[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Proposed Rules]
[Page 15688-15694]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-17]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2540
RIN 1210-AB26
Model Notice of Multiemployer Plan in Critical Status
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Proposed rule.
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SUMMARY: The Pension Protection Act of 2006 amended the Employee
Retirement Income Security Act (ERISA) and the Internal Revenue Code
(Code) to require that sponsors of multiemployer defined benefit
pension plans that are in, or will be in, endangered or critical status
for a plan year provide notice of this status to participants,
beneficiaries, the bargaining parties, the Pension Benefit Guaranty
Corporation and the Department of Labor. This document contains a model
notice that is intended to facilitate compliance with this notification
requirement under ERISA and the Code.
DATES: Written comments should be received by the Department of Labor
on or before April 24, 2008.
ADDRESSES: You may submit comments, identified by RIN 1210-AB26, by one
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: e-ORI@dol.gov. Include ``Notice of Critical
Status: RIN 1210-AB26'' in the subject line of the message.
Mail: Office of Regulations and Interpretations, Employee
Benefits Security Administration, Room N-5655, U.S. Department of
Labor, 200 Constitution Avenue, NW., Washington, DC 20210, Attention:
Model Notice of Critical Status.
Instructions: All submissions received must include the agency name
and Regulatory Information Number (RIN) for this rulemaking. Comments
received will be posted without change to http://www.regulations.gov
and http://www.dol.gov/ebsa, and available for public inspection at the
Public Disclosure Room, N-1513, Employee Benefits Security
Administration, 200 Constitution Avenue, NW., Washington, DC 20210,
including any personal information provided. Persons submitting
comments electronically are encouraged not to submit paper copies.
FOR FURTHER INFORMATION CONTACT: Susan Elizabeth Rees, Office of
[[Page 15689]]
Regulations and Interpretations, Employee Benefits Security
Administration (EBSA), U.S. Department of Labor, (202) 693-8500. This
is not a toll-free number.
SUPPLEMENTARY INFORMATION:
A. Background
Section 202 of the Pension Protection Act of 2006, Public Law 109-
280 (PPA), amended the Employee Retirement Income Security Act of 1974
(ERISA or Act) by adding section 305, and section 212 of the PPA
amended the Internal Revenue Code (Code) by adding section 432, to
provide additional rules for multiemployer defined benefit pension
plans in endangered status or critical status. All references to
section 305 of ERISA should be read to include section 432 of the Code.
Pursuant to Reorganization Plan No. 4, the Department of the Treasury
has interpretive authority over the minimum funding rules of Title I of
ERISA, including section 305 of ERISA.\1\
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\1\ Reorganization Plan No. 4 of 1978, 43 FR 47713 (Oct. 17,
1978).
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In general, section 305(b)(3)(A) of ERISA provides that not later
than the 90th day of each plan year, the actuary of a multiemployer
defined benefit pension plan shall certify to the Secretary of the
Treasury and to the plan sponsor \2\--(i) whether or not the plan is in
endangered status for such plan year and whether or not the plan is or
will be in critical status for such plan year, and (ii) in the case of
a plan which is in a funding improvement or rehabilitation period,
whether or not the plan is making the scheduled progress in meeting the
requirements of its funding improvement or rehabilitation plan.
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\2\ Section 3(16)(B)(ii) of ERISA defines the term ``plan
sponsor'' to mean, in the case of a plan established or maintained
by two or more employers or jointly by one or more employers and one
or more employee organizations, the association, committee, joint
board of trustees, or other similar group of representatives of the
parties who establish or maintain the plan.
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Section 305(b)(3)(D)(i) of ERISA provides that, in any case in
which it is certified under section 305(b)(3)(A) that a multiemployer
plan is or will be in endangered or critical status for a plan year,
the plan sponsor shall, not later than 30 days after the date of the
certification, provide notification of the endangered or critical
status to participants and beneficiaries, the bargaining parties, the
Pension Benefit Guaranty Corporation, and the Secretary of Labor.
Section 305(b)(3)(D)(ii) of ERISA provides that if it is certified
under section 305(b)(3)(A) that a multiemployer plan is or will be in
critical status, the plan sponsor shall include in the notice an
explanation of the possibility that--(i) adjustable benefits (as
defined in section 305(e)(8) of ERISA) may be reduced, and (ii) such
reductions may apply to participants and beneficiaries whose benefit
commencement date is on or after the date such notice is provided for
the first plan year in which the plan is in critical status.
