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<< Older News  |  December 4, 2020

News

All News > PBGC

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PBGC Inspector General Semiannual Report to Congress for the Period April 1, 2020 to September 30, 2020 (PDF)
Office of Inspector General, Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
Dec. 2, 2020

52 pages. "In this reporting period, [PBGC OIG] completed an investigation into a bribery scheme, in which the now former Procurement Director accepted cash, gifts, and the promise of a future job from a government contractor in exchange for steering professional service contracts to the company.... [OIG is] conducting an audit to determine if Procurement Department practices may have allowed contract steering and to look for indications of other contracting improprieties."

Tags: PBGC  •  Retirement Plan Policy

Editor's Pick IRS Bends on CARES Act Funding Deadline; PBGC Follows Suit
Mercer Link to more items from this source
[Guidance Overview]
Nov. 20, 2020

"[F]or calendar-year plans and some noncalendar-year plans starting late in the calendar year, the [effective interest rate (EIR)] almost certainly won’t be known by the Jan. 4 contribution due date. In that case, sponsors should estimate interest using the highest of the three segment rates for the plan year. This conservative approach will ensure that the contribution is at least as large as needed to satisfy minimum requirements. If the actual EIR is lower than the estimate, the sponsor can create prefunding balance with the excess contributions. However, what this means for PBGC premiums is unclear."

Tags: Funding of DB Plans  •  PBGC

Editor's Pick PBGC to Allow Contributions Made by January 4, 2021 to Count for 2020 PBGC Variable-Rate Premium
October Three Consulting Link to more items from this source
[Guidance Overview]
Nov. 19, 2020

"[This] possibility may be significant for, e.g., employers who want to make a CARES Act contribution that reduces 2020 variable-rate premiums but would like to deduct that contribution in 2021.... [S]ome sponsors can reduce 2020 PBGC variable-rate premiums by accelerating 2021 quarterly contributions to January 4, 2021. Under this strategy, the sponsor, in effect, takes the amount of contributions required to be made for 2021 and contributes it for 2019."

Tags: CARES Act  •  Coronavirus (COVID-19)  •  PBGC  •  Retirement Plan Administration

Text of Updated PBGC Technical Update 20-2: Extended Due Date for Inclusion of Prior Year Contributions
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Nov. 17, 2020

Revised Nov. 16, 2020, to conform with IRS Notice 2020-82. "For premium filings due on or after March 1, 2020 and before January 1, 2021, the date by which prior year contributions must be received by the plan to be included in plan assets under Section 4006.4(c) of PBGC's premium rates regulation is extended to January 4, 2021. Because of this relief, the discounted value of a 'prior year contribution' received after the premium is filed and on or before January 4, 2021, may be included in the asset value used to determine the variable-rate premium. Thus, if such a contribution is made, the premium filing may be amended to revise the originally reported asset value and resulting variable-rate premium." [Also see COVID-19-Related Single-Employer Plan Sponsors and Administrators FAQs, updated Nov. 16, 2020]

Tags: CARES Act  •  Coronavirus (COVID-19)  •  PBGC  •  Retirement Plan Administration

Text of PBGC Interest Rate Assumptions for Benefits Payable in Terminated Single-Employer Plans, December 2020
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Nov. 12, 2020

"The December 2020 lump sum interest assumptions will be 0.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit’s placement in pay status. In comparison with the interest assumptions in effect for November 2020, these assumptions represent no change in the immediate rate and are otherwise unchanged."

Tags: PBGC  •  Retirement Plan Administration

PBGC to Pay Pension Benefits for J.C. Penney Corporation Workers, Retirees
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
Nov. 6, 2020

"The [PBGC] is taking responsibility for the J.C. Penney Corporation, Inc. Pension Plan, which covers about 36,000 current and future retirees.... The termination of the plan will be effective as of November 6, 2020. PBGC estimates that J.C. Penney's plan is 92 percent funded with approximately $3.3 billion in assets and about $3.6 billion in benefit liabilities. The plan is underfunded by $270 million."

