2008 Enrolled Actuaries Meeting 

Questions to the PBGC 

and Summary of Their Responses 

April 2008 
 

Summary of Discussions between the Enrolled Actuaries Program Committee 

and Staff of the Pension Benefit Guaranty Corporation 

on February 14, 2008 

The following pages set forth the questions posed to staff of the Pension Benefit Guaranty Corporation at 

discussions on February 14, 2007, with representatives of the Enrolled Actuaries Program Committee. 

Included also are summaries of the responses to those questions. The summary responses to the questions 

are intended to reflect as accurately as possible the statements made by the government representatives. 

However, those responses are merely the current views of the individuals and do not represent the 

positions of the Pension Benefit Guaranty Corporation or of any other governmental agency and cannot 

be relied upon by any person for any purpose. Moreover, PBGC has not in any way approved this booklet 

or reviewed it to determine whether the statements herein are accurate or complete. 

The following representatives of the Enrolled Actuaries Program Committee took part in the discussions: 

 

Harold J. Ashner, Keightley & Ashner LLP 

Bruce A. Cadenhead, Mercer Human Resource Consulting 

Eric Keener, Hewitt Associates LLC 

Marjorie R. Martin, Aon Consulting 

John H. Moore, JP Morgan Compensation and Benefit Strategies 

Jay P. Rosenberg, Buck Consultants 

Donald J. Segal, JP Morgan Compensation and Benefit Strategies 

James A. Stinchcomb, Towers Perrin 

The following representatives of the Pension Benefit Guaranty Corporation took part in the discussions: 

James J. Armbruster, Assistant Chief Counsel, Office of the Chief Counsel 

Kenneth Cooper, Attorney, Office of the General Counsel 

C. David Gustafson, Director, Policy, Research and Analysis Department 

Catherine B. Klion, Manager, Regulatory and Policy Division, Legislative and Regulatory Department 

Constance Markakis, Attorney, Legislative and Regulatory Department 

Deborah C. Murphy, Attorney, Legislative and Regulatory Department 

Jane D. Pacelli, Chief Research Actuary, Policy, Research and Analysis Department 

Neela Ranade, Chief Negotiating Actuary, Department of Insurance Supervision & Compliance 

Amy Viener, Visiting Actuary, Policy, Research and Analysis Department 

The Program Committee would like to thank the practitioners who submitted questions for this booklet. 

Copyright © 2008, Enrolled Actuaries Meeting 

All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited 

number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the 

condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled 

Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting 

does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in 

new collective works, or for sale or resale. 
 

INDEX 

Subject Matter Questions

1. Premiums............................................................................................................................. 1 – 5 

2. Standard Terminations......................................................................................................... 6 – 7 

3. Penalty Policy............................................................................................................................ 8 

4. Reportable Events...................................................................................................................... 9 

5. Other Reporting............................................................................................................... 10 – 12 

6. Other................................................................................................................................ 13 – 22 

 
2008 Enrolled Actuaries Meeting Blue Book Page 1 

QUESTION 1 

Premiums: Reasonable Delay in Payment of Consensual Lump Sum 

Assume that a participant in a calendar-year plan terminates employment on November 15, 

2007, with a right to a consensual lump sum that has a present value greater than $5,000; that 

under the terms of the plan the participant’s annuity starting date is December 1, 2007; that 

the participant elects the lump sum with spousal consent; and that the lump sum is paid on 

January 15, 2008. Is the plan treated as having benefit liabilities with respect to the 

participant as of December 31, 2007, for purposes of determining the flat-rate premium for 

the 2008 premium payment year? (The PBGC’s response to Question 1 of the 2005 Blue 

Book made clear that a participant who is paid a nonconsensual lump sum after the premium 

snapshot date but whose cashout date precedes the premium snapshot date may be excluded 

from the flat-rate participant count where there is no more than a reasonable administrative 

delay between the cashout date and the date of actual payment.) 

RESPONSE 

In order for the plan to exclude the participant from the flat-rate participant count for the 

2008 premium payment year, two conditions must be met: (i) the annuity starting date under 

the terms of the plan (December 1, 2007) must be a date on or before the premium snapshot 

date (proposed to be renamed the “participant count date” for 2008 and later premium 

payment years) (December 31, 2007), and (ii) there must be no more than a reasonable 

administrative delay between the annuity starting date and the date of actual payment 

(January 15, 2008) to the participant. Whether an administrative delay in payment is 

reasonable is based on the facts and circumstances in any particular case. These facts and 

circumstances include the reasonableness of the typical time period required by the plan to 

calculate the benefit amount in consensual lump sum cases, how the time period in the 

particular case compares to that typical time period, and any other facts and circumstances 

surrounding the delay in the participant’s case. 

