13304 Federal Register / Vol. 76, No. 48 / Friday, March 11, 2011 / Proposed Rules 

§ 609.7 Programmatic, technical and 

financial evaluation of Applications. 

* * * * * 

(c) During the Application review 

process DOE may raise issues or 

concerns that were not raised during the 

Pre-Application review process where a 

Pre-Application was requested in the 

applicable solicitation. Any additional 

information submitted to DOE will be 

treated as provided in 10 CFR 600.15 

and must be marked as provided in 10 

CFR 600.15(b). 

* * * * * 

PART 611—ADVANCED TECHNOLOGY 

VEHICLES MANUFACTURER 

ASSISTANCE PROGRAM 

10. The authority citation for part 611 

continues to read as follows: 

Authority: Pub.L. 110–140 (42 U.S.C. 

17013), Pub. L. 110–329. 

11. Section 611.101 is amended by 

revising the introductory text to read as 

follows: 

§ 611.101 Application. 

The information and materials 

submitted in or in connection with 

applications will be treated as provided 

in 10 CFR 600.15 and must be marked 

as provided in 10 CFR 600.15(b). An 

application must include, at a 

minimum, the following information 

and materials: 

* * * * * 

12. Section 611.103 is amended by 

revising paragraph (a) to read as follows: 

§ 611.103 Application evaluation. 

(a) Eligibility screening. Applications 

will be reviewed to determine whether 

the applicant is eligible, the information 

required under § 611.101 is complete, 

and the proposed loan complies with 

applicable statutes and regulations. DOE 

can at any time reject an application, in 

whole or in part, that does not meet 

these requirements. Any additional 

information submitted to DOE will be 

treated as provided in 10 CFR 600.15 

and must be marked as provided in 10 

CFR 600.15(b). 

* * * * * 

[FR Doc. 2011–5677 Filed 3–10–11; 8:45 am] 

BILLING CODE 6450–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Part 4022 

RIN 1212–AB18 

Benefits Payable in Terminated SingleEmployer Plans; Limitations on 

Guaranteed Benefits 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Proposed rule. 

SUMMARY: This is a proposed rule to 

amend PBGC’s regulation on Benefits 

Payable in Terminated Single-Employer 

Plans. That regulation sets forth rules on 

PBGC’s guarantee of pension plan 

benefits, including rules on the phasein of the guarantee. The amendments 

implement section 403 of the Pension 

Protection Act of 2006, which provides 

that the phase-in period for the 

guarantee of benefits that are contingent 

upon the occurrence of an 

‘‘unpredictable contingent event,’’ such 

as a plant shutdown, starts no earlier 

than the date of the shutdown or other 

unpredictable contingent event. 

DATES: Comments must be received on 

or before May 10, 2011. 

ADDRESSES: Comments should be 

identified by Regulation Information 

Number (RIN 1212–AB18), and may be 

submitted by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. 

• Follow the Web site instructions for 

submitting comments. 

• E-mail: reg.comments@pbgc.gov. 

• Fax: 202–326–4224. 

• Mail or Hand Delivery: Legislative 

and Regulatory Department, Pension 

Benefit Guaranty Corporation, 1200 K 

Street, NW., Washington, DC 20005– 

4026. 

PBGC will make all comments available 

on its Web site, http://www.pbgc.gov. 

Copies of comments also may be 

obtained by writing PBGC’s 

Communications and Public Affairs 

Department (CPAD) at Suite 240 at the 

above address or by visiting or calling 

CPAD during normal business hours 

(202–326–4040). 

FOR FURTHER INFORMATION CONTACT: John 

H. Hanley, Director; Gail A. Sevin, 

Manager; or Bernard Klein, Attorney; 

Legislative & Regulatory Department, 

Pension Benefit Guaranty Corporation, 

1200 K Street, NW., Washington, DC 

20005, 202–326–4224. (TTY/TDD users 

may call the Federal relay service tollfree at 1–800–877–8339 and ask to be 

connected to 202–326–4224.) 

SUPPLEMENTARY INFORMATION: 

Background 

The Pension Benefit Guaranty 

Corporation (PBGC) administers the 

single-employer pension plan 

termination insurance program under 

Title IV of the Employee Retirement 

Income Security Act of 1974 (ERISA). 

The program covers certain privatesector, single-employer defined benefit 

plans, for which premiums are paid to 

PBGC each year. 

Covered plans that are underfunded 

may terminate either in a distress 

termination under section 4041(c) of 

ERISA or in an involuntary termination 

(one initiated by PBGC) under section 

4042 of ERISA. When such a plan 

terminates, PBGC typically is appointed 

statutory trustee of the plan, and 

becomes responsible for paying benefits 

in accordance with the provisions of 

Title IV. 

Under sections 4022(b)(1) and 

4022(b)(7) of ERISA and §§ 4022.24 

through .26 of PBGC’s regulation on 

Benefits Payable in Terminated SingleEmployer Plans, 29 CFR part 4022, 

PBGC’s guarantee of new pension 

benefits and benefit increases is ‘‘phased 

in’’ over a five-year period, which begins 

on the date the new benefit or benefit 

increase is adopted or effective 

(whichever is later). 

On August 17, 2006, the Pension 

Protection Act of 2006, Public Law 109– 

280 (PPA 2006), was signed into law. 

Section 403 of PPA 2006 amended 

section 4022 of ERISA by adding a new 

section 4022(b)(8), which changes the 

start of the phase-in period for plant 

shutdown and other ‘‘unpredictable 

contingent event benefits’’ (UCEBs). 

Under new section 4022(b)(8), the 

phase-in rules are applied as if a plan 

amendment creating a UCEB was 

adopted on the date the unpredictable 

contingent event (‘‘UCE’’) occurred 

rather than as of the actual adoption 

date of the amendment, which is almost 

always earlier. As a result of the new 

provision, the guarantee of benefits 

arising from plant shutdowns and other 

UCEs that occur within 5 years of plan 

termination (or the date the plan 

sponsor entered bankruptcy, if 

applicable under PPA 2006, as 

explained below) generally will be 

lower than under prior law. This new 

provision, which does not otherwise 

change the existing phase-in rules, 

applies to benefits that become payable 

as a result of a UCE that occurs after July 

26, 2005. 

This proposed rule would amend part 

4022 to implement the PPA 2006 

changes to the guarantee of UCEBs. 

With one exception, explained below 

under the heading ‘‘Bankruptcy filing 


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1The Technical Explanation of PPA 2006 

prepared by the Joint Committee on Taxation Staff 

specifies that UCEBs include benefits payable with 

respect to ‘‘facility shutdowns or reductions in 

workforce.’’ Joint Committee on Taxation, Technical 

Explanation of H.R. 4, the ‘‘Pension Protection Act 

of 2006,’’ as passed by the House on July 26, 2006, 

and as considered by the Senate on August 3, 2006 

(JCX–38–06), August 3, 2006, at 90 (hereinafter 

Technical Explanation of PPA 2006). 

2Public Law 100–203, 10 Stat. 1330, 339–41 

(codified as amended at 26 U.S.C. 412(l) (1987)); see 

S. Rep. No. 100–63 at 171–72, 175–76 (1987). 

date treated as deemed termination 

date,’’ the other provisions of PPA 2006 

affecting PBGC’s guarantee do not affect 

phase-in of the guarantee of UCEBs and 

thus are not addressed in this proposed 

rule. 

Phase-in of PBGC Guarantee 

Under section 4022(b)(7) of ERISA, 

the guarantee of benefits under a new 

plan or of a new benefit or benefit 

increase under an amendment to an 

existing plan (all of which are referred 

to in PBGC’s regulations as ‘‘benefit 

increases’’) is ‘‘phased in’’ based on the 

number of full years the benefit increase 

is in the plan. The time period that a 

benefit increase has been provided 

under a plan is measured from the later 

of the adoption date of the provision 

creating the benefit increase or the 

effective date of the benefit increase. 

