Limiting the Pension Benefit Guaranty Corporation's ability to levy charges against defined benefit plan sponsors that shut down certain operations would save employers $15 million over the next decade, according to the Congressional Budget Office.
An amendment of ERISA to do just that was passed by the Senate Committee on Health, Education, Labor and Pensions in July. While saving them money, the amendment also would mean sponsors couldn't write off any extra dollars directed to a DB plan when they temporarily close or move a plant and, consequently, would raise federal government tax revenues by $14 million between 2015 and 2024, the CBO said.
The CBO also said the Joint Committee on Taxation estimated that enacting S. 2511 would reduce the federal deficit by $29 million over the same period.
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Under ERISA's 4062(e), any money collected from sponsors is paid into the sponsors' defined benefit plan, for the purpose of assuring a plan's solvency.
After a concerted effort by plan sponsors calling for an examination of the burdens 4062(e) places on businesses, the PBGC earlier this year announced a moratorium on the enforcement of 4062(e) through the end of 2014.
The amendment, which passed on a bipartisan vote, clarifies the definition of "substantial cessation of operations."
As now written, the law defines "substantial cessation" as any closing of a facility that then results in a 20-percent reduction of the employees at the facility who are part of the employer's defined benefit pension plan, according to the CBO.
The amendment will narrow how 4062(e) can be enforced. Specifically, all operations in a facility will have to be shut down, as opposed to just a portion of a facility's operation.
And the cessation of a facility will have to be expected to be permanent, as opposed to temporary, which is now enough to trigger enforcement of 4062(e).
Plan sponsors would also have the liberty to shut down an operation in one facility and move it to another without triggering a 4062(e) action under the amendment. They also would be allowed to sell off an operation and avoid 4062(e) action if the new owner resumes operations.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