PBGC premium compliance evaluations include examination of any delay in paying lump 

sums after the participant count date to participants who are excluded from the participant 

count 
2008 Enrolled Actuaries Meeting Blue Book Page 2 

QUESTION 2 

Premiums: Applicability of Yield Curve Election to VRP 

The preamble to the proposed rule implementing the new PPA funding rules states that, 

where a plan sponsor elects to use the full yield curve the amount of the funding target 

calculated in accordance with such an election “applies for all purposes, including 

determining the adjusted funding target attainment percentage under section 436 and the 

applicable limitations under section 404” (72 Fed. Reg. 74215, 74220 (Dec. 28, 2007)). 

Would an election to use the full yield curve apply for purposes of determining the standard 

premium funding target for purposes of the PBGC’s variable-rate premium? 

RESPONSE 

No. The preamble language in Treasury’s proposed regulation does not override the statutory 

§ 4006 language requiring that the interest rate used for variable-rate premium (VRP) 

purposes “shall be equal to the first, second, or third segment rate ....... which would be 

determined under section 303(h)(2)(C) if section 303(h)(2)(D) were applied by using 

monthly yields .... rather than the average of such yields for a 24-month period.” 

Note that under the proposed premium regulation, an election could be made to use the 

alternative premium funding target, in which case the discount rate used to determine the 

premium funding target would be identical to the discount rate used to determine the funding 

target for minimum funding purposes. If such an election were in effect, a plan using the full 

yield curve for minimum funding purposes would also use it for VRP purposes. 
2008 Enrolled Actuaries Meeting Blue Book Page 3 

QUESTION 3 

Premiums: Termination Premium Collection Experience 

The preamble to the PBGC’s final rule implementing the termination premium stated that, in 

light of the “specific intent” of Congress “to avoid a limited recovery of the termination 

premium in bankruptcy and to ensure a full recovery post-bankruptcy,” it would be 

“inappropriate for PBGC to adopt a policy of routinely settling termination premium claims 

for less than the full amount” (72 Fed. Reg. 71222, 71227 (December 17, 2007)). Please 

describe the PBGC’s experience to date attempting to collect the termination premium 

through settlements or litigation, both in the bankruptcy context and the non-bankruptcy 

context (e.g., where a distress termination is approved under Distress Test 3 (“inability to 

continue in business”)). 

RESPONSE 

PBGC has published a final rule on the termination premium, referenced above. 

Contributing sponsors of plans subject to the termination premium (and their controlled 

group members) must pay the termination premium in accordance with the statute and 

regulation and may incur late payment charges (interest and penalties) if they fail to pay 

timely. The form and instructions for this purpose are available at 

http://www.pbgc.gov/practitioners/premium-filings/content/page16329.html 

PBGC generally does not comment on or discuss enforcement efforts or settlements, which 

depend heavily on the specific facts of each case. 

There is litigation on the termination premium in a case commenced in the U.S. Bankruptcy 

Court for the Southern District of New York involving Oneida Ltd. After Oneida emerged 

from bankruptcy, it brought an adversary action in the bankruptcy court that confirmed its 

plan of reorganization, asserting that the termination premium is actually a pre-petition 

“claim” under the Bankruptcy Code and thus was discharged. PBGC asserts that the 

termination premium is a post-bankruptcy obligation where a pension plan is terminated by a 

reorganizing debtor. In the fall of 2007, the parties filed competing motions for summary 

judgment, and the bankruptcy court held a hearing on November 13, 2007. On February 27, 

2008, the court ruled against PBGC, holding that the termination premium is a pre-petition 

bankruptcy claim. PBGC expects to appeal the decision. See Question 18 for more 

information on this case. 

