The Pension Benefit Guaranty Corporation reports that shifting its enforcement policy away from companies unlikely to default on their pensions benefited about 50 businesses by almost $1 billion since the start of a pilot program announced in November.
“The new approach screens out financially sound companies and small plans with less than 100 people, which excludes 92 percent of businesses that sponsor plans from the agency's enforcement efforts,” according to the agency.
"By focusing on companies that pose real risk, we hope to preserve and encourage companies to continue to offer traditional pensions," PBGC’s Director, Josh Gotbaum said in a statement released by the PBGC.
The shift in policy exempted financially sound companies such as Anheuser-Busch InBev, Procter & Gamble Co., and Whirlpool Corp., from having to address pension liabilities after ending operations at their work sites.
According to the agency, under the pilot program, “PBGC didn't enforce pension liabilities of about $475 million on 30 companies that were financially sound.”
Additionally, the agency ended pre-existing enforcement agreements originally valued at $450 million with 17 companies because they were unlikely to default on pension benefits for their workers and retirees.
The agency's policy change follows a Presidentially-mandated review of regulations and feedback from companies that said PBGC targeted businesses even when plans posed little or no risk of defaulting on pension obligations.
Under a section of pension law called 4062(e), when a company ceases operations at a facility, and 20% of workers in the pension plan lose their jobs, PBGC requires financial assurance to support benefits earned by plan participants. Typically companies provide that assurance through additional contributions to the plan or a letter of credit guaranteeing future contributions.
Register or login for access to this item and much more
All Employee Benefit Adviser content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access