Title 29—Labor--Volume 1
PART 4041—TERMINATION OF SINGLE-EMPLOYER PLANS
§ 4041.1   Purpose and scope.
This part sets forth the rules and procedures for terminating a single-employer plan in a standard or distress termination under section 4041 of ERISA, the exclusive means of voluntarily terminating a plan.
§ 4041.2   Definitions.
The following terms are defined in § 4001.2 of this chapter: affected party, annuity, benefit liabilities, Code, contributing sponsor, controlled group, distress termination, distribution date, EIN, employer, ERISA, guaranteed benefit, insurer, irrevocable commitment, IRS, mandatory employee contributions, normal retirement age, notice of intent to terminate, PBGC, person, plan administrator, plan year, PN, single-employer plan, standard termination, termination date, and title IV benefit. In addition, for purposes of this part:
Distress termination notice means the notice filed with the PBGC pursuant to § 4041.45.
Distribution notice means the notice issued to the plan administrator by the PBGC pursuant to § 4041.47(c) upon the PBGC's determination that the plan has sufficient assets to pay at least guaranteed benefits.
Majority owner means, with respect to a contributing sponsor of a single-employer plan, an individual who owns, directly or indirectly, 50 percent or more (taking into account the constructive ownership rules of section 414(b) and (c) of the Code) of—
(1) An unincorporated trade or business;
(2) The capital interest or the profits interest in a partnership; or
(3) Either the voting stock of a corporation or the value of all of the stock of a corporation.
Notice of noncompliance means a notice issued to a plan administrator by the PBGC pursuant to § 4041.31 advising the plan administrator that the requirements for a standard termination have not been satisfied and that the plan is an ongoing plan.
Notice of plan benefits means the notice to each participant and beneficiary required by § 4041.24.
Participant means—
(1) Any individual who is currently in employment covered by the plan and who is earning or retaining credited service under the plan, including any individual who is considered covered under the plan for purposes of meeting the minimum participation requirements but who, because of offset or similar provisions, does not have any accrued benefits;
(2) Any nonvested individual who is not currently in employment covered by the plan but who is earning or retaining credited service under the plan; and
(3) Any individual who is retired or separated from employment covered by the plan and who is receiving benefits under the plan or is entitled to begin receiving benefits under the plan in the future, excluding any such individual to whom an insurer has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan.
Plan benefits means benefit liabilities determined as of the termination date (taking into account the rules in § 4041.8(a)).
Proposed termination date means the date specified as such by the plan administrator in the notice of intent to terminate or, if later, in the standard or distress termination notice.
Residual assets means the plan assets remaining after all plan benefits and other liabilities (e.g., PBGC premiums) of the plan have been satisfied (taking into account the rules in § 4041.8(b)).
Standard termination notice means the notice filed with the PBGC pursuant to § 4041.25.
State guaranty association means an association of insurers created by a State, the District of Columbia, or the Commonwealth of Puerto Rico to pay benefits and to continue coverage, within statutory limits, under life and health insurance policies and annuity contracts when an insurer fails.
§ 4041.3   Computation of time; filing and issuance rules.
(a) Computation of time. The PBGC applies the rules in subpart D of part 4000 of this chapter to compute any time period under this part. A proposed termination date may be any day, including a weekend or Federal holiday.
(b) Filing with the PBGC —(1) Method and date of filing. The PBGC applies the rules in subpart A of part 4000 of this chapter to determine permissible methods of filing with the PBGC under this part. The PBGC applies the rules in subpart C of part 4000 of this chapter to determine the date that a submission under this part was filed with the PBGC.
(2) Where to file. See § 4000.4 of this chapter for information on where to file.
(c) Issuance to third parties. The following rules apply to affected parties (other than the PBGC). For purposes of this paragraph (c), a person entitled to notice under the spin-off/termination transaction rules of § 4041.23(c) or § 4041.24(f) is treated as an affected party.
(1) Method and date of issuance. The PBGC applies the rules in subpart B of part 4000 of this chapter to determine permissible methods of issuance under this part. The PBGC applies the rules in subpart C of part 4000 of this chapter to determine the date that an issuance under this part was provided.
(2) Omission of affected parties. The failure to issue any notice to an affected party (other than any employee organization) within the specified time period will not cause the notice to be untimely if—
(i) After-discovered affected parties. The plan administrator could not reasonably have been expected to know of the affected party, and issues the notice promptly after discovering the affected party; or
(ii) Unlocated participants. The plan administrator could not locate the affected party after making reasonable efforts, and issues the notice promptly in the event the affected party is located.
(3) Deceased participants. In the case of a deceased participant, the plan administrator need not issue a notice to the participant's estate if the estate is not entitled to a distribution.
(4) Form of notices to affected parties. All notices to affected parties must be readable and written in a manner calculated to be understood by the average plan participant. The plan administrator may provide additional information with a notice only if the information is not misleading.
(5) Foreign languages. The plan administrator of a plan that (as of the proposed termination date) covers the numbers or percentages in § 2520.104b-10(e) of this title of participants literate only in the same non-English language must, for any notice to affected parties—
(i) Include a prominent legend in that common non-English language advising them how to obtain assistance in understanding the notice; or
(ii) Provide the notice in that common non-English language to those affected parties literate only in that language.
§ 4041.4   Disaster relief.
When the President of the United States declares that, under the Disaster Relief Act (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, the Executive Director of the PBGC (or his or her designee) may, by issuing one or more notices of disaster relief, extend by up to 180 days any due date under this part.
§ 4041.5   Record retention and availability.
(a) Retention requirement —(1) Persons subject to requirement; records to be retained. Each contributing sponsor and the plan administrator of a plan terminating in a standard termination, or in a distress termination that closes out in accordance with § 4041.50, must maintain all records necessary to demonstrate compliance with section 4041 of ERISA and this part. If a contributing sponsor or the plan administrator maintains information in accordance with this section, the other(s) need not maintain that information.
(2) Retention period. The records described in paragraph (a)(1) of this section must be preserved for six years after the date when the post-distribution certification under this part is filed with the PBGC.
(3) Electronic recordkeeping. The contributing sponsor or plan administrator may use electronic media for maintenance and retention of records required by this part in accordance with the requirements of subpart E of part 4000 of this chapter.
(b) Availability of records. The contributing sponsor or plan administrator must make all records needed to determine compliance with section 4041 of ERISA and this part available to the PBGC upon request for inspection and photocopying (or, for electronic records, inspection, electronic copying, and printout) at the location where they are kept (or another, mutually agreeable, location) and must submit such records to the PBGC within 30 days after the date of a written request by the PBGC or by a later date specified therein.
§ 4041.6   Effect of failure to provide required information.
If a plan administrator fails to provide any information required under this part within the specified time limit, the PBGC may assess a penalty under section 4071 of ERISA. The PBGC may also pursue any other equitable or legal remedies available to it under the law, including, if appropriate, the issuance of a notice of noncompliance under § 4041.31.
§ 4041.7   Challenges to plan termination under collective bargaining agreement.
(a) Suspension upon formal challenge to termination —(1) Notice of formal challenge. (i) If the PBGC is advised, before its review period under § 4041.26(a) ends, or before issuance of a notice of inability to determine sufficiency or a distribution notice under § 4041.47(b) or (c), that a formal challenge to the termination has been initiated as described in paragraph (c) of this section, the PBGC will suspend the termination proceeding and so advise the plan administrator in writing.
(ii) If the PBGC is advised of a challenge described in paragraph (a)(1)(i) of this section after the time specified therein, the PBGC may suspend the termination proceeding and will so advise the plan administrator in writing.
(2) Standard terminations. During any period of suspension in a standard termination—
(i) The running of all time periods specified in ERISA or this part relevant to the termination will be suspended; and
(ii) The plan administrator must comply with the prohibitions in § 4041.22.
(3) Distress terminations. During any period of suspension in a distress termination—
(i) The issuance by the PBGC of any notice of inability to determine sufficiency or distribution notice will be stayed or, if any such notice was previously issued, its effectiveness will be stayed;
(ii) The plan administrator must comply with the prohibitions in § 4041.42; and
(iii) The plan administrator must file a distress termination notice with the PBGC pursuant to § 4041.45.
(b) Existing collective bargaining agreement. For purposes of this section, an existing collective bargaining agreement means a collective bargaining agreement that has not been made inoperative by a judicial ruling and, by its terms, either has not expired or is extended beyond its stated expiration date because neither of the collective bargaining parties took the required action to terminate it. When a collective bargaining agreement no longer meets these conditions, it ceases to be an “existing collective bargaining agreement,” whether or not any or all of its terms may continue to apply by operation of law.