Section 305(b)(3)(D)(iii) provides that the Secretary of Labor
shall prescribe a model notice that a multiemployer plan may use to
satisfy the requirements of section 305(b)(3)(D)(ii) of ERISA. The
Department consulted with both the PBGC and the IRS in developing the
model notice.
Other provisions in section 305 define when a plan is in endangered
or critical status and what corrective steps must be taken, by when,
and by whom. These other provisions are beyond the scope of this
notice. The Department of the Treasury and IRS have advised that they
are developing guidance on these other provisions.
Section 202(f)(1) of the PPA provides, generally, that the
amendments made by this section shall apply with respect to plan years
beginning after 2007, while section 202(f)(3) provides a special rule
in the case of plans having certain restored benefits.
Section 202(f)(2) of the PPA provides that in any case in which a
plan's actuary certifies that it is reasonably expected that a
multiemployer plan will be in critical status under section 305(b)(3)
of the ERISA, with respect to the first plan year beginning after 2007,
the notice required under section 305(b)(3)(D) of ERISA may be provided
at any time after the date of enactment, so long as it is provided on
or before the last date for providing the notice under such
subparagraph.
B. Model
Pursuant to section 305(b)(3)(D)(iii) of ERISA, the Department is
publishing a model notice, entitled Notice of Critical Status, that a
multiemployer plan may use to satisfy the content requirements of
section 305(b)(3)(D) of ERISA.\3\ The IRS advises that it will consider
the sponsor of a plan in critical status who uses the model notice to
notify participants and others of the status of the plan to have
satisfied its content obligations under 432(b)(3)(D) of the Code. While
the model notice contained in this document specifically relates to
plans in critical status, the Department believes that the model may be
useful in preparing notices required to be furnished by plans in
endangered status.
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\3\ Plans may not use the model notice published herein to
satisfy the notice requirement under section 305(e)(8)(C) of ERISA.
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To discharge the obligation to furnish a notice to the Department
of Labor, plans may mail notices to U.S. Department of Labor, Employee
Benefits Security Administration, Public Disclosure Room, N-1513, 200
Constitution Ave., NW., Washington, DC 20210. Alternatively, notices
may be e-mailed to criticalstatusnotice@dol.gov. Critical Status
notices received by the Department will be available for public
inspection at the Public Disclosure Room, and accessible on EBSA's Web
site at: http://www.dol.gov/ebsa.
To discharge the obligation to furnish a notice to the Pension
Benefit Guaranty Corporation, plans may mail notices to Multiemployer
Program Division, Pension Benefit Guaranty Corporation, 1200 K Street,
NW., Suite 930, Washington, DC 20005. Alternatively, notices may be e-
mailed to multiemployerprogram@pbgc.gov.
C. Effective Date
This regulation will be effective 60 days after the date of
publication of the final regulation in the Federal Register. However,
because section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the
Code are effective with respect to plan years beginning after 2007, the
Department, as well as Treasury and IRS, will, for purposes of notices
required to be furnished prior to the effective date of a final
regulation, view utilization of the model notice contained in this
document, if accurately completed and timely furnished, as satisfying
the notice requirements of section 305(b)(3)(D) of ERISA and
432(b)(3)(D) of the Code.
D. Regulatory Impact Analysis
Summary
The Notice of Critical Status (``Model Notice'') in paragraph (b)
of the proposed regulation will help sponsors of plans in critical
status who use the model notice to satisfy their obligations under
section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the Code.
While the Model Notice is not mandatory, the sponsor of a plan in
critical status who uses the model notice to notify participants and
others of the status of the plan will be considered to have satisfied
its obligations under ERISA and the Code. The anticipated benefit of
the Model Notice, therefore, is to help plan sponsors fulfill their
disclosure responsibilities with greater certainty and less cost.
[[Page 15690]]
Executive Order 12866
Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is ``significant'' and therefore
subject to review by the Office of Management and Budget (OMB). Section
3(f) of the Executive Order defines a ``significant regulatory action''
as an action that is likely to result in a rule (1) having an annual
effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
``economically significant''); (2) creating serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. It has been determined that this
action is not significant under section 3(f) of the Executive Order.
Paperwork Reduction Act
As part of its continuing effort to reduce paperwork and respondent
burden, the Department conducts a preclearance consultation program to
provide the general public and federal agencies with an opportunity to
comment on proposed and continuing collections of information in
accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)). This helps to ensure that requested data can be
provided in the desired format, reporting burden (time and financial
resources) is minimized, collection instruments are clearly understood,
and the impact of collection requirements on respondents can be
properly assessed.
