“CROmnibus” Takes on Pension Problems
Legislation working its way through Congress designed to avoid a government shutdown also contains some pension plan provisions.
While the driver of the pension agreement
is some significant multiemployer pension reforms, the amendment also includes provisions applicable to single-employer pension plans. The agreement that will be introduced and voted on in the House of Representatives as an amendment to the so-called “CROmnibus” (a hybrid nomenclature for this combination of a “continuing resolution” and “omnibus” bill) spending package
If the amendment containing the agreement is passed, it will be combined with the CROmnibus and sent to the Senate for consideration. Legislation that funds government operations needs to be sent to President Obama’s desk by midnight on Thursday to avoid a government shutdown.
The broadly applicable provision restricts the Pension Benefit Guaranty Corporation’s (PBGC) enforcement of a downsizing liability provision contained in section 4062(e) of ERISA. Section 4062(e) requires companies with an ERISA-covered plan to post security with the PBGC in the event the company shuts down a major facility and, as a result, lays off a substantial portion of its workforce.
However, in recent years, the PBGC has interpreted Section 4062(e) broadly to apply to routine business transactions and assessed a substantial liability penalty that, in effect, forced companies to contribute more to their pension plans. The language in the new agreement would more clearly define the instances in which the PBGC could use its authority under Section 4062(e) and would require that a more rational liability calculation assessment be applied.
Other Pension Provisions
A second provision in the agreement addresses an issue certain pension plans had with Internal Revenue Service (IRS) regulations defining “normal retirement age.” In 2007, the Internal Revenue Service issued guidance that generally required pension plans to have a “normal retirement age” of at least age 62. Plans that provided for a normal retirement date of the earlier of a stated age (even if the age was 62 or older) and completion of 30 years of service failed to meet the age 62 safe harbor because a participant could meet the 30-years of service requirement before attaining age 62.
The new agreement would allow plans that already define normal retirement age as the earlier of a specified age and 30 years of service to apply that definition to participants employed before Jan. 1, 2017, provided the age would otherwise meet the current requirements.
Finally, the agreement contains a third rifle-shot provision that carves out the pension plan of the Boys Scouts of America
from the Pension Protection Act funding rules.
The ASPPA GAC team will keep you posted on the legislative developments of this agreement when they happen, including the multi-employer provisions contained in the agreement.
Andrew Remo is the Congressional Affairs Manager at NAPA and ASPPA.