(c) Formal challenge to termination. A formal challenge to a plan termination asserting that the termination would violate the terms and conditions of an existing collective bargaining agreement is initiated when—
(1) Any procedure specified in the collective bargaining agreement for resolving disputes under the agreement commences; or
(2) Any action before an arbitrator, administrative agency or board, or court under applicable labor-management relations law commences.
(d) Resolution of challenge. Immediately upon the final resolution of the challenge, the plan administrator must notify the PBGC in writing of the outcome of the challenge, provide the PBGC with a copy of any award or order, and, if the validity of the proposed termination has been upheld, advise the PBGC whether the proposed termination is to proceed. The final resolution ends the suspension period under paragraph (a) of this section.
(1) Challenge sustained. If the final resolution is that the proposed termination violates an existing collective bargaining agreement, the PBGC will dismiss the termination proceeding, all actions taken to effect the plan termination will be null and void, and the plan will be an ongoing plan. In this event, in a distress termination, § 4041.42(d) will apply as of the date of the dismissal by the PBGC.
(2) Termination sustained. If the final resolution is that the proposed termination does not violate an existing collective bargaining agreement and the plan administrator has notified the PBGC that the termination is to proceed, the PBGC will reactivate the termination proceeding by sending a written notice thereof to the plan administrator, and—
(i) The termination proceeding will continue from the point where it was suspended;
(ii) All actions taken to effect the termination before the suspension will be effective;
(iii) Any time periods that were suspended will resume running from the date of the PBGC's notice of the reactivation of the proceeding;
(iv) Any time periods that had fewer than 15 days remaining will be extended to the 15th day after the date of the PBGC's notice, or such later date as the PBGC may specify; and
(v) In a distress termination, the PBGC will proceed to issue a notice of inability to determine sufficiency or a distribution notice (or reactivate any such notice stayed under paragraph (a)(3) of this section), either with or without first requesting updated information from the plan administrator pursuant to § 4041.45(c).
(e) Final resolution of challenge. A formal challenge to a proposed termination is finally resolved when—
(1) The parties involved in the challenge enter into a settlement that resolves the challenge;
(2) A final award, administrative decision, or court order is issued that is not subject to review or appeal; or
(3) A final award, administrative decision, or court order is issued that is not appealed, or review or enforcement of which is not sought, within the time for filing an appeal or requesting review or enforcement.
(f) Involuntary termination by the PBGC. Notwithstanding any other provision of this section, the PBGC retains the authority in any case to initiate a plan termination in accordance with the provisions of section 4042 of ERISA.
§ 4041.8   Post-termination amendments.
(a) Plan benefits. A participant's or beneficiary's plan benefits are determined under the plan's provisions in effect on the plan's termination date. Notwithstanding the preceding sentence, an amendment that is adopted after the plan's termination date is taken into account with respect to a participant's or beneficiary's plan benefits to the extent the amendment—
(1) Does not decrease the value of the participant's or beneficiary's plan benefits under the plan's provisions in effect on the termination date; and
(2) Does not eliminate or restrict any form of benefit available to the participant or beneficiary on the plan's termination date.
(b) Residual assets. In a plan in which participants or beneficiaries will receive some or all of the plan's residual assets based on an allocation formula, the amount of the plan's residual assets and each participant's or beneficiary's share thereof is determined under the plan's provisions in effect on the plan's termination date. Notwithstanding the preceding sentence, an amendment adopted after the plan's termination date is taken into account with respect to a participant's or beneficiary's allocation of residual assets to the extent the amendment does not decrease the value of the participant's or beneficiary's allocation of residual assets under the plan's provisions in effect on the termination date.
(c) Permitted decreases. For purposes of this section, an amendment shall not be treated as decreasing the value of a participant's or beneficiary's plan benefits or allocation of residual assets to the extent—
(1) The decrease is necessary to meet a qualification requirement under section 401 of the Code;
(2) The participant's or beneficiary's allocation of residual assets is paid in the form of an increase in the participant's or beneficiary's plan benefits; or
(3) The decrease is offset by assets that would otherwise revert to the contributing sponsor or by additional contributions.
(d) Distress terminations. In the case of a distress termination, a participant's or beneficiary's benefit liabilities are determined as of the termination date in the same manner as plan benefits under this section.
§ 4041.21   Requirements for a standard termination.
(a) Notice and distribution requirements. A standard termination is valid if the plan administrator—
(1) Issues a notice of intent to terminate to all affected parties (other than the PBGC) in accordance with § 4041.23;
(2) Issues notices of plan benefits to all affected parties entitled to plan benefits in accordance with § 4041.24;
(3) Files a standard termination notice with the PBGC in accordance with § 4041.25;
(4) Distributes the plan's assets in satisfaction of plan benefits in accordance with § 4041.28(a) and (c); and
(5) In the case of a spin-off/termination transaction (as defined in § 4041.23(c)), issues the notices required by § 4041.23(c), § 4041.24(f), and § 4041.27(a)(2) in accordance with such sections.
(b) Plan sufficiency —(1) Commitment to make plan sufficient. A contributing sponsor of a plan or any other member of the plan's controlled group may make a commitment to contribute any additional sums necessary to enable the plan to satisfy plan benefits in accordance with § 4041.28. A commitment will be valid only if—
(i) It is made to the plan;
(ii) It is in writing, signed by the contributing sponsor or controlled group member(s); and
(iii) In any case in which the person making the commitment is the subject of a bankruptcy liquidation or reorganization proceeding, as described in § 4041.41(c)(1) or (c)(2), the commitment is approved by the court before which the liquidation or reorganization proceeding is pending or a person not in bankruptcy unconditionally guarantees to meet the commitment at or before the time distribution of assets is required.
(2) Alternative treatment of majority owner's benefit. A majority owner may elect to forgo receipt of his or her plan benefits to the extent necessary to enable the plan to satisfy all other plan benefits in accordance with § 4041.28. Any such alternative treatment of the majority owner's plan benefits is valid only if—
(i) The majority owner's election is in writing;
(ii) In any case in which the plan would require the spouse of the majority owner to consent to distribution of the majority owner's receipt of his or her plan benefits in a form other than a qualified joint and survivor annuity, the spouse consents in writing to the election;
(iii) The majority owner makes the election and the spouse consents during the time period beginning with the date of issuance of the first notice of intent to terminate and ending with the date of the last distribution; and
(iv) Neither the majority owner's election nor the spouse's consent is inconsistent with a qualified domestic relations order (as defined in section 206(d)(3) of ERISA).
§ 4041.22   Administration of plan during pendency of termination process.
(a) In general. A plan administrator may distribute plan assets in connection with the termination of the plan only in accordance with the provisions of this part. From the first day the plan administrator issues a notice of intent to terminate to the last day of the PBGC's review period under § 4041.26(a), the plan administrator must continue to carry out the normal operations of the plan. During that time period, except as provided in paragraph (b) of this section, the plan administrator may not—
(1) Purchase irrevocable commitments to provide any plan benefits; or
(2) Pay benefits attributable to employer contributions, other than death benefits, in any form other than an annuity.
(b) Exception. The plan administrator may pay benefits attributable to employer contributions either through the purchase of irrevocable commitments or in a form other than an annuity if—
(1) The participant has separated from active employment or is otherwise permitted under the Code to receive the distribution;
(2) The distribution is consistent with prior plan practice; and
(3) The distribution is not reasonably expected to jeopardize the plan's sufficiency for plan benefits.
§ 4041.23   Notice of intent to terminate.
(a) Notice requirement —(1) In general. At least 60 days and no more than 90 days before the proposed termination date, the plan administrator must issue a notice of intent to terminate to each person (other than the PBGC) that is an affected party as of the proposed termination date. In the case of a beneficiary of a deceased participant or an alternate payee, the plan administrator must issue a notice of intent to terminate promptly to any person that becomes an affected party after the proposed termination date and on or before the distribution date.
(2) Early issuance of NOIT. The PBGC may consider a notice of intent to terminate to be timely under paragraph (a)(1) of this section if the notice was early by a de minimis number of days and the PBGC finds that the early issuance was the result of administrative error.