Generally, 20 percent of a benefit 

increase is guaranteed after one year, 40 

percent after two years, etc., with full 

phase-in of the guarantee after five 

years. If the amount of the monthly 

benefit increase is below $100, the 

annual rate of phase-in is $20 rather 

than 20 percent. 

The phase-in limitation generally 

serves to protect the insurance program 

from losses caused by benefit increases 

that are adopted or made effective 

shortly before plan termination. This 

protection is needed because benefit 

increases can create large unfunded 

liabilities. An example is a plan 

amendment that significantly increases 

credit under the plan benefit formula for 

service performed prior to the 

amendment. Such increases generally 

are funded over time under the ERISA 

minimum funding rules. An immediate 

full guarantee would result in an 

inappropriate loss for PBGC if a plan 

terminated before an employer 

significantly funded a benefit increase. 

Phase-in of the guarantee allows time 

for some funding of new liabilities 

before they are fully guaranteed. 

Funding of liabilities created by a 

benefit increase generally starts at the 

same time as the PBGC guarantee first 

applies under the phase-in rule. Under 

ERISA and the Internal Revenue Code 

(‘‘Code’’), liability created by a benefit 

increase must be reflected in a plan’s 

required contribution no later than the 

plan year following adoption of the 

benefit increase. For example, a benefit 

increase that is adopted and effective in 

the 2009 plan year must be reflected in 

the minimum funding contribution 

calculations for a plan year not later 

than the 2010 plan year. Similarly, such 

a benefit increase would become 

partially guaranteed during the 2010 

plan year. 

Over the years, legislative reforms, 

including those in PPA 2006, have 

generally shortened the permitted 

funding period from thirty years to 

seven years (or less in certain cases). 

This closer coordination between the 

permitted funding period and five-year 

guarantee phase-in period generally 

enhanced the effectiveness of phase-in 

in protecting the PBGC insurance 

program against losses due to unfunded 

benefit increases. However, as explained 

below, before the PPA 2006 changes to 

the phase-in of UCEBs, this 

coordination generally failed in the case 

of UCEBs. 

Unpredictable Contingent Event 

Benefits 

UCEBs, described more specifically 

below, are benefits or benefit increases 

that become payable solely by reason of 

the occurrence of a UCE such as a plant 

shutdown. 

UCEBs typically provide a full 

pension, without any reduction for age, 

starting well before an unreduced 

pension would otherwise be payable. 

The events most commonly giving rise 

to UCEBs are events relating to full or 

partial plant shutdowns or other 

reductions in force. UCEBs, which are 

frequently provided in pension plans in 

various industries such as the steel and 

automobile industries, are payable with 

respect to full or partial plant 

shutdowns as well as shutdowns of 

different kinds of facilities, such as 

administrative offices, warehouses, 

retail operations, etc. UCEBs are also 

payable, in some cases, with respect to 

layoffs and other workforce reductions.1

A typical shutdown benefit provision 

in the steel industry—the so-called ‘‘70/ 

80 Rule’’—generally allows participants 

who lose their jobs due to the complete 

or partial closing of a facility or a 

reduction-in-force and whose age plus 

service equals 70 (if at least age 55) or 

80 (at any age) to begin receiving their 

full accrued pension immediately, even 

though they have not reached normal 

retirement age. Similar UCEBs are 

common in the automobile industry 

with respect to shutdowns and layoffs. 

The purpose of these benefits is to assist 

participants financially in adjusting to a 

permanent job loss. 

Time Lag Between Start of Guarantee 

Phase-in and Funding of UCEBs 

A UCEB provision typically has been 

in a plan many years before the 

occurrence of the event that eventually 

triggers the benefit, such as a plant 

shutdown. As a result, before PPA 2006, 

shutdown benefits, for example, were 

often fully guaranteed under the phasein rules when a shutdown occurred. 

Because the benefit is contingent on the 

occurrence of an unpredictable event, 

plan sponsors typically did not make 

contributions to provide for advance 

funding of such benefits; funding of 

such benefits often did not begin until 

after the UCE had occurred. If, as often 

happened, plan termination occurred 

within a few years after a shutdown, the 

time lag between the start of the phasein period and the start of funding 

resulted in an increased loss to the 

insurance program. 

Treatment of UCEBs in OBRA 1987 

Congress first explicitly addressed 

UCEBs in funding reforms contained in 

the Pension Protection Act of 1987, 

enacted as part of Public Law 100–203, 

the Omnibus Budget Reconciliation Act 

of 1987 (OBRA 1987). The OBRA 1987 

rules for deficit reduction contributions 

required employers to recognize UCEBs 

on an accelerated basis (generally, 

within five to seven years), beginning 

after the triggering event occurred.2

However, the rules did not address the 

mismatch of the funding and guarantee 

phase-in periods discussed above. They 

also did not address the fact that UCEBs 

are likely to be triggered when the 

employer is experiencing financial 

difficulty, which threatens both funding 

and continuation of the plan. For these 

reasons, in the years since OBRA 1987, 

PBGC has assumed more than $1 billion 

of unfunded benefit liabilities from 

shutdown and similar benefits. 

Treatment of UCEBs in PPA 2006 

Congress further addressed UCEBs in 

PPA 2006. PPA 2006 affected UCEBs in 

two important ways. 

First, PPA 2006 added new ERISA 

section 206(g) and parallel Code section 

436(b) that restrict payment of UCEBs 

with respect to a UCE if the plan is less 

than 60 percent funded for the plan year 

in which the UCE occurs (or would be 

less than 60 percent funded taking the 

UCEB into account). Unless the 

restriction is removed during that plan 

year as a result of additional 

contributions to the plan or an actuarial 

certification meeting certain 


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3Treasury Regulations under Code sections 430 

and 436 also apply for purposes of the parallel rules 

in ERISA sections 303 and 206(g). 

4 74 FR 53004, 53062 (Oct. 15, 2009). Treas. Reg. 

§ 1.436–1(a)(4)(iii) permits all or any portion of 

prohibited UCEBs to be restored by a plan 

amendment that meets the requirements of section 

436(c) of the Code and Treas. Reg. § 1.436–1(c) and 

other applicable requirements. Such an amendment 

would create a ‘‘benefit increase’’ under § 4022.2 

and therefore PBGC’s guarantee of UCEBs restored 

by such an amendment would be phased in from 

the later of the adoption date of the amendment or 

the effective date as of which the UCEB is restored, 

as provided under § 4022.27(c) of the proposed 

regulation. 

5 In addition, Treas. Reg. § 1.430(d)–(1)(f)(6) 

requires that calculation of the funding target for a 

single-employer plan take into account, based on 

information as of the valuation date, the probability 

that UCEBs will become payable. Under that 

Treasury Regulation, the probability may be 

assumed to be zero if there is not more than a de 

minimis likelihood that the UCE will occur. 

requirements, the restriction becomes 

permanent and, under Treas. Reg. 

§ 1.436–1(a)(4)(iii),3 the plan is treated 

as if it does not provide for those 

UCEBs.4 Because PBGC guarantees only 

benefits that are provided under a plan, 

a UCEB that is treated as not provided 

under the plan because of this 

restriction is not guaranteeable by PBGC 

at all, and the phase-in rules that are the 

subject of this proposed regulation do 

not come into play for such a UCEB. 

Moreover, under Treas. Reg. § 1.436– 

1(a)(3)(ii), benefit limitations under 

ERISA section 206(g) that were in effect 

immediately before plan termination 

continue to apply after termination. 