In addition, PBGC has asserted claims for the termination premium in cases involving 

liquidating, as distinguished from reorganizing, plan sponsors. In In re USA Commercial 

Mortgage, a Chapter 11 case in Las Vegas, Nevada, the liquidating trustee has objected to 

PBGC's assertion that the claim for termination premiums is entitled to tax priority under the 

Bankruptcy Code. PBGC expects that the matter will be heard by the bankruptcy court in 

April. 
2008 Enrolled Actuaries Meeting Blue Book Page 4 

QUESTION 4 

Premiums: Exemptions from E-Filing Requirement 

PBGCs regulations now mandate e-filing of premium information, subject to PBGC’s 

authority to grant exemptions from the e-filing requirement “for good cause in appropriate 

circumstances” (29 CFR § 4007.3). Please describe the PBGC’s experience to date with any 

such exemption requests. 

RESPONSE 

Less than one percent of filers requested exemptions from premium e-filing during the 

mandatory e-filing transition years (2006 for large plans and 2007 for small and medium 

plans). Most of those requests were granted for good cause. For these transition years, 

PBGC was lenient in its application of the “good cause” exemption because filing 

electronically was a significant change from past procedure. Now that filers have experience 

with the e-filing requirement, PBGC expects to take a stricter approach when reviewing 

exemption requests. 
2008 Enrolled Actuaries Meeting Blue Book Page 5 

QUESTION 5 

Premiums: PBGC Audit and Enforcement Plans 

Please describe the PBGC’s audit and enforcement plans relating to PBGC premiums, 

particularly in light of the recent legislative changes increasing the flat-rate premium for all 

plans and the variable-rate premium for many plans. 

RESPONSE 

PBGC continues to enforce premium requirements as part of its Premium Compliance 

Evaluation Program, which covers both flat-rate and variable rate premiums. PBGC uses 

computer matching and electronic data analysis to identify plans for audit, including potential 

on-site evaluations. PBGC is in the process of modifying its screening procedures to reflect 

the changes made by PPA 2006. PBGC is also reviewing its Premium Compliance 

Evaluation Program, particularly with respect to changes to the variable rate premium 

starting with 2008 plan years. 
2008 Enrolled Actuaries Meeting Blue Book Page 6 

QUESTION 6 

Standard Terminations: Lump Sum Amendments 

In Technical Update 07-3 (“Minimum Lump Sum Assumptions for Terminating SingleEmployer Plans; Effect of Pension Protection Act of 2006 “) (available at 

http://pbgc.gov/practitioners/law-regulations-informal-guidance/content/tu16272.html), PBGC 

provided guidance on lump sum valuation issues for single-employer plans that terminate in a 

standard termination with a termination date prior to, and a final distribution date on or after, 

the effective date of changes in the interest rate and mortality table used in calculating 

minimum lump sum values under PPA 2006. 

(a) The Technical Update provides in footnote 4 that PBGC would not take into account a 

post-termination amendment that substitutes the PPA 2006 assumptions for the pre-PPA 

2006 assumptions governing minimum lump sum values even if the amendment increases 

benefits for some participants. Would the PBGC take into account such an amendment to 

the extent it increases benefits for some participants, where the amendment is adopted on 

or before the plan’s termination date? 

(b) Assume that a plan with a pre-2008 plan year termination date is amended, on or before 

that termination date, to incorporate the PPA 2006 requirements governing minimum 

lump sum values for post-2007 plan year distributions, and distributes benefit liabilities 

during the 2008 plan year through purchase of an irrevocable commitment that preserves 

the participant’s right to elect a lump sum upon retirement (e.g,, in 2025). Is the 

irrevocable commitment required to provide for the use of the pre-PPA assumptions, or 

the PPA assumptions, governing minimum lump sum values? 

RESPONSE 

(a) No. This is indicated in the paragraph containing footnote 4, which states “plan 

provisions [incorporating PPA requirements] (regardless of whether they were added to 

the plan before, or on or after, the plan’s termination date) are not effective for a plan 

with a termination date before the beginning of its 2008 plan year . . .” 

(b) This issue is not addressed by the Technical Update 07-3. Applying the principles in the 

technical update to the purchase of an irrevocable commitment that preserves the 

participant's right to elect a lump sum upon retirement would not be inconsistent with the 

technical update. 

 
2008 Enrolled Actuaries Meeting Blue Book Page 7 

QUESTION 7 

Standard Terminations: Post-Distribution Certification 

In the response to Question 6 of the 2007 Blue Book, PBGC stated that it interpreted 29 CFR 

§ 4041.24(a), which requires the issuance of 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, as not requiring issuance of such a notice to a participant whose benefits are 

paid out in accordance with 29 CFR § 4041.22 on or before the due date for issuing the 

Notice of Plan Benefits. Is such a participant to be included among the participants whose 

distributions of benefit liabilities are certified to and described (by category and amount) in 

the post-distribution certification (PBGC Form 501)? 

