. 4041.24, except that--
(1) The deadline for issuing the notices of benefit distribution is
the 60th day after receipt of the distribution notice; and
(2) With respect to the information described in Sec. 4041.24 (b)
through (e), the term ``plan benefits'' is replaced with ``title IV
benefits'' and the term ``proposed termination date'' is replaced with
``termination date''.
(b) Certification to PBGC. No later than 15 days after the date on
which the plan administrator completes the issuance of the notices of
benefit distribution, the plan administrator must file with the PBGC a
certification that the notices were so issued in accordance with the
requirements of this section.
(c) Notice of annuity information. (1) In general. Unless all title
IV benefits will be distributed in the form of nonconsensual lump sums,
the plan administrator must provide a notice of annuity information to
each affected party other than--
(i) An affected party whose title IV benefits will be distributed
in the form of a nonconsensual lump sum; and
(ii) The PBGC.
(2) Spin-off/termination transactions. The plan administrator must
provide the information in paragraph (c)(4) of this section to a person
entitled to notice under Sec. 4041.43(c), at the same time and in the
same manner as required for an affected party described in paragraph
(c)(1) of this section.
(3) Selection of different insurer. A plan administrator that
decides to select a different insurer after having previously notified
the affected party of the identity of insurer(s) under this paragraph
must provide another notice of annuity information.
(4) Content of notice. The notice must include--
(i) The identity-of-insurer information in Sec. 4041.27(b)(1);
(ii) The information regarding change in identity of insurer(s) in
Sec. 4041.27(b)(2); and
(iii) Unless the state guaranty coverage information in
Sec. 4041.27(b)(3) was previously provided to the affected party, such
information and the extinguishment-of-guaranty information in
Sec. 4041.23(b)(9) (replacing the term ``plan benefits'' with ``title
IV benefits'').
(5) Deadline for notice. The plan administrator must issue the
notice of annuity information to each affected party by the deadline in
Sec. 4041.27(d)(1).
(d) Request for IRS determination letter. To qualify for the
distribution deadline in Sec. 4041.28(a)(1)(ii) (as modified and made
applicable by Sec. 4041.50(c)), the plan administrator must submit to
the IRS a valid request for a determination of the plan's qualification
status upon termination (``determination letter'') by the day on which
the plan administrator completes the issuance of the notices of benefit
distribution.
Sec. 4041.49 Verification of plan sufficiency prior to closeout.
(a) General rule. Before distributing plan assets pursuant to a
closeout under Sec. 4041.50, the plan administrator must verify whether
the plan's assets are still sufficient to provide for benefits at the level
determined by the PBGC, i.e., guaranteed benefits or benefit
liabilities. If the plan administrator finds that the plan is no longer
able to provide for benefits at the level determined by the PBGC, then
paragraph (b) or (c) of this section, as appropriate, will apply.
(b) Subsequent insufficiency for guaranteed benefits. When a plan
administrator finds that a plan is no longer sufficient for guaranteed
benefits, the plan administrator must promptly notify the PBGC in
writing of that fact and may take no further action to implement the
plan termination, pending the PBGC's determination and notice pursuant
to paragraph (b)(1) or (b)(2) of this section.
(1) PBGC concurrence with finding. If the PBGC concurs with the
plan administrator's finding, the distribution notice will be void, and
the PBGC will--
(i) Issue the plan administrator a notice of inability to determine
sufficiency in accordance with Sec. 4041.47(b); and
(ii) Require the plan administrator to submit a new valuation,
certified to by an enrolled actuary, of the benefit liabilities and
guaranteed benefits under the plan, valued in accordance with
Secs. 4044.41 through 4044.57 of this chapter as of the date of the
plan administrator's notice to the PBGC.
(2) PBGC non-concurrence with finding. If the PBGC does not concur
with the plan administrator's finding, it will so notify the plan
administrator in writing, and the distribution notice will remain in
effect.
(c) Subsequent insufficiency for benefit liabilities. When a plan
administrator finds that a plan is sufficient for guaranteed benefits
but is no longer sufficient for benefit liabilities, the plan
administrator must immediately notify the PBGC in writing of this fact,
but must continue with the distribution of assets in accordance with
Sec. 4041.50.
(d) Finding by PBGC of subsequent insufficiency. In any case in
which the PBGC finds on its own initiative that a subsequent
insufficiency for guaranteed benefits has occurred, paragraph (b)(1) of
this section will apply, except that the guaranteed benefits must be
revalued as of the date of the PBGC's finding.
(e) Restrictions upon finding of subsequent insufficiency. When the
plan administrator makes the finding described in paragraph (b) of this
section or receives notice that the PBGC has made the finding described
in paragraph (d) of this section, the plan administrator is (except to
the extent the PBGC otherwise directs) subject to the prohibitions in
Sec. 4041.42.
Sec. 4041.50 Closeout of plan.
If a plan administrator receives a distribution notice from the
PBGC pursuant to Sec. 4041.47 and neither the plan administrator nor
the PBGC makes the finding described in Sec. 4041.49(b) or (d), the
plan administrator must distribute plan assets in accordance with
Sec. 4041.28 and file a post-distribution certification in accordance
with Sec. 4041.29, except that--
(a) The term ``plan benefits'' is replaced with ``title IV
benefits'';
(b) For purposes of applying the distribution deadline in
Sec. 4041.28(a)(1)(i), the phrase ``after the expiration of the PBGC's
60-day (or extended) review period under Sec. 4041.26(a)'' is replaced
with ``the day on which the plan administrator completes the issuance
of the notices of benefit distribution pursuant to Sec. 4041.48(a)'';
and
(c) For purposes of applying the distribution deadline in
Sec. 4041.28(a)(1)(ii), the phrase ``the requirements of
Sec. 4041.25(c)'' is replaced with ``the requirements of
Sec. 4041.48(d)''.
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