Second, PPA 2006 better aligns the 

starting dates of the funding and 

guarantee phase-in of UCEBs. Under 

PPA 2006, phase-in of the PBGC 

guarantee does not start until the UCE 

actually occurs. Specifically, ERISA 

section 4022(b)(8), added by section 403 

of PPA 2006, provides: ‘‘If an 

unpredictable contingent event benefit 

(as defined in section 206(g)(1)) is 

payable by reason of the occurrence of 

any event, this section shall be applied 

as if a plan amendment had been 

adopted on the date such event 

occurred.’’ The provision applies to 

UCEs that occur after July 26, 2005. 

Thus, for purposes of the phase-in 

limitation, the date a UCE occurs is 

treated as the adoption date of the plan 

provision that provides for the related 

UCEB. This statutory change provides 

the PBGC insurance program a greater 

measure of protection than prior law 

from losses due to unfunded UCEBs— 

most notably, benefits that become 

payable by reason of a plant shutdown 

or similar event such as a permanent 

layoff.5

ERISA section 206(g)(1), as added by 

section 103(a) of PPA 2006, defines 

‘‘unpredictable contingent event benefit’’ 

as: 

‘‘any benefit payable solely by reason 

of — 

(i) A plant shutdown (or similar 

event, as determined by the Secretary of 

the Treasury), or 

(ii) An event other than the 

attainment of any age, performance of 

any service, receipt or derivation of any 

compensation, or occurrence of death or 

disability.’’ 

PPA 2006 did not alter the rule that 

UCEBs are not guaranteed at all unless 

the triggering event occurred prior to the 

plan termination date (see PBGC v. 

Republic Tech. Int’l, LLC, 386 F.3d 659 

(6th Cir. 2004)). 

Treasury Final Regulation UCEB 

Definition 

On October 15, 2009 (at 74 FR 53004), 

the Department of the Treasury 

(Treasury) published a final rule on 

Benefit Restrictions for Underfunded 

Pension Plans that defines UCEB for 

purposes of ERISA section 206(g)(1), 

and thus also for purposes of section 

4022(b)(8). Treasury’s final regulation 

clarifies the following points regarding 

UCEBs: 

• UCEBs include only benefits or 

benefit increases to the extent such 

benefits or benefit increases would not 

be payable but for the occurrence of a 

UCE. 

• The reference to ‘‘plant shutdown’’ 

in the statutory definition of UCEB 

includes a full or partial shutdown. 

Treasury’s final regulation also states 

that a UCEB includes benefits triggered 

by events similar to plant shutdowns. 

Treas. Reg. § 1.436–1(j)(9) defines a 

UCEB as follows: 

An unpredictable contingent event benefit 

means any benefit or increase in benefits to 

the extent the benefit or increase would not 

be payable but for the occurrence of an 

unpredictable contingent event. For this 

purpose, an unpredictable contingent event 

means a plant shutdown (whether full or 

partial) or similar event, or an event 

(including the absence of an event) other 

than the attainment of any age, performance 

of any service, receipt or derivation of any 

compensation, or the occurrence of death or 

disability. For example, if a plan provides for 

an unreduced early retirement benefit upon 

the occurrence of an event other than the 

attainment of any age, performance of any 

service, receipt or derivation of any 

compensation, or the occurrence of death or 

disability, then that unreduced early 

retirement benefit is an unpredictable 

contingent event benefit to the extent of any 

portion of the benefit that would not be 

payable but for the occurrence of the event, 

even if the remainder of the benefit is 

payable without regard to the occurrence of 

the event. Similarly, if a plan includes a 

benefit payable upon the presence (including 

the absence) of circumstances specified in 

the plan (other than the attainment of any 

age, performance of any service, receipt or 

derivation of any compensation, or the 

occurrence of death or disability), but not 

upon a severance from employment that does 

not include those circumstances, that benefit 

is an unpredictable contingent event benefit. 

Overview of Proposed Regulatory 

Changes 

This proposed regulation incorporates 

the definition of UCEB under section 

206(g)(1)(C) of ERISA and Treas. Reg. 

§ 1.436–1(j)(9). It also provides that the 

guarantee of a UCEB would be phased 

in from the latest of the date the benefit 

provision is adopted, the date the 

benefit is effective, or the date the UCE 

that makes the benefit payable occurs. 

Under the proposed regulation, PBGC 

would determine the date the UCE 

occurs based on the plan provisions and 

the relevant facts and circumstances, 

such as the nature and level of activity 

at a facility that is closing and the 

permanence of the event. The date of 

the event as conceived, planned, 

announced, or agreed to by the 

employer might be relevant but would 

not be controlling. Where a plan 

provides that a UCEB is payable only 

upon the occurrence of more than one 

UCE, the proposed regulation provides 

that the guarantee would be phased in 

from the latest date when all such UCEs 

have occurred. For example, if a UCEB 

is payable only if a participant is laid off 

and the layoff continues for a specified 

period of time, the phase-in period 

would begin at the end of the specified 

period of time. Similarly, if a UCEB is 

payable only if both the plant where an 

employee worked is permanently shut 

down and it is determined that the 

employer has no other suitable 

employment for the employee, the 

phase-in period would begin when it is 

determined that the employer had no 

other suitable employment for the 

employee (assuming that date was later 

than the shutdown date). 

The proposed regulation includes 

eight examples that show how the UCEB 

phase-in rules would apply in the 

following situations: 

• Shutdown that occurs later than the 

announced shutdown date. 

• Sequential permanent layoffs. 

• Skeleton shutdown crews. 

• Permanent layoff benefit for which 

the participant qualifies shortly before 

the sponsor enters bankruptcy. 

• Employer declaration during a 

layoff that return to work is unlikely. 

• Shutdown benefit with age 

requirement that can be met after the 

shutdown. 

• Retroactive UCEB. 


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6The examples in proposed § 4022.7 are not an 

exclusive list of UCEs or UCEBs and are not 

intended to narrow the statutory definition, as 

further delineated in Treasury Regulations. 

7As explained in Technical Explanation of PPA 

2006, supra note 1, ‘‘layoff benefits,’’ as that term is 

used in Treasury Regulation § 1.401–1(b)(1)(i), are 

severance benefits that may not be included in taxqualified pension plans. In contrast, the benefits 

covered in this proposed regulation are retirement 

benefits payable in the event of certain workforce 

reductions. These retirement benefits—generally 

subsidized early retirement benefits—may be 

provided in tax-qualified plans insured by PBGC. 

• Removal of IRC Section 436 

restriction.6

Whether a UCEB phase-in 

determination applies on a participantby-participant basis, as opposed to 

facility-wide or some other basis, would 

depend largely upon plan provisions. 

For example, a benefit triggered by a 

reduction-in-force would be determined 

with respect to each participant, and 

thus layoffs that occur on different dates 

would generally be distinct UCEs. But a 

benefit payable only upon the complete 

shutdown of the employer’s entire 

operations would apply plan-wide, and 

thus the shutdown date generally would 

be the date of the UCE for all 

participants. 

Discussion 

UCEBs Covered 

As noted above, new ERISA section 

4022(b)(8), added by section 403 of PPA 

2006, changes the rules for phasing in 

the guarantee of UCEBs in the case of 

UCEs that occur after July 26, 2005. 

Section 4022(b)(8) covers shutdowntype benefits, including benefits payable 

by reason of complete shutdowns of 

plants, and benefits payable when 

participants lose their jobs or retire as a 

result of partial closings or reductionsin-force at all kinds of facilities, in 

addition to other UCEBs. Accordingly, 

proposed § 4022.27(a) expressly refers to 

benefits payable as a result of ‘‘plant 

shutdowns or other unpredictable 

contingent events * * * , such as 

partial facility closings and permanent 

layoffs.’’ 7

As stated above, a UCEB is defined by 

section 206(g)(1)(C) of ERISA to include 

benefits payable solely by reason of (1) 

a plant shutdown or similar event, or (2) 

an event other than an event such as 

attainment of a certain age or 

performance of service, that would 

trigger eligibility for a retirement 

benefit. The proposed regulation 

provides that PBGC would determine 

whether a benefit is a UCEB based on 

the facts and circumstances; the 

substance of the benefit, not what it is 

called, determines whether the benefit 

would be a UCEB covered by the new 

phase-in rule. Accordingly, under 

proposed § 4022.27(b), the guarantee of 

any benefit that PBGC determines, based 

on plan provisions and facts and 

circumstances, is a shutdown benefit or 

is otherwise a UCEB would be phased 

in as a UCEB. 