Tags: Funding of DB Plans  •  PBGC

PBGC Premiums Getting in the Way of Its Mission
PLANSPONSOR; free registration may be required Link to more items from this source
Nov. 4, 2020

"[F]rom 2012 to 2020, the flat rate premium has more than doubled and the [variable rate premium] has increased by a factor of 5, though the cap has limited this increase for the most poorly funded plans.... The Academy argues that letting the PBGC set its own premiums would not only take them 'off budget,' but would allow the agency 'to review the premium structure and adjust it to be more timely when needed, to more appropriately reflect its risks, to reduce moral hazards and anti-selection and to discourage termination of plans and lump sums.' "

Tags: PBGC

PBGC Update: Present Value of PBGC Maximum Guarantee
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Oct. 26, 2020

"The values [in this table] apply to benefits with annuity starting dates in 2021. [Also available is] a two-column spreadsheet version [XLSX] of the 2021 table."

Tags: PBGC  •  Retirement Plan Administration

Memorandum from the President on Pensions of Delphi Corporation Retirees and Other Retirees Covered by Vulnerable Pension Plans
The White House Link to more items from this source
[Official Guidance]
Oct. 23, 2020

"The Secretary of the Treasury, the Secretary of Commerce, and the Secretary of Labor, in consultation with the Assistant to the President for Trade and Manufacturing Policy, shall review the Delphi matter ... and inform the President ... of any appropriate action that may be taken, consistent with applicable law, to [1] address affected Delphi retirees' lost pension benefits, and [2] bring additional transparency to the decision to terminate the plan ... This review shall include an evaluation of the feasibility of enacting legislation and whether the plan may be restored to its pretermination status under section 1347 of title 29, United States Code....

"The Secretary of the Treasury, the Secretary of Commerce, and the Secretary of Labor, in consultation with the Assistant to the President for Economic Policy, shall review the pension plans presently held in trusteeship by the PBGC and inform the President ... of any appropriate action that may be taken consistent with applicable law. Actions may include proposing legislation that appropriately balances the interests of all those covered by the pension system -- from retirees, workers, employers, and unions, to plans and taxpayers -- to address the insolvency of such plans and to maintain the future solvency of the PBGC's Single-Employer and Multi-Employer Programs." [Also see: Fact Sheet]

Tags: Funding of DB Plans  •  PBGC  •  Retirement Plan Policy

Editor's Pick Annuity Settlements in the Context of Steeply Declining Interest Rates
October Three Consulting Link to more items from this source
Oct. 22, 2020

"Significant declines in interest rates over the past two years do ... lower VRPs for plans at the VRP headcount cap. For plans using the alternative method for calculating unfunded vested benefits (UVBs), headcount reductions via annuity settlements may generate a 'loss' -- that is, an increase in VRPs.... Sponsors will want to consider the effect of annuity settlements on minimum funding requirements -- particularly payments that may take the plan below 80% funding (on a HATFA basis), triggering benefit restrictions."

Tags: Funding of DB Plans  •  PBGC

Considerations Before Terminating a Single-Employer Pension Plan (PDF)
Proskauer, via Bloomberg Law Link to more items from this source
Oct. 22, 2020

"As the economic fallout from the COVID-19 pandemic continues, many employers with significant single-employer defined benefit pension plan liabilities are revisiting options to mitigate their pension exposure in an effort to reduce their annual expenses and to clean up their balance sheets. One option that is often considered is a termination of the pension plan. However, terminations are only permitted under certain circumstances and have ramifications that must be carefully considered and managed."

Tags: Funding of DB Plans  •  PBGC  •  Retirement Plan Design

PBGC Report: Analysis of Single-Employer Pension Plan Partial Risk Transfers (PDF)
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
Oct. 20, 2020

14 pages, Oct. 2020. "8.0 percent of PBGC-covered plans performed [Risk Transfer Activity (RTA)] during the 2015-2018 study period. 44.8 percent of large plans (greater than 1,000 participants) performed an RTA during the study period.... 2.4 million participants received either a lump sum distribution or an annuity as part of a risk transfer transaction during the study period, and thus are no longer participating in their pension plan or covered by PBGC insurance."