RESPONSE 

Such a participant must be included among those whose distributions of benefit liabilities are 

to be so certified and described, unless the participant’s benefits are paid out prior to the 

plan’s termination date. 
2008 Enrolled Actuaries Meeting Blue Book Page 8 

 QUESTION 8 

Penalty Policy: Disclosure of Termination Information 

Does PBGC’s existing policy on the assessment of penalties under ERISA section 4071, as 

published in the Federal Register on July 18, 1995 (60 Fed. Reg. 36937), including the 

general “guideline” penalties described therein, apply to failures to provide information in 

accordance with PPA section 506 (“Disclosure of Termination Information to Plan 

Participants”)? 

RESPONSE 

PBGC’s current policy on the assessment of penalties under ERISA 4071 and part 4071, 

which authorizes PBGC to assess a penalty of up to $1,100 a day if material information is 

not timely provided, covers the information required to be provided to participants under 

PPA 506. PBGC is reviewing its current penalty policy to see if it should be updated and 

simplified. However, until this policy is revised, PBGC will apply the current policy to 

penalties for violating PPA 506 and will generally follow the guidelines. As always, PBGC 

will look at the facts and circumstances of each case and may adjust the penalty amounts up 

or down, depending on such facts and circumstances. 
2008 Enrolled Actuaries Meeting Blue Book Page 9 

QUESTION 9 

Reportable Events: Technical Update 07-2 

The following questions relate to PBGC Technical Update 07-2 (“Funding-Related 

Determinations for Reporting under Parts 4010 and 4043; Effect of the Pension Protection 

Act of 2006; Transitional Guidance”) (available at http://www.pbgc.gov/practitioners/lawregulations-informal-guidance/content/tu16267.html). In brief, Technical Update 07-2 

generally provided that, for information years beginning before 2008 under the employer 

reporting regulation (29 CFR Part 4010) and for event years that begin in 2008 under the 

reportable events regulation (29 CFR Part 4043, subparts A, B, and C), certain premiumrelated determinations are made without regard to the PPA 2006 changes to the variable-rate 

premium (VRP) rules that went into effect starting with the 2008 plan year. 

(a) Technical Update 07-2 permits the use of certain pre-PPA 2006 rules for waivers under 

the reportable events regulation that are tied to premium-related determinations for the 

event year. The Technical Update explicitly mentions waivers, but does not explicitly 

mention extensions. May these same rules be used for purposes of the extensions that are 

tied to premium-related determinations for the plan year preceding the event year? 

(b) The methodology described in Technical Update 07-2 for making premium-related 

determinations for an event year beginning in 2008 under the reportable events regulation 

explicitly refers to two terms defined in the regulation: “vested benefits amount” and 

“unfunded vested benefits.” Premium-related determinations in the regulation that are 

based on the “vested benefits amount” are also based on a third defined term—the “fair 

market value of the plan’s assets.” Does the PBGC intend that the same rules (i.e., 

disregarding the PPA 2006 changes to the VRP rules that went into effect starting with 

the 2008 plan year) be used when determining “the fair market value of the plan’s assets” 

for an event year beginning in 2008 under Technical Update 07-2? (This could affect 

whether contributions made during the 2008 plan year for the 2007 plan year must be 

discounted.) 

(c) According to the PBGC’s response to Question 15 of the 2006 Blue Book, where the plan 

year that contains the testing date ends on or after January 1, 2006, the mortality tables to 

be used under the reportable events regulation when determining UVBs based on the 

4010 Optional Assumptions are those used under 29 CFR Part 4044, Subpart B, for post2005 valuation dates. The chart in part III.C. of Technical Update 07-2 provides for use 

of the § 412(l)(7)-1 tables without indicating that an exception applies when using the 

4010 Optional Assumptions. Does the PBGC intend that the § 412(l)(7)-1 tables or the 

29 CFR Part 4044, Subpart B, tables be used when determining UVBs based on the 4010 

Optional Assumptions under Technical Update 07-2 for event years beginning in 2008? 