The proposed definition of UCEB 

under § 4022.2 provides that a benefit 

does not cease to be a UCEB for phasein purposes merely because the UCE has 

already occurred or its occurrence has 

become reasonably predictable. This 

interpretation is supported by the plain 

language of ERISA section 4022(b)(8), 

which incorporates ERISA section 

206(g)(1)(C). Section 206(g)(1)(C) 

expressly defines a UCEB not in terms 

of degree of predictability, but rather 

whether a benefit is ‘‘payable solely by 

reason of a shutdown or similar event 

* * * or an event other than the 

attainment of any age, performance of 

any service, receipt or derivation of any 

compensation, or occurrence of death or 

disability.’’ In other words, section 

206(g)(1)(C) provides that a UCEB 

remains a UCEB after the UCE occurs. 

Because many events that are not 

reliably and reasonably predictable 

become predictable immediately before 

they occur, and the concept of 

predictability does not apply to events 

after they have occurred, PBGC 

interprets ERISA section 4022(b)(8) to 

apply to benefits such as shutdown 

benefits regardless of whether the events 

triggering those benefits have already 

occurred or have become predictable. 

Date Phase-in of PBGC Guarantee 

Begins 

ERISA sections 4022(b)(1) and 

4022(b)(7) provide that PBGC’s 

guarantee of a benefit increase is phased 

in from the date the benefit increase is 

‘‘in effect,’’ i.e., from the later of the 

adoption date or effective date of the 

increase. ERISA section 4022(b)(8) 

(added by PPA 2006) provides that, for 

phase-in purposes, shutdown benefits 

and other UCEBs are deemed to be 

‘‘adopted on the date * * * [the UCE] 

occurs.’’ Thus ERISA section 4022(b)(8) 

protects PBGC in the typical situation 

where a shutdown or permanent layoff 

occurs long after a shutdown benefit 

provision was originally adopted. 

Section 4022(b)(8) could be read to 

produce an incongruous result in an 

unusual situation—where the UCE 

occurs first and a UCEB is adopted later, 

effective retroactive to the UCE. Because 

the date of the UCE would be treated 

under section 4022(b)(8) as the adoption 

date of the UCEB, in this situation the 

phase-in arguably would begin on the 

date of the UCE (the later of the 

adoption date or effective date of the 

UCEB), rather than on the actual 

adoption date of the plan amendment, 

as under pre-PPA 2006 law. The result 

would be a more generous—and more 

costly—guarantee of UCEBs than under 

pre-PPA 2006 law. To avoid this 

incongruous result, proposed 

§ 4022.27(c) provides that a benefit 

increase due solely to a UCEB would be 

‘‘in effect’’ as of the latest of the adoption 

date of the plan provision that provides 

for the UCEB, the effective date of the 

UCEB, or the date the UCE occurs. 

Finally, if a UCEB becomes payable 

because a restriction under IRC section 

436 is removed after, for example, an 

adequate funding contribution is made, 

the effective date of the UCEB for phasein purposes is determined without 

regard to the restriction. 

Allocation of Assets 

When PBGC becomes trustee of a 

pension plan that terminates without 

sufficient assets to provide all benefits, 

it allocates plan assets to plan benefits 

in accordance with the statutory priority 

categories in section 4044 of ERISA. The 

category to which a particular benefit is 

assigned in the asset allocation can 

affect insurance program costs and the 

extent to which participants receive 

nonguaranteed benefits. 

Priority category 3 in the asset 

allocation is particularly important, 

because it often includes benefits that, 

depending on the level of the plan 

assets, may be paid by PBGC even 

though not guaranteed. Priority category 

3 contains only those benefits that were 

in pay status at least three years before 

the termination date of the plan (or that 

would have been in pay status if the 

participant had retired before that threeyear period). An individual’s benefit 

amount in priority category 3 is based 

on the plan provisions in effect during 

the five-year period preceding plan 

termination under which the benefit 

amount would be the least. Thus 

priority category 3 does not include 

benefit increases that were adopted or 

became effective in the five years before 

plan termination or, in some cases as 

discussed below, the bankruptcy filing 

date. 

PBGC considered whether the UCEBs 

that are not guaranteed under the PPA 

2006 changes should be excluded from 

priority category 3. Under that 

approach, plan assets would go farther 

to pay for other benefits, especially 

guaranteed benefits, and participants 

would be less likely to receive UCEBs 

that are not guaranteed. Alternatively, if 

UCEBs that are not guaranteed under 

the PPA 2006 changes were included in 

priority category 3—as they are under 

pre-PPA law and PBGC’s current 

regulation on Allocation of Assets (part 


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8By contrast, three other provisions of PPA 2006 

that changed PBGC’s guarantee of benefits 

specifically provide changes to the asset allocation 

scheme under section 4044. See PPA 2006 sections 

404 (treatment of bankruptcy filing date as deemed 

termination date), 402(g)(2)(A) (special termination 

rules for commercial airlines), and 407 (relating to 

majority owners), enacting respectively sections 

4044(e), 4022(h), and 4044(b)(3) of ERISA. 

9See definition of ‘‘PPA 2006 bankruptcy 

termination’’ in § 4001.2. 

4044)—plan assets would be less likely 

to reach other benefits, especially 

guaranteed benefits, and participants 

would be more likely to receive UCEBs 

that are not guaranteed. 

Because section 403 of PPA 2006 does 

not make any reference to section 4044,8

PBGC concluded that the latter 

interpretation is the better one, and thus 

the proposed regulation does not amend 

part 4044. 

Bankruptcy Filing Date Treated as 

Deemed Termination Date 

On July 1, 2008 (73 FR 37390), PBGC 

published a proposed rule, ‘‘Bankruptcy 

Filing Date Treated as Plan Termination 

Date for Certain Purposes; Guaranteed 

Benefits; Allocation of Plan Assets; 

Pension Protection Act of 2006,’’ to 

implement section 404 of PPA 2006, 

which added a new section 4022(g) to 

ERISA. This section provides that when 

an underfunded plan terminates while 

its contributing sponsor is in 

bankruptcy, the amount of guaranteed 

benefits under section 4022 will be 

determined as of the date the sponsor 

entered bankruptcy (the ‘‘bankruptcy 

filing date’’) rather than as of the 

termination date. The provision applies 

to plans terminating while the sponsor 

is in bankruptcy, if the bankruptcy filing 

date is on or after September 16, 2006.9

Section 4022(g) applies to all types of 

plan benefits, including UCEBs. Under 

this provision, if a permanent shutdown 

(or other UCE) occurs after the 

bankruptcy filing date, UCEBs arising 

from the UCE are not guaranteed 

because the benefits are not 

nonforfeitable as of the bankruptcy 

filing date. Similarly, if the shutdown 

(or other UCE) occurs before the 

bankruptcy filing date, the five-year 

phase-in period for any resulting UCEBs 

is measured from the date of the UCE to 

the bankruptcy filing date, rather than to 

the plan termination date. For example, 

if a permanent shutdown occurs three 

years before the bankruptcy filing date, 

the guarantee of any resulting UCEBs 

will be only 60 percent phased in, even 

if the shutdown was more than five 

years before the plan’s termination date. 

This rule is illustrated by Examples 4 

and 5 in the proposed regulation. 

