The Pension Benefit Guaranty Corp. wants to treat the date when a pension plan sponsor files for bankruptcy as the plan termination date for some purposes.
The PBGC has published that proposal and others in a proposed rule that appears today in the Federal Register.
Other sections deal with what benefits are guaranteed by the PBGC and the priority list for distributing the assets of a terminated plan.
The proposed regulations would implement Section 404 of the Pension Protection Act of 2006, which deals with terminations of underfunded, PBGC-covered, single-employer pension plans with sponsors that have sought bankruptcy court protection.
The PPA changes the data for determining what benefits the PBGC will guarantee to the sponsor bankruptcy date, rather than the plan termination date. That change, in most cases, will “reduce the amount of guaranteed benefits,” officials warn in a preamble to the proposed regulations.
The proposed regulations would, for example, state that the PBGC would base the guaranteed benefits of a participant in a terminated single-employer plan on the participant’s amount of service and the amount of compensation as of the bankruptcy filing date, officials write.
The maximum guaranteed benefit and other limits would be determined as of the bankruptcy filing date.
“Only benefits that are nonforfeitable as of the bankruptcy filing date are guaranteed,” officials write. “Thus, for example, early retirement subsidies and disability benefits to which a participant becomes entitled after the bankruptcy filing date are not guaranteed.”
Comments on the proposed rule are due Sept. 2.