Tags: PBGC  •  Retirement Plan Administration

Editor's Pick PBGC Issues Maximum Monthly Guarantee Amounts
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Oct. 19, 2020

As a result of the indexing rules provided by law, the guarantee limits for single-employer plans that fail in 2021 will be 3.81% higher than the limits that applied for 2020. The linked page includes a table showing the 2021 guarantee limits for various ages and payment forms. The guarantee limits for multiemployer plans are not indexed and therefore have not changed.

Tags: PBGC  •  Retirement Plan Administration

2020 PBGC Premiums Could Be Much Higher Than Expected; 2021 May Be Worse
Morgan Lewis Link to more items from this source
Oct. 16, 2020

"With the decline in interest rates thus far in 2020, plans may expect a further increase in their variable rate PBGC premium for 2021 because the value of the 'unfunded vested benefits' may be quite a bit higher in 2021 compared to 2020.... The spot segment rates in December 2020 will be used to determine variable rate premiums in 2021 for calendar year plans unless the Alternative Premium Funding Target has been elected."

Tags: PBGC  •  Retirement Plan Administration

PBGC Releases 2021 Premium Rates
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Oct. 15, 2020

PBGC has determined the premium rates applicable for 2021 plan years in accordance with the indexing rules of ERISA § 4006.

Tags: Multiemployer Plans  •  PBGC  •  Retirement Plan Administration

Text of PBGC Interest Rate Assumptions for Benefits Payable in Terminated Single-Employer Plans, November 2020
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Oct. 14, 2020

"The November 2020 lump sum interest assumptions will be 0.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for October 2020, these assumptions represent no change in the immediate rate and are otherwise unchanged."

Tags: PBGC  •  Retirement Plan Administration

Text of PBGC Proposed Regs: Examination and Copying of Records
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Oct. 9, 2020

37 pages. "This proposed rule would: [1] Clarify that PBGC's disclosable records are generally available in an electronic, rather than paper, format. [2] Describe the procedure to seek expedited treatment for record requests. [3] Clarify the acceptable methods for submitting record requests. [4] Update the time limit to respond to record requests. [5] Clarify the procedures available to a requester when PBGC extends the time to respond to a disclosure request or an appeal. [6] Clarify the procedure for responding to requests that are of concern to a Federal agency other than PBGC. [7] Update the fees for search and review time. [8] Modify the definitions of certain categories of requesters."

Tags: PBGC

Editor's Pick Issue Brief: PBGC Single-Employer Premiums and Their Impact on Plan Sponsorship (PDF)
American Academy of Actuaries Link to more items from this source
Oct. 9, 2020

11 pages. "Decisions made by employers to discontinue a plan, reduce the size of their plan, or decide not to adopt a plan due to the large premiums can be attributed in part to lawmakers' failure to recognize the PBGC's mission ... [C]hanges to the premium structure are advisable. This issue brief addresses this complex subject by raising some issues in a question-and-answer format. It focuses exclusively on the PBGC's single-employer program."

Tags: PBGC  •  Retirement Plan Design

PBGC Provides Temporary Flexibility for Variable-Rate Premium Calculations
Proskauer Link to more items from this source
[Guidance Overview]
Oct. 6, 2020

"Under the PBGC's new guidance, the deadline to receive 'prior year contributions' that are taken into account is extended to January 1, 2021 for premium filings due on or after March 1, 2020 and before January 1, 2021. Importantly, the PBGC's guidance does not extend the deadline for premium filings, and filings cannot reflect contributions that have not been made. Plan sponsors that want to take advantage of the guidance must instead amend their filings by February 1, 2021 to revise the variable-rate premium calculation data after the eligible 'prior year contributions' are paid to the plan."

Tags: CARES Act  •  Coronavirus (COVID-19)  •  PBGC  •  Retirement Plan Administration

The PBGC's Inconvenient Surplus
The Principal Blog Link to more items from this source
[Opinion]
Oct. 2, 2020

"The single-employer program had a surplus of $8.7 billion on September 30, 2019 ... The median projected surplus in ten years is $46 billion.... [Plan] sponsors now wonder why their levies need to be so high.... Two Proposals: [1] Stop Indexing! ... [2] Offset Premiums with Extra Plan Contributions.... Of course, these suggestions only work if the single-employer program is looked at in isolation."