PBGC considered whether UCEBs 

could be excepted from the section 

4022(g) bankruptcy provision on the 

ground that the general phase-in rule in 

section 4022(g) is superseded by the 

specific section 4022(b)(8) phase-in rule 

for UCEBs. However, PBGC concluded 

that the language of the bankruptcy and 

UCEB statutory provisions does not 

allow for any such exception. The UCEB 

provision alters the starting date for 

phase-in of UCEBs, while the 

bankruptcy provision alters the date 

beyond which no further phase-in is 

allowed for any benefit increase, 

including a UCEB. PBGC sees no 

conflict in applying both provisions to 

UCEBs. 

Estimated Guaranteed Benefits 

ERISA section 4041(c)(3)(D)(ii)(IV) 

requires administrators of plans 

terminating in a distress termination to 

limit payment of benefits to estimated 

guaranteed benefits and estimated nonguaranteed benefits funded under 

section 4044, beginning on the proposed 

termination date. Section 4022.62 of 

PBGC’s regulation on Benefits Payable 

in Terminated Single-Employer Plans 

contains rules for computing estimated 

guaranteed benefits, including 

provisions for estimating guaranteed 

benefits when a new benefit or benefit 

increase was added to the plan within 

five years before plan termination. The 

proposed regulation would amend 

§ 4022.62 to provide that the date the 

UCE occurs is treated as the date the 

UCEB was adopted, i.e., the date the 

plan was amended to include the UCEB. 

Applicability 

The regulatory changes made by this 

rule, like section 403 of PPA 2006, 

would apply to UCEBs that become 

payable as a result of a UCE that occurs 

after July 26, 2005. 

Compliance With Regulatory 

Guidelines 

Executive Order 12866 

PBGC has determined that this 

proposed rule is a ‘‘significant regulatory 

action’’ under Executive Order 12866. 

The Office of Management and Budget 

has therefore reviewed the proposed 

rule under Executive Order 12866. 

Under Section 3(f)(1) of Executive 

Order 12866, a regulatory action is 

economically significant if ‘‘it is likely to 

result in a rule that may * * * [h]ave 

an annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, or Tribal 

governments or communities.’’ The 

PBGC has determined that this proposed 

rule does not cross the $100 million 

threshold for economic significance and 

is not otherwise economically 

significant. 

The economic effect of the proposed 

rule is entirely attributable to the 

economic effect of section 403 of PPA 

2006. Three factors tend to reduce the 

economic impact of section 403. 

First, before section 403 went into 

effect, PBGC often involuntarily 

terminated plans with shutdown 

liabilities before company-wide 

shutdowns, under the ‘‘long-run loss’’ 

provision in section 4042(a)(4) of 

ERISA. That provision allows PBGC to 

initiate termination proceedings if its 

long-run loss ‘‘may reasonably be 

expected to increase unreasonably if the 

plan is not terminated.’’ A sudden 

increase in PBGC’s liabilities resulting 

from a shutdown could create just such 

an unreasonable increase in long-run 

loss. Section 403 avoids the need for 

PBGC to make case-by-case decisions 

whether to initiate such ‘‘pre-emptive’’ 

terminations. Although it is difficult to 

make assumptions about PBGC’s ability 

and intent to pursue such terminations 

if section 403 had not gone into effect, 

this factor tends to reduce its economic 

impact. 

Second, another PPA 2006 

amendment provides that if a plan 

terminates while the sponsor is in 

bankruptcy, the amount of benefits 

guaranteed by PBGC is fixed at the date 

of the bankruptcy filing rather than at 

the plan termination date. Because of 

that provision, if a plant shutdown or 

other UCE occurred between the 

bankruptcy filing date and the 

termination date, the resulting UCEB 

would not be guaranteed at all, and thus 

section 403 would have no economic 

effect. 

Third—and perhaps most important— 

as also discussed above, other PPA 2006 

provisions restrict payment of UCEBs if 

a plan is less than 60 percent funded. If, 

because of those restrictions, a UCEB 

was not payable at all, section 403 again 

would have no economic effect. 

As stated above in Applicability, 

section 403 applies to any UCEB that 

becomes payable as a result of a UCE 

that occurs after July 26, 2005. PBGC 

estimates that, to date, the total effect of 

section 403—in terms of lower benefits 

paid to participants and associated 

savings for PBGC—is less than $4 

million. Although PBGC cannot predict 

with certainty which plans with UCEBs 

will terminate, the funding level of such 

plans, or what benefits will be affected 

by the guarantee limits, given the 

relatively low estimate of the effect of 

the statutory provision to date, PBGC 

has determined that the annual effect of 


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the proposed rule will be less than $100 

million. 

Regulatory Flexibility Act 

PBGC certifies under section 605(b) of 

the Regulatory Flexibility Act that this 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

The amendments implement and in 

some cases clarify statutory changes 

made in PPA 2006; they do not impose 

new burdens on entities of any size. 

Virtually all of the statutory changes 

affect only PBGC and persons who 

receive benefits from PBGC. 

Accordingly, sections 603 and 604 of 

the Regulatory Flexibility Act do not 

apply. 

List of Subjects in 29 CFR Part 4022 

Pension insurance, Pensions, 

Reporting and recordkeeping 

requirements. 

For the reasons given above, PBGC 

proposes to amend 29 CFR part 4022 as 

follows: 

PART 4022—BENEFITS PAYABLE IN 

TERMINATED SINGLE-EMPLOYER 

PLANS 

1. The authority citation for part 4022 

continues to read as follows: 

Authority: 29 U.S.C. 1302, 1322, 1322b, 

1341(c)(3)(D), and 1344. 

2. In § 4022.2: 

a. Amend the definition of ‘‘benefit 

increase’’ by removing the final ‘‘and’’ in 

the second sentence and adding in its 

place, ‘‘an unpredictable contingent 

event benefit, and’’; and 

b Add in alphabetical order 

definitions for unpredictable contingent 

event (UCE) and unpredictable 

contingent event benefit (UCEB) to read 

as follows: 

§ 4022.2 Definitions. 

* * * * * 

Unpredictable contingent event (UCE) 

has the same meaning as unpredictable 

contingent event in section 206(g)(1)(C) 

of ERISA and Treas. Reg. § 1.436–1(j)(9). 

It includes a plant shutdown (full or 

partial) or a similar event (such as a full 

or partial closing of another type of 

facility, or a layoff or other workforce 

reduction), or any event other than the 

attainment of any age, performance of 

any service, receipt or derivation of any 

compensation, or occurrence of death or 

disability. 

Unpredictable contingent event 

benefit (UCEB) has the same meaning as 

unpredictable contingent event benefit 

in section 206(g)(1)(C) of ERISA and 

Treas. Reg. § 1.436–1(j)(9). Thus, a 

UCEB is any benefit or benefit increase 

to the extent that it would not be 

payable but for the occurrence of a UCE. 

A benefit or benefit increase that is 

conditioned upon the occurrence of a 

UCE does not cease to be a UCEB as a 

result of the contingent event having 

occurred or its occurrence having 

become reasonably predictable. 

3. § 4022.24(e) is revised to read as 

follows: 

§ 4022.24 Benefit Increases. 

* * * * * 

(e) Except as provided in § 4022.27(c), 

for the purposes of §§ 4022.22 through 

4022.28, a benefit increase is deemed to 

be in effect commencing on the later of 

its adoption date or its effective date. 

§ 4022.27 [Redesignated as § 4022.28] 

4. Section 4022.27 is redesignated as 

§ 4022.28. 

5. New § 4022.27 is added to read as 

follows: 

§ 4022.27 Phase-in of guarantee of 

unpredictable contingent event benefits. 

(a) Scope. This section applies to a 

benefit increase, as defined in § 4022.2 

of this part, that is an unpredictable 

contingent event benefit (UCEB) and 

that is payable with respect to an 

unpredictable contingent event (UCE) 

that occurs after July 26, 2005. 

(1) Examples of benefit increases 

within the scope of this section include 

unreduced early retirement benefits or 

other early retirement subsidies, or 

other benefits to the extent that such 

benefits would not be payable but for 

the occurrence of one or more UCEs. 