(b) Contents of notice. The PBGC's standard termination forms and instructions package includes a model notice of intent to terminate. The notice of intent to terminate must include—
(1) Identifying information. The name and PN of the plan, the name and EIN of each contributing sponsor, and the name, address, and telephone number of the person who may be contacted by an affected party with questions concerning the plan's termination;
(2) Intent to terminate plan. A statement that the plan administrator intends to terminate the plan in a standard termination as of a specified proposed termination date and will notify the affected party if the proposed termination date is changed to a later date or if the termination does not occur;
(3) Sufficiency requirement. A statement that, in order to terminate in a standard termination, plan assets must be sufficient to provide all plan benefits under the plan;
(4) Cessation of accruals. A statement (as applicable) that—
(i) Benefit accruals will cease as of the termination date, but will continue if the plan does not terminate;
(ii) A plan amendment has been adopted under which benefit accruals will cease, in accordance with section 204(h) of ERISA, as of the proposed termination date or a specified date before the proposed termination date, whether or not the plan is terminated; or
(iii) Benefit accruals ceased, in accordance with section 204(h) of ERISA, as of a specified date before the notice of intent to terminate was issued;
(5) Annuity information. If required under § 4041.27, the annuity information described therein;
(6) Benefit information. A statement that each affected party entitled to plan benefits will receive a written notification regarding his or her plan benefits;
(7) Summary plan description. A statement as to how an affected party entitled to receive the latest updated summary plan description under section 104(b) of ERISA can obtain it.
(8) Continuation of monthly benefits. For persons who are, as of the proposed termination date, in pay status, a statement (as applicable)—
(i) That their monthly (or other periodic) benefit amounts will not be affected by the plan's termination; or
(ii) Explaining how their monthly (or other periodic) benefit amounts will be affected under plan provisions); and
(9) Extinguishment of guarantee. A statement that after plan assets have been distributed in full satisfaction of all plan benefits under the plan with respect to a participant or a beneficiary of a deceased participant, either by the purchase of irrevocable commitments (annuity contracts) or by an alternative form of distribution provided for under the plan, the PBGC no longer guarantees that participant's or beneficiary's plan benefits.
(c) Spin-off/termination transactions. In the case of a transaction in which a single defined benefit plan is split into two or more plans and there is a reversion of residual assets to an employer upon the termination of one or more but fewer than all of the resulting plans (a “spin-off/termination transaction”), the plan administrator must, within the time period specified in paragraph (a) of this section, provide a notice describing the transaction to all participants, beneficiaries of deceased participants, and alternate payees in the original plan who are, as of the proposed termination date, covered by an ongoing plan.
§ 4041.24   Notices of plan benefits.
(a) Notice requirement. The plan administrator must, no later than the time the plan administrator files the standard termination notice with the PBGC, issue a notice of plan benefits to each person (other than the PBGC and any employee organization) who is an affected party as of the proposed termination date. In the case of a beneficiary of a deceased participant or an alternate payee, the plan administrator must issue a notice of plan benefits promptly to any person that becomes an affected party after the proposed termination date and on or before the distribution date.
(b) Contents of notice. The plan administrator must include in each notice of plan benefits—
(1) The name and PN of the plan, the name and EIN of each contributing sponsor, and the name, address, and telephone number of an individual who may be contacted to answer questions concerning plan benefits;
(2) The proposed termination date given in the notice of intent to terminate and any extended proposed termination date under § 4041.25(b);
(3) If the amount of plan benefits set forth in the notice is an estimate, a statement that the amount is an estimate and that plan benefits paid may be greater than or less than the estimate;
(4) Except in the case of an affected party in pay status for more than one year as of the proposed termination date—
(i) The personal data (if available) needed to calculate the affected party's plan benefits, along with a statement requesting that the affected party promptly correct any information he or she believes to be incorrect; and
(ii) If any of the personal data needed to calculate the affected party's plan benefits is not available, the best available data, along with a statement informing the affected party of the data not available and affording him or her the opportunity to provide it; and
(5) The information in paragraphs (c) through (e) of this section, as applicable.
(c) Benefits of persons in pay status. For an affected party in pay status as of the proposed termination date, the plan administrator must include in the notice of plan benefits—
(1) The amount and form of the participant's or beneficiary's plan benefits payable as of the proposed termination date;
(2) The amount and form of plan benefits, if any, payable to a beneficiary upon the participant's death and the name of the beneficiary; and
(3) The amount and date of any increase or decrease in the benefit scheduled to occur (or that has already occurred) after the proposed termination date and an explanation of the increase or decrease, including, where applicable, a reference to the pertinent plan provision.
(d) Benefits of persons with valid elections or de minimis benefits. For an affected party who, as of the proposed termination date, has validly elected a form and starting date with respect to plan benefits not yet in pay status, or with respect to whom the plan administrator has determined that a nonconsensual lump sum distribution will be made, the plan administrator must include in the notice of plan benefits—
(1) The amount and form of the person's plan benefits payable as of the projected benefit starting date, and what that date is;
(2) The information in paragraphs (c)(2) and (c)(3) of this section;
(3) If the plan benefits will be paid in any form other than a lump sum and the age at which, or form in which, the plan benefits will be paid differs from the normal retirement benefit—
(i) The age or form stated in the plan; and
(ii) The age or form adjustment factors; and
(4) If the plan benefits will be paid in a lump sum—
(i) An explanation of when a lump sum may be paid without the consent of the participant or the participant's spouse;
(ii) A description of the mortality table used to convert to the lump sum benefit (e.g., the mortality table published by the IRS in Revenue Ruling 95-6, 1995-1 C.B. 80) and a reference to the pertinent plan provisions;
(iii) A description of the interest rate to be used to convert to the lump sum benefit (e.g., the 30-year Treasury rate for the third month before the month in which the lump sum is distributed), a reference to the pertinent plan provision, and (if known) the applicable interest rate;
(iv) An explanation of how interest rates are used to calculate lump sums;
(v) A statement that the use of a higher interest rate results in a smaller lump sum amount; and
(vi) A statement that the applicable interest rate may change before the distribution date.
(e) Benefits of all other persons not in pay status. For any other affected party not described in paragraph (c) or (d) of this section (or described therein only with respect to a portion of the affected party's plan benefits), the plan administrator must include in the notice of plan benefits—
(1) The amount and form of the person's plan benefits payable at normal retirement age in any one form permitted under the plan;
(2) Any alternative benefit forms, including those payable to a beneficiary upon the person's death either before or after benefits commence;
(3) If the person is or may become entitled to a benefit that would be payable before normal retirement age, the amount and form of benefit that would be payable at the earliest benefit commencement date (or, if more than one such form is payable at the earliest benefit commencement date, any one of those forms) and whether the benefit commencing on such date would be subject to future reduction; and
(4) If the plan benefits may be paid in a lump sum, the information in paragraph (d)(4) of this section.
(f) Spin-off/termination transactions. In the case of a spin-off/termination transaction (as defined in § 4041.23(c)), the plan administrator must, no later than the time the plan administrator files the standard termination notice for any terminating plan, provide all participants, beneficiaries of deceased participants, and alternate payees in the original plan who are (as of the proposed termination date) covered by an ongoing plan with a notice of plan benefits containing the information in paragraphs (b) through (e) of this section.
§ 4041.25   Standard termination notice.
(a) Notice requirement. The plan administrator must file with the PBGC a standard termination notice, consisting of the PBGC Form 500, completed in accordance with the instructions thereto, on or before the 180th day after the proposed termination date.
(b) Change of proposed termination date. The plan administrator may, in the standard termination notice, select a proposed termination date that is later than the date specified in the notice of intent to terminate, provided it is not later than 90 days after the earliest date on which a notice of intent to terminate was issued to any affected party.
(c) Request for IRS determination letter. To qualify for the distribution deadline in § 4041.28(a)(1)(ii), the plan administrator must submit to the IRS a valid request for a determination of the plan's qualification status upon termination (“determination letter”) by the time the standard termination notice is filed.
§ 4041.26   PBGC review of standard termination notice.
(a) Review period —(1) In general. The PBGC will notify the plan administrator in writing of the date on which it received a complete standard termination notice at the address provided in the PBGC's standard termination forms and instructions package. If the PBGC does not issue a notice of noncompliance under § 4041.31 during its 60-day review period following such date, the plan administrator must proceed to close out the plan in accordance with § 4041.28.
(2) Extension of review period. The PBGC and the plan administrator may, before the expiration of the PBGC review period in paragraph (a)(1) of this section, agree in writing to extend that period.
(b) If standard termination notice is incomplete —(1) For purposes of timely filing. If the standard termination notice is incomplete, the PBGC may, based on the nature and extent of the omission, provide the plan administrator an opportunity to complete the notice. In such a case, the standard termination notice will be deemed to have been complete as of the date when originally filed for purposes of § 4041.25(a), provided the plan administrator provides the missing information by the later of—
(i) The 180th day after the proposed termination date; or
(ii) The 30th day after the date of the PBGC notice that the filing was incomplete.