Tags: PBGC  •  Retirement Plan Policy

PBGC Allows Amendment to Premium Filing to Reflect Later Contributions
Graydon Link to more items from this source
[Guidance Overview]
Sept. 29, 2020

"Under the new guidance, contributions may be included in plan assets for calculating the variable rate premium if received by January 1, 2021. However, the premium filing may not anticipate future contributions. Instead, plans will be able to amend the premium filing to revise the originally reported asset value once all prior year contributions have been made, and receive a refund of the previously calculated premium."

Tags: PBGC  •  Retirement Plan Administration

PBGC's Updated Lump-Sum Methodology Will Affect Few Plans
Segal Link to more items from this source
[Guidance Overview]
Sept. 29, 2020

"The updated PBGC methodology will affect single-employer plans terminating in a distress or involuntary termination. It could also affect ongoing plans that provide: [1] A lump sum based on whichever provides a higher lump sum, the PBGC assumptions or the Code lump-sum rates. [2] Other optional forms of payment that use the PBGC assumptions as the applicable actuarial assumptions for conversion from the normal form of payment."

Tags: PBGC  •  Retirement Plan Administration

Measuring UVBs for Variable-Rate Premiums: The Alternative vs. Standard Method Election
October Three Consulting Link to more items from this source
Sept. 25, 2020

"Defined benefit plan sponsors that [1] currently [use] the standard (spot-rate) method to determine unfunded vested benefits (UVBs) for purposes of calculating [PBGC] variable-rate premiums, and who [2] have the ability to elect to switch to the alternative (24-month average) method, may have an opportunity to reduce (in some cases significantly) 2020 variable-rate premiums by doing so. This election generally must be made (for a calendar plan) by October 15, 2020. The decision with respect to this election is made particularly acute by the continuing decline in interest rates over the period 2019-2020."

Tags: Funding of DB Plans  •  PBGC

PBGC to Allow Contributions Made by January 1, 2021 to Count for 2020 PBGC Variable-Rate Premium
October Three Consulting Link to more items from this source
[Guidance Overview]
Sept. 24, 2020

"PBGC announced that it intends ... to allow DB sponsors to make contributions through January 1, 2021, that may be counted as plan assets for purposes of the 2020 variable-rate premium calculation. With respect to contributions made after October 15, 2020, this will generally require an amended premium filing and a refund of any premium overpayment.... [IRS Notice 2020-61] generally requires an amendment to the Form 5500 for post-filing contributions that are counted as contributions for that plan year."

Tags: Coronavirus (COVID-19)  •  Funding of DB Plans  •  PBGC

Text of PBGC Technical Update 20-2: Extended Due Date for Inclusion of Prior Year Contributions
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Sept. 23, 2020

"This Technical Update provides [PBGC] guidance and relief related to the timing of contribution receipts includable in the asset value used to determine variable rate premiums due in 2020. The CARES Act extended the due date for certain pension contributions. The relief in this Technical Update will generally enable plan sponsors to take advantage of the CARES Act extension and still ultimately pay the same variable-rate premium they would have owed had the plan received all prior year contributions by the regular contribution due date....

"For premium filings due on or after March 1, 2020 and before January 1, 2021, the date by which prior year contributions must be received by the plan to be included in plan assets under Section  4006.4(c) of PBGC's premium rates regulation is extended to January 1, 2021.

"Because of this relief, the discounted value of a 'prior year contribution' received after the premium is filed and on or before January 1, 2021, may be included in the asset value used to determine the variable-rate premium. Thus, if such a contribution is made, the premium filing may be amended to revise the originally reported asset value and resulting variable-rate premium.

"This relief has no effect on premium due dates (e.g., for calendar year plans, the 2020 premium is due October 15, 2020) and does not permit a premium filing to reflect a contribution that has not yet been made....

"Plan administrators that want to take advantage of this relief must amend their premium filing by February 1, 2021, to revise the variable-rate premium data accordingly after eligible prior year contributions are received by the plan."

[BenefitsLink note:  This link provides the Technical Update as originally published on Sep. 23, 2020; PBGC subsequently revised this Update to reflect IRS Notice 2020-82]

Tags: CARES Act  •  Coronavirus (COVID-19)  •  PBGC


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