A moratorium by the Pension Benefit Guaranty Corp. on the enforcement of the hotly contested 4062(e) regulation has been lifted. 

In its place are new standards more favorable to sponsors, changes that were made as part of the recently adopted omnibus spending bill, alongside the Multiemployer Pension Reform Act of 2014. 

For years, the PBGC seemed disinterested in enforcing the "substantial cessation" rule, which resulted in fines against defined benefit plans whenever a sponsor ceased operations at a facility that triggered a 20 percent reduction in participants. 

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That changed in 2006, when the agency published a new set of rules around 4062(e), giving it far broader power in assessing fines, affecting even temporary shutdowns of plan facilities. 

The PBGC pursued more than 300 4062(e) cases since 2006, according to an advisory brief by the law firm Steptoe and Johnson. By 2012, the reg made the U.S. Chamber of Commerce's "most troubling federal rules and regulations" list. 

Last year, a campaign by sponsors and benefits advocates culminated in a letter to the secretaries of Labor, Treasury and Commerce, claiming PBGC's enforcement of 4062(e) was inconsistent with the law and hurting enrollees in private-sector defined benefit plans. 

Former PBGC head Josh Gotbaum, who announced his resignation just days after the moratorium on 4062 (e) regulation was initiated, had argued the agency was more than accommodating to plan sponsors, when in 2012, under his direction, more than 90 percent of sponsors were exempted from 4062(e) actions. 

Sponsor advocates, needless to say, disagreed. 

Going forward, 4062(e) will only apply to plans with 100 or more participants and a funding ratio lower than 90 percent. 

A "substantial cessation" now means a permanent closing of a facility, and will not be applied to temporary closings. 

Also, now a cessation will have to mean a 15-percent reduction in the sponsor's workforce and include participants in all of a company's retirement plans — including 401(k) and other defined contribution plans. Previously, if a cessation affected 20 percent of defined benefit employees, the reg was triggered.

In short, the new regulations make it less likely a cessation will affect enough participants to require 4062(e) action. 

When fines are imposed, sponsors can pay off the assessment in installments over seven years. And if during that period the plan returns to a 90-percent funding level, the sponsors will not have to pay the remainder of the fine owed.

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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.