(2) For purposes of PBGC review period. If the standard termination notice is completed under paragraph (b)(1) of this section, the PBGC will determine whether the notice will be deemed to have been complete as of the date when originally filed for purposes of determining when the PBGC's review period begins under § 4041.26(a)(1).
(c) Additional information —(1) Deadline for providing additional information. The PBGC may in any case require the submission of additional information relevant to the termination proceeding. Any such additional information becomes part of the standard termination notice and must be submitted within 30 days after the date of a written request by the PBGC, or within a different time period specified therein. The PBGC may in its discretion shorten the time period where it determines that the interests of the PBGC or participants may be prejudiced by a delay in receipt of the information.
(2) Effect on termination proceeding. A request for additional information will suspend the running of the PBGC's 60-day review period. The review period will begin running again on the day the required information is received and continue for the greater of—
(i) The number of days remaining in the review period; or
(ii) Five regular business days.
§ 4041.27   Notice of annuity information.
(a) Notice requirement —(1) In general. The plan administrator must provide notices in accordance with this section to each affected party entitled to plan benefits other than an affected party whose plan benefits will be distributed in the form of a nonconsensual lump sum.
(2) Spin-off/termination transactions. The plan administrator must provide the information in paragraph (d) of this section to a person entitled to notice under §§ 4041.23(c) or 4041.24(f), at the same time and in the same manner as required for an affected party.
(b) Content of notice. The plan administrator must include, as part of the notice of intent to terminate—
(1) Identity of insurers. The name and address of the insurer or insurers from whom (if known), or (if not) from among whom, the plan administrator intends to purchase irrevocable commitments (annuity contracts);
(2) Change in identity of insurers. A statement that if the plan administrator later decides to select a different insurer, affected parties will receive a supplemental notice no later than 45 days before the distribution date; and
(3) State guaranty association coverage information. A statement informing the affected party—
(i) That once the plan distributes a benefit in the form of an annuity purchased from an insurance company, the insurance company takes over the responsibility for paying that benefit;
(ii) That all states, the District of Columbia, and the Commonwealth of Puerto Rico have established “guaranty associations” to protect policy holders in the event of an insurance company's financial failure;
(iii) That a guaranty association is responsible for all, part, or none of the annuity if the insurance company cannot pay;
(iv) That each guaranty association has dollar limits on the extent of its guaranty coverage, along with a general description of the applicable dollar coverage limits;
(v) That in most cases the policy holder is covered by the guaranty association for the state where he or she lives at the time the insurance company fails to pay; and
(vi) How to obtain the addresses and telephone numbers of guaranty association offices from the PBGC (as described in the applicable forms and instructions package).
(c) Where insurer(s) not known —(1) Extension of deadline for notice. If the identity-of-insurer information in paragraph (b)(1) of this section is not known at the time the plan administrator is required to provide it to an affected party as part of a notice of intent to terminate, the plan administrator must instead provide it in a supplemental notice under paragraph (d) of this section.
(2) Alternative NOIT information. A plan administrator that qualifies for the extension in paragraph (c)(1) of this section with respect to a notice of intent to terminate must include therein (in lieu of the information in paragraph (b) of this section) a statement that—
(i) Irrevocable commitments (annuity contracts) may be purchased from an insurer to provide some or all of the benefits under the plan;
(ii) The insurer or insurers have not yet been identified; and
(iii) Affected parties will be notified at a later date (but no later than 45 days before the distribution date) of the name and address of the insurer or insurers from whom (if known), or (if not) from among whom, the plan administrator intends to purchase irrevocable commitments (annuity contracts).
(d) Supplemental notice. The plan administrator must provide a supplemental notice to an affected party in accordance with this paragraph (d) if the plan administrator did not previously notify the affected party of the identity of insurer(s) or, after having previously notified the affected party of the identity of insurer(s), decides to select a different insurer. A failure to provide a required supplemental notice to an affected party will be deemed to be a failure to comply with the notice of intent to terminate requirements.
(1) Deadline for supplemental notice. The deadline for issuing the supplemental notice is 45 days before the affected party's distribution date (or, in the case of an employee organization, 45 days before the earliest distribution date for any affected party that it represents).
(2) Content of supplemental notice. The supplemental notice must include—
(i) The identity-of-insurer information in paragraph (b)(1) of this section;
(ii) The information regarding change of identity of insurer(s) in paragraph (b)(2) of this section; and
(iii) Unless the state guaranty association coverage information in paragraph (b)(3) of this section was previously provided to the affected party, such information and the extinguishment-of-guarantee information in § 4041.23(b)(9).
§ 4041.28   Closeout of plan.
(a) Distribution deadline —(1) In general. Unless a notice of noncompliance is issued under § 4041.31(a), the plan administrator must complete the distribution of plan assets in satisfaction of plan benefits (through priority category 6 under section 4044 of ERISA and part 4044 of this chapter) by the later of—
(i) 180 days after the expiration of the PBGC's 60-day (or extended) review period under § 4041.26(a); or
(ii) If the plan administrator meets the requirements of § 4041.25(c), 120 days after receipt of a favorable determination from the IRS.
(2) Revocation of notice of noncompliance. If the PBGC revokes a notice of noncompliance issued under § 4041.31(a), the distribution deadline is extended until the 180th day after the date of the revocation.
(3) Missing participants and beneficiaries. The distribution deadline is considered met with respect to a missing distributee to whom subpart A of part 4050 of this chapter applies if the benefit transfer amount for the missing distributee is considered timely transferred to PBGC under subpart A of part 4050 of this chapter.
(b) Assets insufficient to satisfy plan benefits. If, at the time of any distribution, the plan administrator determines that plan assets are not sufficient to satisfy all plan benefits (with assets determined net of other liabilities, including PBGC premiums), the plan administrator may not make any further distribution of assets to effect the plan's termination and must promptly notify the PBGC.
(c) Method of distribution —(1) In general. The plan administrator must, in accordance with all applicable requirements under the Code and ERISA, distribute plan assets in satisfaction of all plan benefits by purchase of an irrevocable commitment from an insurer or in another permitted form.
(2) Lump sum calculations. In the absence of evidence establishing that another date is the “annuity starting date” under the Code, the distribution date is the “annuity starting date” for purposes of—
(i) Calculating the present value of plan benefits that may be provided in a form other than by purchase of an irrevocable commitment from an insurer (e.g., in selecting the interest rate(s) to be used to value a lump sum distribution); and
(ii) Determining whether plan benefits will be paid in such other form.
(3) Selection of insurer. In the case of plan benefits that will be provided by purchase of an irrevocable commitment from an insurer, the plan administrator must select the insurer in accordance with the fiduciary standards of Title I of ERISA.
(4) Participating annuity contracts. In the case of a plan in which any residual assets will be distributed to participants, a participating annuity contract may be purchased to satisfy the requirement that annuities be provided by the purchase of irrevocable commitments only if the portion of the price of the contract that is attributable to the participation feature—
(i) Is not taken into account in determining the amount of residual assets; and
(ii) Is not paid from residual assets allocable to participants.
(5) Missing participants. The plan administrator must distribute plan benefits to missing participants in accordance with subpart A of part 4050 of this chapter.
(d) Provision of annuity contract. If plan benefits are provided through the purchase of irrevocable commitments—
(1) Either the plan administrator or the insurer must, within 30 days after it is available, provide each participant and beneficiary with a copy of the annuity contract or certificate showing the insurer's name and address and clearly reflecting the insurer's obligation to provide the participant's or beneficiary's plan benefits; and
(2) If such a contract or certificate is not provided to the participant or beneficiary by the date on which the post-distribution certification is required to be filed in order to avoid the assessment of penalties under § 4041.29(b), the plan administrator must, no later than that date, provide the participant and beneficiary with a notice that includes—
(i) A statement that the obligation for providing the participant's or beneficiary's plan benefits has transferred to the insurer;
(ii) The name and address of the insurer;
(iii) The name, address, and telephone number of the person designated by the insurer to answer questions concerning the annuity; and
(iv) A statement that the participant or beneficiary will receive from the plan administrator or insurer a copy of the annuity contract or a certificate showing the insurer's name and address and clearly reflecting the insurer's obligation to provide the participant's or beneficiary's plan benefits.
§ 4041.29   Post-distribution certification.
