When the Pension Benefit Guaranty Corporation (PBGC) announced a moratorium from July 8 – December 31, 2014 on its enforcement of ERISA Section 4062(e), it raised hopes that the PBGC might refocus its efforts on truly at-risk defined benefit pension plans. But, the PBGC announcement did not provide relief. Employers must still report Section 4062(e) transactions and the PBGC reserve the right to enforce events which occur during the moratorium.
ERISA Section 4062(e) applies to defined benefit pension plans when 20% or more of the plan's participants have a termination of employment resulting from the cessation of an operation at a facility. The cessation could result from a strike or natural disaster as well as the employer shutdown of an operation and could be only a portion of a larger facility. Determination of the cessation event and the resulting terminations of employment have challenged employers, with the PBGC instructions including indications that small restructurings could be covered by this provision.
If a Section 4062(e) event occurs, notice must be filed with the PBGC within 60 days of the later of the cessation of the operation or the termination of 20% of the active plan participants. Failure to file can involve penalties up to $1,100 per day. The notice requires a good deal of information about the plan, its funding status and the event.
If a Section 4062(e) event occurs, employers are generally required to make plan contributions or obtain a bond or escrow amount based on the plans unfunded termination liability.
Notwithstanding the moratorium on enforcement, employers with defined benefit pensions should continue to review ERISA Section 4062(e) and its obligations regarding defined benefit pension plans whenever contemplating the cessation of an operation or facility. Sales of business units should be reviewed in advance to assess the risk of a Section 4062(e) event. Section 4062(e) Event Notice filings must continue to be made with the PBGC.