RESPONSE 

Technical Update 07-2 does not explicitly address these questions. Applying the principle in 

the technical update — of “using the rules for determining the VRP under the law in effect 

before PPA 2006” — to extensions and asset determinations would not be inconsistent with 

the technical update. The chart in part III.C. of the technical update should not be understood 

to prohibit the use of any valuation approach that would otherwise be legally permissible. 
2008 Enrolled Actuaries Meeting Blue Book Page 10 

QUESTION 10 

Other Reporting: Enforcement Policy for Section 4062(e) Events 

On June 16, 2006, PBGC issued a final rule specifying how to calculate the liability that 

arises under ERISA section 4062(e) when an employer ceases operations at a facility and, as 

a result, more than 20 percent of employees covered by its defined benefit pension plan 

separate from employment. Please describe the PBGC’s experience and enforcement plans 

in connection with finding out about such events (including its policy relating to penalties for 

reporting failures) and pursuing the related liability. 

RESPONSE 

PBGC learns about section 4062(e) events from notices filed by plan administrators as well 

as third-party sources. PBGC evaluates each case based on the facts and circumstances and 

resolves the liability accordingly. 
2008 Enrolled Actuaries Meeting Blue Book Page 11 

QUESTION 11 

Other Reporting: Substantial Cessation of Operations 

The following questions relate to ERISA section 4062(e): 

(a) In the response to Question 21 of the 2007 Blue Book, PBGC stated that, if a section 

4062(e) event occurs, reporting is required under ERISA section 4063(a) regardless of 

the size of the plan. Is such reporting also required regardless of the funding level of the 

plan? 

(b) Suppose that before the cessation of operations at a facility, only a few active employees 

remain, but the plan continues to cover many retired employees. Would that impact the 

application of section 4062(e)? 

(c) Assume that an event described in ERISA section 4062(e) occurs for a plan that is 

undergoing a standard termination, and that the deadline for the plan administrator to 

provide PBGC with notice of the 4062(e) event under ERISA section 4063(a) is on or 

after the date the plan’s assets have been distributed, pursuant to the standard termination, 

in satisfaction of all benefit liabilities through priority category 6 of ERISA section 4044. 

Is the plan administrator required to provide PBGC with such notice? 

RESPONSE 

(a) Yes. There is no exemption from reporting a section 4062(e) event under section 4063(a) 

based on the plan’s funding level. 

(b) Under the statute, neither the absolute number of active employees nor the number of 

active employees in proportion to the number of total participants is relevant; what 

matters is the percentage of active employees who are participants in the plan who are 

separated from employment as a result of a cessation of operations at a facility. 

 (c) PBGC generally would not enforce the notice requirement in these circumstances. 
2008 Enrolled Actuaries Meeting Blue Book Page 12 

 QUESTION 12 

Other Reporting: Substantial Cessation of Operations 

Assume that a Section 4062(e) event occurs for a plan, with the facility closing, to be 

effective October 31, 2008, publicly announced by the contributing sponsor on July 1, 2008; 

the separations from employment of the plan’s active participants commencing on September 

1, 2008, and continuing through and including December 31, 2008; the operations not 

ceasing until December 31, 2008; and the 20% threshold under Section 4062(e) being crossed 

on December 15, 2008. When does the 60-day period for the notice of the Section 4062(e) 

event under ERISA Section 4063(a) start to run? 

RESPONSE 

PBGC evaluates each case based on the facts and circumstances. PBGC encourages 

employers to contact the PBGC’s Department of Insurance Supervision and Compliance 

before any section 4062(e) event to discuss the situation and any potential liability. 
2008 Enrolled Actuaries Meeting Blue Book Page 13 

QUESTION 13 

Other: Maximum Guaranteed Benefit (Lump Sum Restrictions) 

In Technical Update 07-4 (“Present Value of the Maximum PBGC Guaranteed Benefit under 

IRC Section 436(d)(3)(A)(ii) and ERISA Section 206(g)(3)(C)(i)(II)”) (available at 

http://pbgc.gov/practitioners/law-regulations-informal-guidance/content/tu16287.html), 

PBGC provided guidance on determining the present value of the maximum guaranteed 

benefit for purposes of the PPA limitations on lump sums and other “prohibited payments” 

for plans with an adjusted funding target attainment percentage of at least 60% but less than 

80%. The Technical Update states that PBGC will issue a table, to be updated annually, that 

will show, for the calendar year, the applicable present value amount based on the age of the 

participant. When using this table: 

(a) Is age to be determined based on attained age or age nearest birthday? 

(b) How is age to be determined for a participant who is between ages on the annuity starting 

date? 