(a) Filing requirement. The plan administrator must either—
(1) Within 30 days after the last distribution date for any affected party, file with PBGC a post-distribution certification (PBGC Form 501), completed in accordance with the instructions thereto; or
(2)(i) Within 30 days after the last distribution date for any affected party, certify to PBGC, in the manner prescribed in the instructions to PBGC Form 501, that the plan assets have been distributed as required, and
(ii) Within 60 days after the last distribution date for any affected party, file a post-distribution certification (PBGC Form 501), completed in accordance with the instructions thereto.
(b) Assessment of penalties. PBGC will assess a penalty for a late filing under paragraph (a) of this section only if the required information is filed more than 90 days after the distribution deadline (including extensions) under § 4041.28(a).
§ 4041.30   Requests for deadline extensions.
(a) In general. The PBGC may in its discretion extend a deadline for taking action under this subpart to a later date. The PBGC will grant such an extension where it finds compelling reasons why it is not administratively feasible for the plan administrator (or other persons acting on behalf of the plan administrator) to take the action until the later date and the delay is brief. The PBGC will consider—
(1) The length of the delay; and
(2) Whether ordinary business care and prudence in attempting to meet the deadline is exercised.
(b) Time of extension request. Any request for an extension under paragraph (a) of this section that is filed later than the 15th day before the applicable deadline must include a justification for not filing the request earlier.
(c) IRS determination letter requests. Any request for an extension under paragraph (a) of this section of the deadline in § 4041.25(c) for submitting a determination letter request to the IRS (in order to qualify for the distribution deadline in § 4041.28(a)(1)(ii)) will be deemed to be granted unless the PBGC notifies the plan administrator otherwise within 60 days after receipt of the request (or, if later, by the end of the PBGC's review period under § 4041.26(a)). The PBGC will notify the plan administrator in writing of the date on which it receives such request.
(d) Statutory deadlines not extendable. The PBGC will not—
(1) Pre-distribution deadlines. (i) Extend the 60-day time limit under § 4041.23(a) for issuing the notice of intent to terminate; or
(ii) Waive the requirement in § 4041.24(a) that the notice of plan benefits be issued by the time the plan administrator files the standard termination notice with the PBGC; or
(2) Post-distribution deadlines. Extend a filing deadline under § 4041.29(a).
§ 4041.31   Notice of noncompliance.
(a) Failure to meet pre-distribution requirements —(1) In general. Except as provided in paragraphs (a)(2) and (c) of this section, the PBGC will issue a notice of noncompliance within the 60-day (or extended) time period prescribed by § 4041.26(a) whenever it determines that—
(i) The plan administrator failed to issue the notice of intent to terminate to all affected parties (other than the PBGC) in accordance with § 4041.23;
(ii) The plan administrator failed to issue notices of plan benefits to all affected parties entitled to plan benefits in accordance with § 4041.24;
(iii) The plan administrator failed to file the standard termination notice in accordance with § 4041.25;
(iv) As of the distribution date proposed in the standard termination notice, plan assets will not be sufficient to satisfy all plan benefits under the plan; or
(v) In the case of a spin-off/termination transaction (as described in § 4041.23(c)), the plan administrator failed to issue any notice required by § 4041.23(c), § 4041.24(f), or § 4041.27(a)(2) in accordance with such section.
(2) Interests of participants. The PBGC may decide not to issue a notice of noncompliance based on a failure to meet a requirement under paragraphs (a)(1)(i) through (a)(1)(iii) or (a)(1)(v) of this section if it determines that issuance of the notice would be inconsistent with the interests of participants and beneficiaries.
(3) Continuing authority. The PBGC may issue a notice of noncompliance or suspend the termination proceeding based on a failure to meet a requirement under paragraphs (a)(1)(i) through (a)(1)(v) of this section after expiration of the 60-day (or extended) time period prescribed by § 4041.26(a) (including upon audit) if the PBGC determines such action is necessary to carry out the purposes of Title IV.
(b) Failure to meet distribution requirements —(1) In general. If the PBGC determines, as part of an audit or otherwise, that the plan administrator has not satisfied any distribution requirement of § 4041.28(a) or (c), it may issue a notice of noncompliance.
(2) Criteria. In deciding whether to issue a notice of noncompliance under paragraph (b)(1) of this section, the PBGC may consider—
(i) The nature and extent of the failure to satisfy a requirement of § 4041.28(a) or (c);
(ii) Any corrective action taken by the plan administrator; and
(iii) The interests of participants and beneficiaries.
(3) Late distributions. The PBGC will not issue a notice of noncompliance for failure to distribute timely based on any facts disclosed in the post-distribution certification if 60 or more days have passed from the PBGC's receipt of the post-distribution certification. The 60-day period may be extended by agreement between the plan administrator and the PBGC.
(c) Correction of errors. The PBGC will not issue a notice of noncompliance based solely on the plan administrator's inclusion of erroneous information (or omission of correct information) in a notice required to be provided to any person under this part if—
(1) The PBGC determines that the plan administrator acted in good faith in connection with the error;
(2) The plan administrator corrects the error no later than—
(i) In the case of an error in the notice of plan benefits under § 4041.24, the latest date an election notice may be provided to the person; or
(ii) In any other case, as soon as practicable after the plan administrator knows or should know of the error, or by any later date specified by the PBGC; and
(3) The PBGC determines that the delay in providing the correct information will not substantially harm any person.
(d) Reconsideration. A plan administrator may request reconsideration of a notice of noncompliance in accordance with the rules prescribed in part 4003, subpart C.
(e) Consequences of notice of noncompliance —(1) Effect on termination. A notice of noncompliance ends the standard termination proceeding, nullifies all actions taken to terminate the plan, and renders the plan an ongoing plan. A notice of noncompliance is effective upon the expiration of the period within which the plan administrator may request reconsideration under paragraph (d) of this section or, if reconsideration is requested, a decision by the PBGC upholding the notice. However, once a notice is issued, the running of all time periods specified in ERISA or this part relevant to the termination will be suspended, and the plan administrator may take no further action to terminate the plan (except by initiation of a new termination) unless and until the notice is revoked. A plan administrator that still desires to terminate a plan must initiate the termination process again, starting with the issuance of a new notice of intent to terminate.
(2) Effect on plan administration. If the PBGC issues a notice of noncompliance, the prohibitions in § 4041.22(a)(1) and (a)(2) will cease to apply—
(i) Upon expiration of the period during which reconsideration may be requested or, if earlier, at the time the plan administrator decides not to request reconsideration; or
(ii) If reconsideration is requested, upon PBGC issuance of a decision on reconsideration upholding the notice of noncompliance.
(3) Revocation of notice of noncompliance. If a notice of noncompliance is revoked, unless the PBGC provides otherwise, any time period suspended by the issuance of the notice will resume running from the date of the revocation. In no case will the review period under § 4041.26(a) end less than 60 days from the date the PBGC received the standard termination notice.
(f) If no notice of noncompliance is issued. A standard termination is deemed to be valid if—
(1) The plan administrator files a standard termination notice under § 4041.25 and the PBGC does not issue a notice of noncompliance pursuant to § 4041.31(a); and
(2) The plan administrator files a post-distribution certification under § 4041.29 and the PBGC does not issue a notice of noncompliance pursuant to § 4041.31(b).
(g) Notice to affected parties. Upon a decision by the PBGC on reconsideration affirming the issuance of a notice of noncompliance or, if earlier, upon the plan administrator's decision not to request reconsideration, the plan administrator must notify the affected parties (other than the PBGC), and any persons who were provided notice under § 4041.23(c), in writing that the plan is not going to terminate or, if applicable, that the termination was invalid but that a new notice of intent to terminate is being issued.
§ 4041.41   Requirements for a distress termination.
(a) Distress requirements. A plan may be terminated in a distress termination only if—
(1) The plan administrator issues a notice of intent to terminate to each affected party in accordance with § 4041.43 at least 60 days and (except with PBGC approval) not more than 90 days before the proposed termination date;
(2) The plan administrator files a distress termination notice with the PBGC in accordance with § 4041.45 no later than 120 days after the proposed termination date; and
(3) The PBGC determines that each contributing sponsor and each member of its controlled group satisfy one of the distress criteria set forth in paragraph (c) of this section.
(b) Effect of failure to satisfy requirements. (1) Except as provided in paragraph (b)(2)(i) of this section, if the plan administrator does not satisfy all of the requirements for a distress termination, any action taken to effect the plan termination is null and void, and the plan is an ongoing plan. A plan administrator who still desires to terminate the plan must initiate the termination process again, starting with the issuance of a new notice of intent to terminate.