(2) Examples of UCEs within the 

scope of this section include full and 

partial closings of plants or other 

facilities, and permanent workforce 

reductions, such as permanent layoffs. 

Permanent layoffs include layoffs 

during which an idled employee 

continues to earn credited service 

(‘‘creep-type’’ layoff) for a period of time 

at the end of which the layoff is deemed 

to be permanent. Permanent layoffs also 

include layoffs that become permanent 

upon the occurrence of an additional 

event such as a declaration by the 

employer that the participant’s return to 

work is unlikely or a failure by the 

employer to offer the employee suitable 

work in a specified area. 

(3) The examples in this section are 

not an exclusive list of UCEs or UCEBs 

and are not intended to narrow the 

statutory definitions, as further 

delineated in Treasury Regulations. 

(b) Facts and circumstances. If PBGC 

determines that a benefit is a shutdown 

benefit or other type of UCEB, the 

benefit will be treated as a UCEB for 

purposes of this subpart. PBGC will 

make such determinations based on the 

facts and circumstances, consistent with 

these regulations; how a benefit is 

characterized by the employer or other 

parties may be relevant but is not 

determinative. 

(c) Date phase-in begins. (1) The date 

the phase-in of PBGC’s guarantee of a 

UCEB begins is determined in 

accordance with subpart B of this part. 

For purposes of this subpart, a UCEB is 

deemed to be in effect as of the latest 

of— 

(i) The adoption date of the plan 

provision that provides for the UCEB, 

(ii) The effective date of the UCEB, or 

(iii) The date the UCE occurs. 

(2) The date the phase-in of PBGC’s 

guarantee of a UCEB begins is not 

affected by any delay that may occur in 

placing participants in pay status due to 

removal of a restriction under section 

436(b)of the Code. See the example in 

paragraph (e)(8) of this section. 

(d) Date UCE occurs. For purposes of 

this section, PBGC will determine the 

date the UCE occurs based on the plan 

provisions and the relevant facts and 

circumstances, such as the nature and 

level of activity at a facility that is 

closing and the permanence of the 

event; the date of the event as 

conceived, planned, announced, or 

agreed to by the employer may be 

relevant but is not determinative. 

(1) The date a UCE occurs is 

determined on a participant-byparticipant basis, or on a different basis, 

such as a facility-wide or company-wide 

basis, depending upon plan provisions 

and the facts and circumstances. For 

example, a benefit triggered by a 

permanent layoff of a participant would 

be determined with respect to each 

participant, and thus layoffs that occur 

on different dates would generally be 

distinct UCEs. In contrast, a benefit 

payable only upon a complete plant 

shutdown would apply facility-wide, 

and generally the shutdown date would 

be the date of the UCE for all 

participants who work at that plant. 

Similarly, a benefit payable only upon 

the complete shutdown of the 

employer’s entire operations would 

apply plan-wide, and thus the 

shutdown date of company operations 

generally would be the date of the UCE 

for all participants. 

(2) For purposes of paragraph (c)(3) of 

this section, if a benefit is contingent 

upon more than one UCE, PBGC will 

apply the rule under Treas. Reg. 

§ 1.436–1(b)(3)(ii) (i.e., the date the UCE 

occurs is the date of the latest UCE). 

(e) Examples. The following examples 

illustrate the operation of the rules in 

this section. Except as provided in 

Example 8, no benefit limitation under 


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13310 Federal Register / Vol. 76, No. 48 / Friday, March 11, 2011 / Proposed Rules 

Code section 436 applies in any of these 

examples. 

(1) Date of UCE. (i) Facts: On January 

1, 2000, a Company adopts a plan that 

provides an unreduced early retirement 

benefit for participants with specified 

age and service whose continuous 

service is broken by a permanent plant 

closing or permanent layoff that occurs 

on or after January 1, 2001. On January 

1, 2007, the Company informally and 

without announcement decides to close 

Facility A within a two-year period. On 

January 1, 2008, the Company’s Board of 

Directors passes a resolution directing 

the Company’s officers to close Facility 

A on or before September 1, 2008. On 

June 1, 2008, the Company issues a 

notice pursuant to the Worker 

Adjustment and Retraining Notification 

(‘‘WARN’’) Act, 29 U.S.C. section 2101, 

et seq., that Facility A will close, and all 

employees will be permanently laid off, 

on or about August 1, 2008. The 

Company and the Union representing 

the employees enter into collective 

bargaining concerning the closing of 

Facility A and on July 1, 2008, they 

jointly agree and announce that Facility 

A will close and employees who work 

there will be permanently laid off as of 

November 1, 2008. However, due to 

unanticipated business conditions, 

Facility A continues to operate until 

December 31, 2008, when operations 

cease and all employees are 

permanently laid off. The plan 

terminates as of December 1, 2009. 

(ii) Conclusion: PBGC would 

determine that the UCE is the facility 

closing and permanent layoff that 

occurred on December 31, 2008. 

Because the date that the UCE occurred 

(December 31, 2008) is later than both 

the date the plan provision that 

established the UCEB was adopted 

(January 1, 2000) and the date the UCEB 

became effective (January 1, 2001), 

December 31, 2008, would be the date 

the phase-in period under ERISA 

section 4022 begins. In light of the plan 

termination date of December 1, 2009, 

the guarantee of the UCEBs of 

participants laid off on December 31, 

2008, would be 0 percent phased in. 

(2) Sequential layoffs. (i) Facts: The 

same facts as Example 1, with these 

exceptions: Not all employees are laid 

off on December 31, 2008. The Company 

and Union agree to and subsequently 

implement a shutdown in which 

employees are permanently laid off in 

stages—one-third of the employees are 

laid off on October 31, 2008, another 

third are laid off on November 30, 2008, 

and the remaining one-third are laid off 

on December 31, 2008. 

(ii) Conclusion: Because the plan 

provides that a UCEB is payable in the 

event of either a permanent layoff or a 

plant shutdown, PBGC would determine 

that phase-in begins on the date of the 

UCE applicable to each of the three 

groups of employees. Because the first 

two groups of employees were 

permanently laid off before the plant 

closed, October 31, 2008, and November 

30, 2008, are the dates that the phasein period under ERISA section 4022 

begins for those groups. Because the 

third group was permanently laid off on 

December 31, 2008, the same date the 

plant closed, the phase-in period would 

begin on that date for that group. Based 

on the plan termination date of 

December 1, 2009, participants laid off 

on October 31, 2008, and November 30, 

2008, would have 20 percent of the 

UCEBs (or $20 per month, if greater) 

guaranteed under the phase-in rule. The 

guarantee of the UCEBs of participants 

laid off on December 31, 2008, would be 

0 percent phased in. 

(3) Skeleton shutdown crews. (i) 

Facts: The same facts as Example 1, 

with these exceptions: The plan 

provides for an unreduced early 

retirement benefit for age-service 

qualified participants only in the event 

of a break in continuous service due to 

a permanent and complete plant 

closing. A minimal skeleton crew 

remains to perform primarily security 

and basic maintenance functions until 

March 31, 2009, when skeleton crew 

members are permanently laid off and 

the facility is sold to an unrelated 

investment group that does not assume 

the plan or resume business operations 

at the facility. The plan has no specific 

provision or past practice governing 

benefits of skeleton shutdown crews. 

The plan terminates as of January 1, 

2009. 