RESPONSE 

The Technical Update does not provide rules for determining age for purposes of looking up 

values on the table. Given the Technical Update’s silence, sponsors should adopt a 

reasonable methodology and use it consistently. Sponsors may determine age in a manner 

consistent with current plan practice for other calculations or adopt another methodology for 

this purpose. 

For sponsors that want to use only integral ages for this purposes, it would be reasonable to 

use either attained age or age nearest. For sponsors that prefer to use age in years and 

months, it would be reasonable to interpolate the amounts shown on the table or to create an 

expanded table based on the methodology summarized in the Technical Update. 
2008 Enrolled Actuaries Meeting Blue Book Page 14 

QUESTION 14 

Other: Collection from Foreign Entities 

Please describe PBGC’s experience in attempting to collect employer liability, due and 

unpaid contributions, and premiums (along with related penalties and interest) from foreign 

entities that are members of a controlled group maintaining a PBGC-covered plan that 

terminates in a distress or involuntary termination. 

RESPONSE 

Controlled group liability for employer liability extends to foreign entities that are members 

of the sponsor's controlled group, as explained in PBGC Opinion Letter 97-1. That same 

reasoning has applied to liability for unpaid contributions and premiums. PBGC pursues 

enforcement against foreign controlled group members and has made recoveries in a number 

of cases involving foreign entities. 
2008 Enrolled Actuaries Meeting Blue Book Page 15 

QUESTION 15 

Other: Voluntary Correction Program 

Does PBGC have in place, or have any plans to implement, any kind of voluntary correction 

program for late information filings (e.g., reportable events, Forms 200, annual employer 

reports under ERISA section 4010, notices of 4062(e) events under ERISA section 4063(a))? 

If so, please provide details. 

RESPONSE 

PBGC does not have, and has no present plans to institute, a formal “voluntary correction 

program” for late information filings. PBGC considers the facts and circumstances of each 

case (including voluntary correction) when assessing and waiving penalties for failure to 

submit required information timely. The volume of penalty cases has not been high enough 

to suggest that this approach is either inefficient or ineffective in accommodating the 

legitimate interests and concerns of filers or that a formal “voluntary correction program” is 

needed. PBGC recognizes that the changes made by the Pension Protection Act of 2006 (like 

any changes in the law) may create issues regarding both the triggers for reporting and the 

data to be reported, and will monitor information filings and public inquiries about 

information filings with a view to providing clarifications and/or changing its procedures — 

perhaps to include the creation of a “voluntary correction program” — if appropriate. 
2008 Enrolled Actuaries Meeting Blue Book Page 16 

QUESTION 16 

Other: “Risk Mitigation” Program 

Please provide an update on the number and kinds of cases the PBGC has been involved in 

over the past year under its “Early Warning” or “Risk Mitigation” program, including a 

description of the results of that involvement. How does the level of activity under this 

program compare to prior years? 

RESPONSE 

PBGC has made numerous inquiries to plan sponsors under its Early Warning Program over 

the past year. The cases were generally similar to the examples described in PBGC 

Technical Update 00-03. The level of activity over the past year is consistent with that for 

the prior several years. 
2008 Enrolled Actuaries Meeting Blue Book Page 17 

QUESTION 17 

Other: “Risk Mitigation” Program

 (a) The criteria in PBGC Technical Update 00-3 (“PBGC’s Early Warning Program”, 

available at http://pbgc.gov/practitioners/law-regulations-informalguidance/content/tu12795.html) for when the PBGC will contact a company for further 

information about a transaction are tied to current liability, a concept that will no longer 

be relevant for most plans after 2007. Has the PBGC decided on a substitute measure to 

be used for this purpose for post-2007 plan years and, if so, what is it? 

(b) PBGC Technical Update 00-3 provides that the PBGC will contact a company for further 

information about a transaction only if: (1) the company has a below investment-grade 

bond rating and sponsors a pension plan that has current liability in excess of $25 million, 

or (2) the company (regardless of its bond rating) sponsors a pension plan that has current 

liability in excess of $25 million and that plan has unfunded current liability in excess of 

$5 million. Does this mean that the PBGC will not contact a company for further 

information about a transaction if these tests are not met, even if the company is a filer 

under ERISA section 4010? 