(2)(i) The PBGC may, upon its own motion, waive any requirement with respect to notices to be filed with the PBGC under paragraph (a)(1) or (a)(2) of this section if the PBGC believes that it will be less costly or administratively burdensome to the PBGC to do so. The PBGC will not entertain requests for waivers under this paragraph.
(ii) Notwithstanding any other provision of this part, the PBGC retains the authority in any case to initiate a plan termination in accordance with the provisions of section 4042 of ERISA.
(c) Distress criteria. In a distress termination, each contributing sponsor and each member of its controlled group must satisfy at least one (but not necessarily the same one) of the following criteria in order for a distress termination to occur:
(1) Liquidation. This criterion is met if, as of the proposed termination date—
(i) A person has filed or had filed against it a petition seeking liquidation in a case under title 11, United States Code, or under a similar federal law or law of a State or political subdivision of a State, or a case described in paragraph (e)(2) of this section has been converted to such a case; and
(ii) The case has not been dismissed.
(2) Reorganization. This criterion is met if—
(i) As of the proposed termination date, a person has filed or had filed against it a petition seeking reorganization in a case under title 11, United States Code, or under a similar law of a state or a political subdivision of a state, or a case described in paragraph (e)(1) of this section has been converted to such a case;
(ii) As of the proposed termination date, the case has not been dismissed;
(iii) The person notifies the PBGC of any request to the bankruptcy court (or other appropriate court in a case under such similar law of a state or a political subdivision of a state) for approval of the plan termination by concurrently filing with the PBGC a copy of the motion requesting court approval, including any documents submitted in support of the request; and
(iv) The bankruptcy court or other appropriate court determines that, unless the plan is terminated, such person will be unable to pay all its debts pursuant to a plan of reorganization and will be unable to continue in business outside the reorganization process and approves the plan termination.
(3) Inability to continue in business. This criterion is met if a person demonstrates to the satisfaction of the PBGC that, unless a distress termination occurs, the person will be unable to pay its debts when due and to continue in business.
(4) Unreasonably burdensome pension costs. This criterion is met if a person demonstrates to the satisfaction of the PBGC that the person's costs of providing pension coverage have become unreasonably burdensome solely as a result of declining covered employment under all single-employer plans for which that person is a contributing sponsor.
(d) Non-duplicative efforts. (1) If a person requests approval of the plan termination by a court, as described in paragraph (c)(2) of this section, the PBGC—
(i) Will normally enter an appearance to request that the court make specific findings as to whether the contributing sponsor or controlled group member meets the distress test in paragraph (c)(3) of this section, or state that it is unable to make such findings;
(ii) Will provide the court with any information it has that may be germane to the court's ruling;
(iii) Will, if the person has requested, or later requests, a determination by the PBGC under paragraph (c)(3) of this section, defer action on the request until the court makes its determination; and
(iv) Will be bound by a final and non-appealable order of the court.
(2) If a person requests a determination by the PBGC under paragraph (c)(3) of this section, the PBGC determines that the distress criterion is not met, and the person thereafter requests approval of the plan termination by a court, as described in paragraph (c)(2) of this section, the PBGC will advise the court of its determination and make its administrative record available to the court.
(e) Non-recognition of certain actions. If the PBGC finds that a person undertook any action or failed to act for the principal purpose of satisfying any of the distress criteria contained in paragraph (c) of this section, rather than for a reasonable business purpose, the PBGC will disregard such act or failure to act in determining whether the person has satisfied any of those criteria.
(f) Requests for deadline extensions. The PBGC may extend any deadline under this subpart in accordance with the rules described in section § 4041.30, except that the PBGC will not extend—
(1) Pre-distribution deadlines. The 60-day time limit under § 4041.43(a) for issuing the notice of intent to terminate; or
(2) Post-distribution deadlines. The deadline under § 4041.50 for filing the post-distribution certification.
§ 4041.42   Administration of plan during termination process.
(a) General rule. Except to the extent specifically prohibited by this section, during the pendency of termination proceedings the plan administrator must continue to carry out the normal operations of the plan, such as putting participants into pay status, collecting contributions due the plan, and investing plan assets.
(b) Prohibitions after issuing notice of intent to terminate. The plan administrator may not make loans to plan participants beginning on the first day he or she issues a notice of intent to terminate, and from that date until a distribution is permitted pursuant to § 4041.50, the plan administrator may not—
(1) Distribute plan assets pursuant to, or (except as required by this part) take any other actions to implement, the termination of the plan;
(2) Pay benefits attributable to employer contributions, other than death benefits, in any form other than as an annuity; or
(3) Purchase irrevocable commitments to provide benefits from an insurer.
(c) Limitation on benefit payments on or after proposed termination date. Beginning on the proposed termination date, the plan administrator must reduce benefits to the level determined under part 4022, subpart D, of this chapter.
(d) Failure to qualify for distress termination. In any case where the PBGC determines, pursuant to § 4041.44(c) or § 4041.46(c)(1), that the requirements for a distress termination are not satisfied—
(1) The prohibitions in paragraph (b) of this section, other than those in paragraph (b)(1), will cease to apply—
(i) Upon expiration of the period during which reconsideration may be requested under §§ 4041.44(e) and 4041.46(e) or, if earlier, at the time the plan administrator decides not to request reconsideration; or
(ii) If reconsideration is requested, upon PBGC issuance of its decision on reconsideration.
(2) Any benefits that were not paid pursuant to paragraph (c) of this section will be due and payable as of the effective date of the PBGC's determination, together with interest from the date (or dates) on which the unpaid amounts were originally due until the date on which they are paid in full at the rate or rates prescribed under § 4022.81(c)(3) of this chapter.
(e) Effect of subsequent insufficiency. If the plan administrator makes a finding of subsequent insufficiency for guaranteed benefits pursuant to § 4041.49(b), or the PBGC notifies the plan administrator that it has made a finding of subsequent insufficiency for guaranteed benefits pursuant to § 4041.40(d), the prohibitions in paragraph (b) of this section will apply in accordance with § 4041.49(e).
§ 4041.43   Notice of intent to terminate.
(a) General rules. (1) At least 60 days and (except with PBGC approval) no more than 90 days before the proposed termination date, the plan administrator must issue a written notice of intent to terminate to each person who is an affected party as of the proposed termination date.
(2) The plan administrator must issue the notice of intent to terminate to all affected parties other than the PBGC at or before the time he or she files the notice with the PBGC.
(3) The notice to affected parties other than the PBGC must contain all of the information specified in paragraph (b) of this section.
(4) The notice to the PBGC must be filed on PBGC Form 600, Distress Termination, Notice of Intent to Terminate, completed in accordance with the instructions thereto.
(5) In the case of a beneficiary of a deceased participant or an alternate payee, the plan administrator must issue a notice of intent to terminate promptly to any person that becomes an affected party after the proposed termination date and on or before the date a trustee is appointed for the plan pursuant to section 4042(c) of ERISA (or, in the case of a plan that distributes assets pursuant to § 4041.50, the distribution date).
(b) Contents of notice to affected parties other than the PBGC. The plan administrator must include in the notice of intent to terminate to each affected party other than the PBGC all of the following information:
(1) The name of the plan and of the contributing sponsor;
(2) The EIN of the contributing sponsor and the PN; if there is no EIN or PN, the notice must so state;
(3) The name, address, and telephone number of the person who may be contacted by an affected party with questions concerning the plan's termination;
(4) A statement that the plan administrator expects to terminate the plan in a distress termination on a specified proposed termination date;
(5) The cessation of accruals information in § 4041.23(b)(4);
(6) A statement as to how an affected party entitled to receive the latest updated summary plan description under section 104(b) of ERISA can obtain it;
(7) A statement of whether plan assets are sufficient to pay all guaranteed benefits or all benefit liabilities;
(8) A brief description of what benefits are guaranteed by the PBGC (e.g., if only a portion of the benefits are guaranteed because of the phase-in rule, this should be explained), and a statement that participants and beneficiaries also may receive a portion of the benefits to which each is entitled under the terms of the plan in excess of guaranteed benefits; and
(9) A statement, if applicable, that benefits may be subject to reduction because of the limitations on the amounts guaranteed by the PBGC or because plan assets are insufficient to pay for full benefits (pursuant to part 4022, subparts B and D, of this chapter) and that payments in excess of the amount guaranteed by the PBGC may be recouped by the PBGC (pursuant to part 4022, subpart E, of this chapter).
