PBGC Submits Updated Proposal for Determining Whether Plans Covered by ERISA

The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) approve, under the Paperwork Reduction Act, a collection of information necessary for the PBGC to determine whether a defined benefit (DB) plan is covered under Title IV of the Employee Retirement Income Security Act (ERISA).

This is the second request by the agency and follows a period of comments on its first request this past December.

A proposed form and instructions would be used by a plan sponsor or plan administrator to request a coverage determination and would be suitable for all types of requests. The proposed form would highlight the four plan types for which coverage determinations are most frequently requested:

• Church plans as listed in Section 4021(b)(3) of ERISA;
• Plans that are established and maintained exclusively for the benefit of plan sponsors’ substantial owners as listed in Section 4021(b)(9);
• Plans established and maintained by professional services employers, as listed in Section 4021(b)(13) that, since September 2, 1974, have covered no more than 25 active participants; and
• Puerto Rico-based plans within the meaning of Section 1022(i)(1) of ERISA.

A number of DB plans that have been determined to qualify for church-plan status by the IRS have had that status challenged in lawsuits. But, the PGGC tells PLANSPONSOR, its latest request has no tie to the lawsuits, and “the purpose of the coverage form is to ease the process by which people can make a request for a coverage determination.”

A supporting statement addressing public comments on the new proposed forms and instructions discusses a comment asking that employers be allowed to request coverage determinations before creating and sponsoring pension plans. Although the agency cannot provide coverage determinations for plans that do not exist, the supporting statement explains that, in limited situations, employers will be able to use the soon-to-be issued coverage forms to request an opinion letter about whether a plan being developed is likely to receive PBGC coverage.

Comments are due to OMB by June 7.