RESPONSE

PBGC has not fully evaluated the effect of PPA on the thresholds provided in Technical 

Update 00-3. At this time we are not in a position to say whether the decision to contact a 

company will be impacted by its having been a 4010 filer. 
2008 Enrolled Actuaries Meeting Blue Book Page 18 

QUESTION 18 

Other: Litigation Issues 

Please describe PBGC litigation in the past year that has established precedent that would be 

of interest to enrolled actuaries. 

RESPONSE 

Beck v. PACE Int’l Union, 127 S.Ct. 2310 (2007): The Supreme Court considered whether 

an employer that sponsors and administers a single-employer defined benefit plan has a 

fiduciary obligation under ERISA to consider merger as a method of implementing the 

employer’s decision to terminate the plan. Deferring to PBGC’s interpretation of ERISA, the 

Court unanimously rejected the Ninth Circuit’s conclusion that merger is a permissible 

method of termination, accepting PBGC’s argument that merger is an alternative to, rather 

than an example of, plan termination. The Court noted that it has “traditionally deferred to 

the PBGC when interpreting ERISA,” and found PBGC’s construction to be “eminently 

reasonable.” PBGC, the Department of Labor and the Solicitor General appeared as amici 

curiae in the case. 

Oneida, Ltd. v. PBGC (In re Oneida, Ltd.), No. 06-10489 (ALG) (Bankr. S.D.N.Y. Feb. 27, 

2008): Oneida filed an adversary proceeding in bankruptcy court against PBGC, seeking a 

declaration that the new statutory termination premium imposed in 2006 was a pre-petition 

bankruptcy claim that was discharged when the company emerged from bankruptcy. PBGC 

asked the district court to withdraw the reference, as resolving the matter would require 

consideration of both the Bankruptcy Code and ERISA. The district court denied the motion, 

and both parties moved for summary judgment in the bankruptcy court, which was argued on 

November 14, 2007. On February 27, 2008, the bankruptcy court ruled that the termination 

premium is a pre-petition bankruptcy claim and was discharged under Oneida’s plan of 

reorganization. PBGC expects to appeal the decision. 

PBGC v. United Airlines, Inc., 2007 WL 57271 (4th Cir. Jan. 9, 2007): The Fourth Circuit 

affirmed the termination date of the United Airlines ground plan. PBGC had entered into a 

trusteeship agreement with United setting the plan’s termination date as March 11, 2005. 

This termination date was critical to preventing a phase-in of $139 million in guaranteed 

benefits that would have taken effect one business day later. AMFA, which represented 

some of the ground plan participants, argued that PBGC’s notice to participants about the 

plan termination, through publication and notice to the union and the company, was not 

enough to cut off participants’ interests, and thus could not be used to set the termination 

date. The Fourth Circuit rejected this and other arguments and affirmed PBGC’s choice of 

the termination date, finding that the notice provided was sufficient. 
2008 Enrolled Actuaries Meeting Blue Book Page 19 

Response to Question 18 continued

In re Rhodes, No. 04-78434 (Bankr. N.D. Ga. Jan. 25, 2008): The bankruptcy court held that 

PBGC’s regulation governs the amount of the agency’s claim for unfunded benefit liabilities, 

refusing to recompute the amount using a “prudent investor” rate. PBGC argued that a 

bankruptcy claim is determined according to the substantive non-bankruptcy law under 

which it arises, and thus, that PBGC properly calculated its claim for pension underfunding 

pursuant to ERISA and its regulations. The court agreed, finding that no Bankruptcy Code 

provision would empower it to disregard PBGC’s regulation and recalculate its claim. The 

court became the fourth bankruptcy court in a row so to rule (following courts in US Airways, 

UAL, and High Voltage), and expressly rejected the reasoning of several previous decisions 

to the contrary (Chateaugay, CF&I, and In re CSC Industries). 

Sara Lee Corp. v. American Bakers Ass’n, 512 F.Supp.2d 32 (D.D.C. 2007): PBGC made 

an administrative determination classifying a pension plan to which more than one employer 

contributed as a multiple-employer plan, rather than an aggregate of single-employer plans, 

as the agency had determined some 29 years earlier. Several contributing employers and the 

plan trustees challenged PBGC’s determination. The district court held that the deferential 

“arbitrary and capricious” standard applied to PBGC’s reclassification of the plan, but held in 

abeyance its decision with respect to PBGC’s motion for summary judgment until it was 

assured that the administrative record was complete. That issue is pending with the 

magistrate judge. 