(ii) Conclusion: Because the 

continued employment of the skeleton 

crew does not effectively continue 

operations of the facility, PBGC would 

determine that there is a permanent and 

complete plant closing (for purposes of 

the plan’s plant closing provision) as of 

December 31, 2008, which is the date 

the phase-in period under ERISA 

section 4022 begins with respect to 

employees who incurred a break in 

continuous service at that time. The 

UCEB of those participants would be a 

nonforfeitable benefit as of the plan 

termination date, but PBGC’s guarantee 

of the UCEB would be 0 percent phased 

in. In the case of the skeleton crew 

members, such participants would not 

be eligible for the UCEB because they 

did not incur a break in continuous 

service until after the plan termination 

date. (If the plan had a provision that 

there is no shutdown until all 

employees, including any skeleton crew 

are terminated, or if the plan were 

reasonably interpreted to so provide in 

light of past practice, PBGC would 

determine that the date that the UCE 

occurred was after the plan termination 

date. Thus the UCEB would not be a 

nonforfeitable benefit as of the plan 

termination date and therefore would 

not be guaranteeable.) 

(4) Creep-type layoff benefit/ 

bankruptcy of contributing sponsor. (i) 

Facts: A plan provides that participants 

who are at least age 55 and whose age 

plus years of continuous service equal at 

least 80 are entitled to an unreduced 

early retirement benefit if their 

continuous service is broken due to a 

permanent layoff. The plan further 

provides that a participant’s continuous 

service is broken due to a permanent 

layoff when the participant is 

terminated due to the permanent 

shutdown of a facility, or the participant 

has been on layoff status for two years. 

These provisions were adopted and 

effective in 1986. Participant A is 56 

years old and has 25 years of continuous 

service when he is laid off in a 

reduction-in-force on May 15, 2008. He 

is not recalled to employment, and on 

May 15, 2010, under the terms of the 

plan, his continuous service is broken 

due to the layoff. He goes into pay status 

on June 1, 2010, with an unreduced 

early retirement benefit. The 

contributing sponsor of Participant A’s 

plan files a bankruptcy petition under 

Chapter 11 of the U.S. Bankruptcy Code 

on September 1, 2011, and the plan 

terminates during the bankruptcy 

proceedings with a termination date of 

October 1, 2012. Under section 4022(g) 

of ERISA, because the plan terminated 

while the contributing sponsor was in 

bankruptcy, the five-year phase-in 

period ended on the bankruptcy filing 

date. 

(ii) Conclusion: PBGC would 

determine that the guarantee of the 

UCEB is phased in beginning on May 

15, 2010, the date of the later of the two 

UCEs necessary to make this benefit 

payable (i.e., the first UCE is the initial 

layoff and the second UCE is the 

expiration of the two-year period 

without rehire). Since that date is more 

than one year (but less than two years) 

before the September 1, 2011, 

bankruptcy filing date, 20 percent of 

Participant A’s UCEB (or $20 per month, 

if greater) would be guaranteed under 

the phase-in rule. 

(5) Creep-type layoff benefit with 

provision for declaration that return to 

work unlikely. (i) Facts: A plan provides 

that participants who are at least age 60 

and have at least 20 years of continuous 

service are entitled to an unreduced 

early retirement benefit if their 


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Federal Register / Vol. 76, No. 48 / Friday, March 11, 2011 / Proposed Rules 13311 

continuous service is broken by a 

permanent layoff. The plan further 

provides that a participant’s continuous 

service is broken by a permanent layoff 

if the participant is laid off and the 

employer declares that the participant’s 

return to work is unlikely. Participants 

may earn up to 2 years of credited 

service while on layoff. The plan was 

adopted and effective in 1990. On 

March 1, 2009, Participant B, who is age 

60 and has 20 years of service, is laid 

off. On June 15, 2009, the employer 

declares that Participant B’s return to 

work is unlikely. Participant B retires 

and goes into pay status as of July 1, 

2009. The employer files for bankruptcy 

on September 1, 2011. 

(ii) Conclusion: PBGC would 

determine that the phase-in period of 

the guarantee of the UCEB would begin 

on June 15, 2009—the later of the two 

UCEs necessary to make the benefit 

payable (i.e., the first UCE is the initial 

layoff and the second UCE is the 

employer’s declaration that it is unlikely 

that Participant B will return to work). 

The phase-in period would end on 

September 1, 2011, the date of the 

bankruptcy filing. Thus 40 percent of 

Participant B’s UCEB (or $40 per month, 

if greater) would be guaranteed under 

the phase-in rule. 

(6) Shutdown benefit with special 

post-employment eligibility provision. 

(i) Facts: A plan provides that, in the 

event of a permanent shutdown of a 

plant, a participant age 60 or older who 

terminates employment due to the 

shutdown and who has at least 20 years 

of service is entitled to an unreduced 

early retirement benefit. The plan also 

provides that a participant with at least 

20 years of service who terminates 

employment due to a plant shutdown at 

a time when the participant is under age 

60 also will be entitled to an unreduced 

early retirement benefit, provided the 

participant’s commencement of benefits 

is on or after attainment of age 60 and 

the time required to attain age 60 does 

not exceed the participant’s years of 

service with the plan sponsor. The plan 

imposes no other conditions on receipt 

of the benefit. Plan provisions were 

adopted and effective in 1991. On 

January 1, 2006, Participant C’s plant is 

permanently shut down. At the time of 

the shutdown, Participant C had 20 

years of service and was age 58. On June 

1, 2007, Participant C reaches age 60 

and retires. The plan terminates as of 

September 1, 2007. 

(ii) Conclusion: PBGC would 

determine that the guarantee of the 

shutdown benefit is phased in from 

January 1, 2006, which is the date of the 

only UCE (the permanent shutdown of 

the plant) necessary to make the benefit 

payable. Thus 20 percent of Participant 

C’s UCEB (or $20 per month, if greater) 

would be guaranteed under the phasein rule. 

(7) Phase-in of retroactive UCEB. (i) 

Facts: As the result of a settlement in a 

class-action lawsuit, a plan provision is 

adopted on September 1, 2011, to 

provide that age/service-qualified 

participants are entitled to an 

unreduced early retirement benefit if 

permanently laid off due to a plant 

shutdown occurring after January 1, 

2008. Benefits under the provision are 

payable prospectively only, beginning 

March 1, 2012. Participant A, who was 

age/service-qualified, was permanently 

laid off due to a plant shutdown 

occurring on January 1, 2009, and 

therefore he is scheduled to be placed 

in pay status as of March 1, 2012. The 

plan is a calendar year plan. The 

unreduced early retirement benefit is 

paid to Participant A beginning on 

March 1, 2012. The plan terminates as 

of February 1, 2014. The termination is 

not a PPA 2006 bankruptcy termination. 

(ii) Conclusion: PBGC would 

determine that the guarantee of the 

UCEB is phased in beginning on March 

1, 2012. This is the date the benefit was 

effective (since it was the first date on 

which the new benefit was payable), 

and it is later than the adoption date of 

the plan provision (September 1, 2011) 

and the date of the UCE (January 1, 

2009). The guarantee of the unreduced 

early retirement benefit is 20% phased 

in. 

(8) Removal of IRC section 436 

restriction. (i) Facts: A plan provision 

was adopted on September 1, 1989, to 

provide that age/service-qualified 

participants are entitled to an 

unreduced early retirement benefit if 

permanently laid off due to a plant 

shutdown occurring after January 1, 

1990. Participant A, who was age/ 

service-qualified, was permanently laid 

off due to a plant shutdown occurring 

on April 1, 2011. The plan is a calendar 

year plan. Under the rules of Code 

section 436 (ERISA section 206(g)) and 

Treasury regulations thereunder, a plan 

cannot provide a UCEB payable with 

respect to an unpredictable contingent 

event, if the event occurs during a plan 

year in which the plan’s adjusted 

funding target attainment percentage is 

less than 60%. On January 30, 2011, the 

plan’s enrolled actuary issued a 

certification stating that the plan’s 

adjusted funding target attainment 

percentage for 2011 is 58%. Therefore, 

the plan restricts payment of the 

unreduced early retirement benefit 

payable with respect to the shutdown 

on April 1, 2011. On August 15, 2011, 

the plan sponsor makes an additional 

contribution to the plan that is 

designated as a contribution under Code 

section 436(b)(2) to eliminate the 

restriction on payment of the shutdown 

benefits. On September 15, 2011, the 

plan’s enrolled actuary issues a 

certification stating that, due to the 

additional section 436(b)(2) 

contribution, the plan’s adjusted 

funding target attainment percentage for 

2011 is 60%. On October 1, 2011, 

Participant A is placed in pay status for 

the unreduced early retirement benefit 

and, as required under Code section 436 

and Treasury regulations thereunder, is 

in addition paid retroactively the 

unreduced benefit for the period May 1, 

2011 (the date the unreduced early 

retirements would have become 

payable) through September 1, 2011. 