The Department is not soliciting comments concerning an information
collection request (ICR) pertaining to the Model Notice. As noted
above, pursuant to Reorganization Plan No. 4, the Department of the
Treasury has interpretive authority over the minimum funding rules of
Title I of ERISA, including section 305 of ERISA, and it has advised
that it is developing guidance under this provision. Costs and burdens
associated with complying with the notice requirement in section
305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the Code, therefore,
will be accounted for in an ICR associated with the Treasury guidance.
To the extent the Model Notice includes an ICR, persons are not
required to respond to, and generally are not subject to any penalty
for failing to comply with, the ICR unless the ICR has a valid OMB
control number.\4\
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\4\ See 5 CFR 1320.1 through 1320.18.
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Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are
likely to have a significant economic impact on a substantial number of
small entities. Unless an agency certifies that a proposed rule is not
likely to have a significant economic impact on a substantial number of
small entities, section 603 of RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of proposed rulemaking describing the impact of the rule
on small entities and seeking public comment on such impact. Small
entities include small businesses, organizations and governmental
jurisdictions.
The Department has deemed that an employee benefit plan shall be
considered a small entity if it has fewer than 100 participants.\5\ By
this standard, data from the EBSA Private Pension Bulletin 2004 (the
latest available information) show that only 67 multiemployer pension
plans or 4% of all multiemployer pension plans are small entities. The
Department does not consider this to be a substantial number of small
entities. Therefore, pursuant to section 605(b) of RFA, the Department
hereby certifies that the proposed rule is not likely to have a
significant economic impact on a substantial number of small entities.
Further, to the Department's knowledge, there are no federal
regulations that might duplicate, overlap, or conflict with the
proposed rule.
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\5\ The basis for this definition is found in section 104(a)(2)
of the Act, which permits the Secretary of Labor to prescribe
simplified annual reports for pension plans that cover fewer than
100 participants.
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Congressional Review Act
The Model Notice being issued here is subject to the Congressional
Review Act provisions of the Small Business Regulatory Enforcement
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and, if finalized, will be
transmitted to Congress and the Comptroller General for review.
Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4), as well as Executive Order 12875, the proposal does not include
any Federal mandate that may result in expenditures by State, local, or
tribal governments, and does not impose an annual burden exceeding $100
million on the private sector, adjusted for inflation.
Federalism Statement
Executive Order 13132 (August 4, 1999) outlines fundamental
principles of federalism, and requires the adherence to specific
criteria by Federal agencies in the process of their formulation and
implementation of policies that have substantial direct effects on the
States, the relationship between the national government and States, or
on the distribution of power and responsibilities among the various
levels of government. This proposed rule does not have federalism
implications because it has no substantial direct effect on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Section 514 of ERISA provides, with certain
exceptions specifically enumerated, that the provisions of Titles I and
IV of ERISA supersede any and all laws of the States as they relate to
any employee benefit plan covered under ERISA. The proposed rule does
not alter the fundamental reporting and disclosure requirements of the
statute with respect to employee benefit plans, and as such have no
implications for the States or the relationship or distribution of
power between the national government and the States.
List of Subjects in 29 CFR Part 2540
Employee benefit plans, Pension plans, Multiemployer plans.
For the reasons set forth above, the Department proposes to amend
Chapter XXV of Title 29 of the Code of Federal Regulations by adding
Subchapter E to read as follows:
Subchapter E--Funding
PART 2540--MINIMUM FUNDING STANDARDS
Authority: 29 U.S.C. 1135 and Secretary of Labor's Order No. 1-
2003, 68 FR 5374 (Feb. 3, 2003). Section 2540.305-1 is also issued
under 29 U.S.C. 1085(b)(3)(D)(iii).
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Sec. 2540.305-1 Model Notice of Critical Status for Multiemployer
Plans.
(a) Pursuant to section 305(b)(3)(D)(iii) of the Employee
Retirement Income Security Act of 1974 (ERISA or Act), paragraph (b) of
this section provides a model notice that a multiemployer plan may use
to satisfy the content requirements under section 305(b)(3)(D) of ERISA
and section 432(b)(3)(D) of the Code. Use of the model notice is not
mandatory. However, the plan sponsor of a plan in critical status who
uses the model notice to notify participants and others of the status
of the plan is considered to have satisfied its content obligations
under section 305(b)(3)(D) of ERISA and section 432(b)(3)(D) of the
Code.
(b) Model notice:
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Signed at Washington, DC, this 18th day of March, 2008.
Bradford P. Campbell,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
[FR Doc. E8-5855 Filed 3-24-08; 8:45 am]
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