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Regulation and Compliance > Federal Regulation

PBGC Protects Citizen Soldiers

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The Pension Benefit Guaranty Corp. is acting to ease the worries of pension plan participants who are serving in the uniformed services when a plan terminates.

The PBGC has adopted a final rule that may protect the pension benefits of a defined benefit pension plan participant who is away serving in the military or in some roles in the National Disaster Medical System when the plan terminates.

To be eligible for protection, plan participants must return to their civilian employers within the 5-year time period set by the Uniformed Services Employment and Reemployment Rights Act of 1994.

USERRA guarantees servicemembers and their dependents a right to continue employer-sponsored group health coverage through a mechanism that resembles the Consolidated Omnibus Budget Reconciliation Act group health benefits continuation system.

USERRA also requires employers to take back returning servicemembers, unless the servicemembers’ jobs have been eliminated for legally acceptable reasons, and, for purposes of pension programs and other benefits programs, it requires the employers to treat returning servicemembers as if the servicemembers had never been away.

USERRA applies to members of the Guard and Reserve who go on active duty, and it also applies to employees who sign up to serve in the “active components of the Armed Forces,” PBGC officials write in a preamble to the final rule.

PBGC, the entity that insurers defined benefit pension plans, issued the final rule to amend the PBGC regulation on Benefits Payable in Terminated Single-Employer Plans.

“Under PBGC’s existing regulations, a benefit is guaranteed only if the participant satisfies the conditions for entitlement to the benefit on or before the plan’s termination date,” officials write in the preamble.

“PBGC is providing an exception to this rule in the unique circumstances of persons serving in the uniformed services as of the plan’s termination date, consistent with USERRA’s statutory mandate to treat such persons, upon reemployment, as if they had never left the employ of their former employer,” officials write.

“This final rule provides that so long as a service member is reemployed within the time limits set by USERRA, even if the reemployment occurs after the plan’s termination date, PBGC will treat the participant as having satisfied the reemployment condition as of the termination date,” officials write.

The change will take effect Dec. 17, and it will apply retroactively to reemployments under USERRA initiated on or after Dec. 12, 1994, officials write.

Starting Dec., “PBGC will begin adjusting final benefit determinations of affected participants and make back payments with interest,” officials write.

The final rule is based on a proposed rule published in July. No one filed any comments, and the final rule is almost identical to the proposed regulation.

“There is no entitlement to pension credit in cases in which an employee permanently and lawfully loses reemployment rights–for example, where an employee dies during the period of military service,” PBGC officials warn.

If a servicemember fails to seek reemployment within the time frame set by USERRA, or the employer has a statutory defense against reemploying the returning servicemember, the new rule will not help that service member, officials write.

The PBGC believes that another regulation already requires a plan that shut downs through a standard termination to provide benefits relating to periods of military service for returning servicemember participants.

But the new rule will protect the servicemember in the event that a plan shuts down as a result of the employer’s bankruptcy, officials write.

“PBGC will provide guidance on how individuals can establish, for purposes of their Title IV benefit, their entitlement to benefits under USERRA,” officials write.

A copy of the final rule is available here.


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