(c) Spin-off/termination transactions. In the case of a spin-off/termination transaction (as described in § 4041.23(c)), the plan administrator must provide all participants and beneficiaries in the original plan who are also participants or beneficiaries in the ongoing plan (as of the proposed termination date) with a notice describing the transaction no later than the date on which the plan administrator completes the issuance of notices of intent to terminate under this section.
§ 4041.44   PBGC review of notice of intent to terminate.
(a) General. When a notice of intent to terminate is filed with it, the PBGC—
(1) Will determine whether the notice was issued in compliance with § 4041.43; and
(2) Will advise the plan administrator of its determination, in accordance with paragraph (b) or (c) of this section, no later than the proposed termination date specified in the notice.
(b) Tentative finding of compliance. If the PBGC determines that the issuance of the notice of intent to terminate appears to be in compliance with § 4041.43, it will notify the plan administrator in writing that—
(1) The PBGC has made a tentative determination of compliance;
(2) The distress termination proceeding may continue; and
(3) After reviewing the distress termination notice filed pursuant to § 4041.45, the PBGC will make final, or reverse, this tentative determination.
(c) Finding of noncompliance. If the PBGC determines that the issuance of the notice of intent to terminate was not in compliance with § 4041.43 (except for requirements that the PBGC elects to waive under § 4041.41(b)(2)(i) with respect to the notice filed with the PBGC), the PBGC will notify the plan administrator in writing—
(1) That the PBGC has determined that the notice of intent to terminate was not properly issued; and
(2) That the proposed distress termination is null and void and the plan is an ongoing plan.
(d) Information on need to institute section 4042 proceedings. The PBGC may require the plan administrator to submit, within 20 days after the plan administrator's receipt of the PBGC's written request (or such other period as may be specified in such written request), any information that the PBGC determines it needs in order to decide whether to institute termination or trusteeship proceedings pursuant to section 4042 of ERISA, whenever—
(1) A notice of intent to terminate indicates that benefits currently in pay status (or that should be in pay status) are not being paid or that this is likely to occur within the 180-day period following the issuance of the notice of intent to terminate;
(2) The PBGC issues a determination under paragraph (c) of this section; or
(3) The PBGC has any reason to believe that it may be necessary or appropriate to institute proceedings under section 4042 of ERISA.
(e) Reconsideration of finding of noncompliance. A plan administrator may request reconsideration of the PBGC's determination of noncompliance under paragraph (c) of this section in accordance with the rules prescribed in part 4003, subpart C, of this chapter. Any request for reconsideration automatically stays the effectiveness of the determination until the PBGC issues its decision on reconsideration, but does not stay the time period within which information must be submitted to the PBGC in response to a request under paragraph (d) of this section.
(f) Notice to affected parties. Upon a decision by the PBGC affirming a finding of noncompliance or upon the expiration of the period within which the plan administrator may request reconsideration of a finding of noncompliance (or, if earlier, upon the plan administrator's decision not to request reconsideration), the plan administrator must notify the affected parties (and any persons who were provided notice under § 4041.43(e)) in writing that the plan is not going to terminate or, if applicable, that the termination is invalid but that a new notice of intent to terminate is being issued.
§ 4041.45   Distress termination notice.
(a) General rule. The plan administrator must file with the PBGC a PBGC Form 601, Distress Termination Notice, Single-Employer Plan Termination, with Schedule EA-D, Distress Termination Enrolled Actuary Certification, that has been completed in accordance with the instructions thereto, on or before the 120th day after the proposed termination date.
(b) Participant and benefit information —(1) Plan insufficient for guaranteed benefits. Unless the enrolled actuary certifies, in the Schedule EA-D filed in accordance with paragraph (a) of this section, that the plan is sufficient either for guaranteed benefits or for benefit liabilities, the plan administrator must file with the PBGC the participant and benefit information described in PBGC Form 601 and the instructions thereto by the later of—
(i) 120 days after the proposed termination date, or
(ii) 30 days after receipt of the PBGC's determination, pursuant to § 4041.46(b), that the requirements for a distress termination have been satisfied.
(2) Plan sufficient for guaranteed benefits or benefit liabilities. If the enrolled actuary certifies that the plan is sufficient either for guaranteed benefits or for benefit liabilities, the plan administrator need not submit the participant and benefit information described in PBGC Form 601 and the instructions thereto unless requested to do so pursuant to paragraph (c) of this section.
(3) Effect of failure to provide information. The PBGC may void the distress termination if the plan administrator fails to provide complete participant and benefit information in accordance with this section.
(c) Additional information. The PBGC may in any case require the submission of any additional information that it needs to make the determinations that it is required to make under this part or to pay benefits pursuant to section 4061 or 4022(c) of ERISA. The plan administrator must submit any information requested under this paragraph within 30 days after receiving the PBGC's written request (or such other period as may be specified in such written request).
§ 4041.46   PBGC determination of compliance with requirements for distress termination.
(a) General. Based on the information contained and submitted with the PBGC Form 600 and the PBGC Form 601, with Schedule EA-D, and on any information submitted by an affected party or otherwise obtained by the PBGC, the PBGC will determine whether the requirements for a distress termination set forth in § 4041.41(c) have been met and will notify the plan administrator in writing of its determination, in accordance with paragraph (b) or (c) of this section.
(b) Qualifying termination. If the PBGC determines that all of the requirements of § 4041.41(c) have been satisfied, it will so advise the plan administrator and will also advise the plan administrator of whether participant and benefit information must be submitted in accordance with § 4041.45(b).
(c) Non-qualifying termination. (1) Except as provided in paragraph (c)(2) of this section, if the PBGC determines that any of the requirements of § 4041.41 have not been met, it will notify the plan administrator of its determination, the basis therefor, and the effect thereof (as provided in § 4041.41(b)).
(2) If the only basis for the PBGC's determination described in paragraph (c)(1) of this section is that the distress termination notice is incomplete, the PBGC will advise the plan administrator of the missing item(s) of information and that the information must be filed with the PBGC no later than the 120th day after the proposed termination date or the 30th day after the date of the PBGC's notice of its determination, whichever is later.
(d) Reconsideration of determination of non-qualification. A plan administrator may request reconsideration of the PBGC's determination under paragraph (c)(1) of this section in accordance with the rules prescribed in part 4003, subpart C, of this chapter. The filing of a request for reconsideration automatically stays the effectiveness of the determination until the PBGC issues its decision on reconsideration.
(e) Notice to affected parties. Upon a decision by the PBGC affirming a determination of non-qualification or upon the expiration of the period within which the plan administrator may request reconsideration of a determination of non-qualification (or, if earlier, upon the plan administrator's decision not to request reconsideration), the plan administrator must notify the affected parties (and any persons who were provided notice under § 4041.43(e)) in writing that the plan is not going to terminate or, if applicable, that the termination is invalid but that a new notice of intent to terminate is being issued.
§ 4041.47   PBGC determination of plan sufficiency/insufficiency.
(a) General. Upon receipt of participant and benefit information filed pursuant to § 4041.45 (b)(1) or (c), the PBGC will determine the degree to which the plan is sufficient and notify the plan administrator in writing of its determination in accordance with paragraph (b) or (c) of this section.
(b) Insufficiency for guaranteed benefits. If the PBGC finds that it is unable to determine that a plan is sufficient for guaranteed benefits, it will issue a “notice of inability to determine sufficiency” notifying the plan administrator of this finding and advising the plan administrator that—
(1) The plan administrator must continue to administer the plan under the restrictions imposed by § 4041.42; and
(2) The termination will be completed under section 4042 of ERISA.
(c) Sufficiency for guaranteed benefits or benefit liabilities. If the PBGC determines that a plan is sufficient for guaranteed benefits but not for benefit liabilities or is sufficient for benefit liabilities, the PBGC will issue to the plan administrator a distribution notice advising the plan administrator—
(1) To issue notices of benefit distribution in accordance with § 4041.48;
(2) To close out the plan in accordance with § 4041.50;
(3) To file a timely post-distribution certification with the PBGC in accordance with § 4041.50(b); and
(4) That either the plan administrator or the contributing sponsor must preserve and maintain plan records in accordance with § 4041.5.
(d) Alternative treatment of majority owner's benefit. A majority owner may elect to forgo receipt of all or part of his or her plan benefits in connection with a distress termination. Any such alternative treatment—
(1) Is valid only if the conditions in § 4041.21(b)(2)(i) through (iv) are met (except that, in the case of a plan that does not distribute assets pursuant to § 4041.50, the majority owner may make the election and the spouse may consent any time on or after the date of issuance of the first notice of intent to terminate); and—
(2) Is subject to the PBGC's approval if the election—
(i) Is made after the termination date; and
(ii) Would result in the PBGC determining that the plan is sufficient for guaranteed benefits under paragraph (c).