The plan terminates as of February 1, 

2014. The termination is not a PPA 2006 

bankruptcy termination. 

(ii) Conclusion: PBGC would 

determine that the guarantee of the 

UCEB is phased in beginning on April 

1, 2011, the date the UCE occurred. 

Because April 1, 2011, is later than both 

the date the plan provision that 

established the UCEB was adopted 

(September 1, 1989) and the date the 

UCEB became effective (January 1, 

1990), it would be the date the phasein period under ERISA section 4022 

begins. Commencement of the phase-in 

period is not affected by the delay in 

providing the unreduced early 

retirement benefit to Participant A due 

to the operation of the rules of Code 

section 436 and the Treasury regulations 

thereunder. The guarantee of the 

unreduced early retirement benefit is 

40% phased in. 

6. In § 4022.62(c)(2)(i), add a sentence 

after the third sentence to read as 

follows: 

§ 4022.62 Estimated guaranteed benefit. 

* * * * * 

(c) * * * 

(2) * * * 

(i) * * * ‘‘New benefits’’ also result 

from increases that become payable by 

reason of the occurrence of an 

unpredictable contingent event 

(provided the event occurred after July 

26, 2005), to the extent the increase 

would not be payable but for the 

occurrence of the event; in the case of 

such new benefits, the date of the 

occurrence of the unpredictable 

contingent event is treated as the 

amendment date for purposes of Table 

I. * * * 

* * * * * 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
13312 Federal Register / Vol. 76, No. 48 / Friday, March 11, 2011 / Proposed Rules 

Issued in Washington, DC, this 3rd day of 

March, 2011. 

Joshua Gotbaum, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2011–5696 Filed 3–10–11; 8:45 am] 

BILLING CODE 7709–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2010–1029] 

RIN 1625–AA09 

Drawbridge Operation Regulations; 

Fox River, Oshkosh, WI 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking; 

withdrawal. 

SUMMARY: The Coast Guard is 

withdrawing its notice of proposed 

rulemaking (NPRM) concerning the 

establishment of remote drawbridge 

operating procedures for the Canadian 

National Railway Bridge across the Fox 

River at Mile 55.72 at Oshkosh, 

Wisconsin. After careful consideration 

of the comments from all parties it was 

determined to be in the best interest of 

navigation to withdraw the NPRM. 

DATES: The notice of proposed 

rulemaking published December 8, 

2010, at 75 FR 76322, is withdrawn on 

March 11, 2011. 

ADDRESSES: The docket for this 

withdrawn rulemaking is available for 

inspection or copying at the Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. You may also 

find this docket on the Internet by going 

to http://www.regulations.gov, inserting 

USCG–2010–1029 in the ‘‘Keyword’’ box 

and then clicking ‘‘Search.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions about this notice, 

call or e-mail Mr. Lee D. Soule, Bridge 

Management Specialist, U.S. Coast 

Guard; telephone 216–902–6085, e-mail 

lee.d.soule@uscg.mil, or fax 216–902– 

6088. If you have questions on viewing 

material in the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Background 

On December 8, 2010, we published 

an NPRM entitled Drawbridge 

Operation Regulation; Fox River, 

Oshkosh, WI. in the Federal Register 

(75 FR 76322). The rulemaking 

concerned the request by the 

drawbridge owner, Canadian National 

Railway (CN RR), for the District 

Commander to approve remote 

operation of the drawbridge in 

accordance with 33 CFR 117.42. The 

drawbridge has been remotely operated 

without specific authorization from the 

District Commander for approximately 

3–4 years, and is currently required to 

open on signal year round. Vessel 

operators have recently informed the 

Coast Guard that the drawbridge was 

formerly left in the open-to-navigation 

position and only closed when a train 

was crossing, but this practice was no 

longer used and vessels were reporting 

unreasonable delays, including no 

response from the remote bridge 

operator to signals for openings, and 

difficulties establishing 

communications with the remote 

operator. During the summer of 2010 the 

U.S. Coast Guard met with CN RR 

officials and developed the operating 

regulation proposed in the NPRM, 

including a set of visual warning signals 

to provide adequate warning to vessels 

that the railroad bridge was about to 

move from the open-to-navigation 

position to the closed-to-navigation 

position. Between April 15 and October 

15 each year, the proposed regulation 

would require the bridge to remain in 

the open-to-navigation position unless 

train traffic is crossing, then reopen 

once train traffic has passed. The 

proposed light and sound signals would 

provide vessels with a method of 

warning when the bridge is expected to 

either close for train traffic or reopen for 

vessel traffic without having to establish 

direct communication with the remote 

bridge operator. The bridge would also 

be required to maintain and operate a 

marine radiotelephone, along with the 

equipment to visually monitor the 

waterway and communicate with 

vessels using all signaling methods 

described in 33 CFR 117.15. The 

proposed regulation also would have 

established a permanent winter 

operating schedule by requiring vessels 

to provide at least 12 hours advance 

notice for a bridge opening during 

winter, or during the traditional nonboating season, between approximately 

October 16 and April 14 each year. 

Withdrawal 

The Coast Guard received four 

comments regarding the NPRM, two that 

were successfully received by the 

Docket Management Facility that were 

negative and two received by direct 

emails that were positive. 

Both negative comments 

characterized the proposed 10-minute 

advance visual warning method to 

vessel operators as a required 10-minute 

delay for trains, resulting in slowed or 

stopped trains, blockages of City of 

Oshkosh streets, and impacts to 

emergency response providers. The two 

negative comments also suggested a 2- 

minute warning method for vessels. The 

NPRM never suggested or implied any 

change to train operations, or that trains 

must change speed or stop and wait 10 

minutes on either bridge approach, or 

on City streets. Among the positive 

comments to the NPRM the local marine 

law enforcement entity stated it is not 

uncommon for ten to twenty vessels to 

be waiting for a bridge opening on 

weekends and holidays. For public 

safety reasons the area around the 

bridge is a county regulated slow nowake speed zone for all vessels and the 

suggested 2-minute warning would not 

provide adequate warning before the 

span transitioned between the open and 

closed positions. 

The Coast Guard is responsible for 

enforcement of the federal drawbridge 

regulations in 33 CFR part 117. Any 

decision by the Coast Guard to authorize 

remote operations or promulgate a 

drawbridge operation regulation must 

ensure that the proposed action 

provides for the safety and reasonable 

needs of navigation. After careful 

consideration of the comments from all 

parties it is determined to be in the best 

interest of navigation to withdraw the 

proposed rule. The bridge will be 

required to be manned by drawtenders 

and to conform to the general 

requirements and regulations found in 

Subpart A of Part 117 of Title 33 of the 

Code of Federal Regulations. 

Authority 

This action is taken under the 

authority of 33 U.S.C. 499; 33 CFR 1.05– 

1; Department of Homeland Security 

Delegation No. 0170.1. 

Dated: February 8, 2011. 

M.N. Parks, 

Rear Admiral, U.S. Coast Guard, Commander, 

Ninth Coast Guard District. 

[FR Doc. 2011–5662 Filed 3–10–11; 8:45 am] 

BILLING CODE 9110–04–P 


jlentini on DSKJ8SOYB1PROD with PROPOSALS