§ 4041.48   Sufficient plans; notice requirements.
(a) Notices of benefit distribution. When a distribution notice is issued by the PBGC pursuant to § 4041.47, the plan administrator must issue notices of benefit distribution in accordance with the rules regarding notices of plan benefits in § 4041.24, except that—
(1) The deadline for issuing the notices of benefit distribution is the 60th day after receipt of the distribution notice; and
(2) With respect to the information described in § 4041.24 (b) through (e), the term “plan benefits” is replaced with “title IV benefits” and the term “proposed termination date” is replaced with “termination date”.
(b) Certification to PBGC. No later than 15 days after the date on which the plan administrator completes the issuance of the notices of benefit distribution, the plan administrator must file with the PBGC a certification that the notices were so issued in accordance with the requirements of this section.
(c) Notice of annuity information —(1) In general. Unless all title IV benefits will be distributed in the form of nonconsensual lump sums, the plan administrator must provide a notice of annuity information to each affected party other than—
(i) An affected party whose title IV benefits will be distributed in the form of a nonconsensual lump sum; and
(ii) The PBGC.
(2) Spin-off/termination transactions. The plan administrator must provide the information in paragraph (c)(4) of this section to a person entitled to notice under § 4041.43(c), at the same time and in the same manner as required for an affected party described in paragraph (c)(1) of this section.
(3) Selection of different insurer. A plan administrator that decides to select a different insurer after having previously notified the affected party of the identity of insurer(s) under this paragraph must provide another notice of annuity information.
(4) Content of notice. The notice must include—
(i) The identity-of-insurer information in § 4041.27(b)(1);
(ii) The information regarding change in identity of insurer(s) in § 4041.27(b)(2); and
(iii) Unless the state guaranty coverage information in § 4041.27(b)(3) was previously provided to the affected party, such information and the extinguishment-of-guaranty information in § 4041.23(b)(9) (replacing the term “plan benefits” with “title IV benefits”).
(5) Deadline for notice. The plan administrator must issue the notice of annuity information to each affected party by the deadline in § 4041.27(d)(1).
(d) Request for IRS determination letter. To qualify for the distribution deadline in § 4041.28(a)(1)(ii) (as modified and made applicable by § 4041.50(c)), the plan administrator must submit to the IRS a valid request for a determination of the plan's qualification status upon termination (“determination letter”) by the day on which the plan administrator completes the issuance of the notices of benefit distribution.
§ 4041.49   Verification of plan sufficiency prior to closeout.
(a) General rule. Before distributing plan assets pursuant to a closeout under § 4041.50, the plan administrator must verify whether the plan's assets are still sufficient to provide for benefits at the level determined by the PBGC, i.e., guaranteed benefits or benefit liabilities. If the plan administrator finds that the plan is no longer able to provide for benefits at the level determined by the PBGC, then paragraph (b) or (c) of this section, as appropriate, will apply.
(b) Subsequent insufficiency for guaranteed benefits. When a plan administrator finds that a plan is no longer sufficient for guaranteed benefits, the plan administrator must promptly notify the PBGC in writing of that fact and may take no further action to implement the plan termination, pending the PBGC's determination and notice pursuant to paragraph (b)(1) or (b)(2) of this section.
(1) PBGC concurrence with finding. If the PBGC concurs with the plan administrator's finding, the distribution notice will be void, and the PBGC will—
(i) Issue the plan administrator a notice of inability to determine sufficiency in accordance with § 4041.47(b); and
(ii) Require the plan administrator to submit a new valuation, certified to by an enrolled actuary, of the benefit liabilities and guaranteed benefits under the plan, valued in accordance with §§ 4044.41 through 4044.58 of this chapter as of the date of the plan administrator's notice to the PBGC.
(2) PBGC non-concurrence with finding. If the PBGC does not concur with the plan administrator's finding, it will so notify the plan administrator in writing, and the distribution notice will remain in effect.
(c) Subsequent insufficiency for benefit liabilities. When a plan administrator finds that a plan is sufficient for guaranteed benefits but is no longer sufficient for benefit liabilities, the plan administrator must immediately notify the PBGC in writing of this fact, but must continue with the distribution of assets in accordance with § 4041.50.
(d) Finding by PBGC of subsequent insufficiency. In any case in which the PBGC finds on its own initiative that a subsequent insufficiency for guaranteed benefits has occurred, paragraph (b)(1) of this section will apply, except that the guaranteed benefits must be revalued as of the date of the PBGC's finding.
(e) Restrictions upon finding of subsequent insufficiency. When the plan administrator makes the finding described in paragraph (b) of this section or receives notice that the PBGC has made the finding described in paragraph (d) of this section, the plan administrator is (except to the extent the PBGC otherwise directs) subject to the prohibitions in § 4041.42.
§ 4041.50   Closeout of plan.
If a plan administrator receives a distribution notice from the PBGC pursuant to § 4041.47 and neither the plan administrator nor the PBGC makes the finding described in § 4041.49(b) or (d), the plan administrator must distribute plan assets in accordance with § 4041.28 and file a post-distribution certification in accordance with § 4041.29, except that—
(a) The term “plan benefits” is replaced with “title IV benefits”;
(b) For purposes of applying the distribution deadline in § 4041.28(a)(1)(i), the phrase “after the expiration of the PBGC's 60-day (or extended) review period under § 4041.26(a)” is replaced with “the day on which the plan administrator completes the issuance of the notices of benefit distribution pursuant to § 4041.48(a)”; and
(c) For purposes of applying the distribution deadline in § 4041.28(a)(1)(ii), the phrase “the requirements of § 4041.25(c)” is replaced with “the requirements of § 4041.48(d)”.
§ 4041.51   Disclosure of information by plan administrator in distress termination.
(a) Request for Information —(1) In general. If a notice of intent to terminate under § 4041.43 is issued with respect to a plan, an affected party may make a request to the plan administrator for information submitted to PBGC under sections 4041(a)(2) and 4041(c)(2) of ERISA and §§ 4041.43 and 4041.45.
(2) Requirements. A request under paragraph (a) of this section must:
(i) Be in writing to the plan administrator;
(ii) State the name of the plan and that the request is for information submitted to PBGC with respect to the application for a distress termination of the plan;
(iii) State the name of the person making the request for information and such person's relationship to the plan (e.g., plan participant), and that such relationship meets the definition of affected party under § 4001.2 of this chapter; and
(iv) Be signed by the person making the request.
(b) Response by Plan Administrator —(1) Information. The information that a plan administrator must provide in response to a request under paragraph (a) of this section includes PBGC Form 600, and any information submitted to PBGC pursuant to section 4041(c)(2) of ERISA and § 4041.45.
(2) Timing of response. A plan administrator that receives a request under paragraph (a) of this section must provide the information requested not later than the 15th business day (as defined in § 4000.22 of this chapter) after receipt of the request.
(3) Deferral of due date. If, at the time the plan administrator receives a request under paragraph (a) of this section, the plan administrator has not filed a PBGC Form 600, the plan administrator must provide the information requested under paragraph (a) not later than the 15th business day (as defined in § 4000.22 of this chapter) after a PBGC Form 600 is filed with PBGC.
(4) Supplemental responses. If, at any time after the later of the receipt of a request under paragraph (a) of this section, or the filing of PBGC Form 600, the plan administrator submits additional information to PBGC with respect to the plan termination under section 4041(c)(2) of ERISA and § 4041.45, the plan administrator must, not later than the 15th business day (as defined in § 4000.22 of this chapter) after each additional submission, provide the additional information to any affected party that has made a request under paragraph (a) of this section.
(5) Confidential information. (i) In responding to a request under paragraph (a) of this section, the plan administrator shall not provide information that may, directly or indirectly, identify an individual participant or beneficiary of the plan.
(ii) A plan administrator that has received a request under paragraph (a) of this section may seek a court order under which confidential information described in section 552(b) of title 5, United States Code—
(A) Will be disclosed only to authorized representatives (within the meaning of section 4041(c)(2)(D)(iv) of ERISA) that agree to ensure the confidentiality of such information, and,
(B) Will not be disclosed to other affected parties.
(6) Reasonable fees. Under section 4041(c)(2)(D)(iii)(II) of ERISA, a plan administrator may charge a reasonable fee for any information provided under this section in other than electronic form.