Chao v. USA Mining, Inc., 2007 WL 208530 (E.D. Tenn. Jan. 24, 2007): The court granted 

summary judgment in favor of the Secretary of Labor and PBGC against an individual and 

three corporations for fiduciary breaches against certain terminated pension plans. Together 

with the plans’ former trustee, the individual had caused the plans to fruitlessly “invest” 

millions of dollars of plan assets in the corporate defendants, which were owned by the 

individual defendant. The court ruled in favor of PBGC and the Department of Labor on all 

counts, finding that the terminated plans were entitled to damages in the full amount of all 

transactions that took place after the individual became a plan fiduciary, and permanently 

enjoined the individual from becoming a plan fiduciary. 

Koehler v. PBGC, No. 06-1421 (N.D. Ohio Apr. 4, 2007), appeal pending, No. 07-03630 

(6th Cir.): The court granted PBGC’s motion to dismiss this suit brought by a group of LTV 

plan participants claiming that they were entitled to disability pensions, which had been 

denied them by the company and subsequently by PBGC. They asserted that PBGC had 

breached its fiduciary duties by failing to pay the claimed benefits. None of the participants 

had appealed their benefit determinations to the PBGC Appeals Board. The district court 

dismissed the complaint based upon the participants’ failure to exhaust their administrative 

remedies. The participants appealed to the Sixth Circuit. 
2008 Enrolled Actuaries Meeting Blue Book Page 20 

Response to Question 18 continued

Dumas v. PBGC, 2007 WL 1099542 (N.D. Ind. Apr. 9, 2007), aff’d per curiam, 2007 WL 

3328179 (7th Cir. Nov. 9, 2007): A participant challenged his benefit determination, 

asserting that according to a PBGC communication addressing the maximum guarantee limit, 

he was entitled to the maximum amount as his pension. After submitting the administrative 

record, PBGC argued on summary judgment that the maximum guarantee limit is merely a 

cap on a participant’s entitlement under the plan, not a separate source of benefit entitlement. 

The court agreed and granted summary judgment to PBGC. The Seventh Circuit affirmed. 

Becker v. Weinberg Group, Inc. Pension Trust, 473 F. Supp. 2d 48 (D.D.C. 2007): A 

participant asserted that the plan administrator underpaid her benefits during a standard 

termination. The participant asked the court to direct PBGC to audit the plan and, as 

necessary, nullify the termination. PBGC moved to dismiss, arguing that there was no ripe 

claim against it, and that its decision not to halt a termination or select a plan for audit is 

committed to the agency’s prosecutorial discretion. The court agreed, finding that PBGC’s 

decision not to act was a “single-shot non-enforcement decision,” which is not reviewable. 

PBGC v. In re Falcon Prods., Inc. (In re Falcon Prods., Inc.), 497 F.3d 838 (8th Cir. 2007), 

aff’g 354 B.R. 889 (E.D. Mo. 2006): The Eighth Circuit held that it was unnecessary to 

address whether ERISA mandates a plan-by-plan or aggregate approach in assessing the 

debtors’ distress termination application for its three pension plans. Relying instead on the 

bankruptcy court’s finding that the debtor could not survive outside of Chapter 11 bankruptcy 

without a potential multi-million-dollar investment — which was expressly conditioned on 

termination of the pension plans — the court of appeals affirmed that termination of all three 

Falcon pension plans was warranted. 

Chao v. Johnston, 2007 WL 2847548 (E.D. Tenn. July 9, 2007): The defendant had served 

as an attorney and escrow agent for the chief executive officer of USA Mining, Inc. and was 

the conduit through which many of the pension plan assets were dissipated. PBGC and the 

Department of Labor sued, seeking to recover his profits. The defendant moved to dismiss, 

claiming that he was not a fiduciary of the pension plan, and thus not liable for any of the 

fiduciary breaches. The district court denied the defendant’s motion, holding that PBGC and 

DOL had adequately alleged that even though he was not a fiduciary, he had knowingly 

participated in the breaches, thus satisfying the standard for liability. 

PBGC v. Durango Ga. Paper Co., 2007 WL 3047329 (11th Cir. Oct. 19, 2007), aff’g per 

curiam 2006 WL 3762085 (S.D. Ga. Dec. 20, 2006): The former plan sponsor challenged the 

termination date agreed to by PBGC and Durango. The court held that when a pension plan 

is terminated under section 4042 of ERISA, the statute authorizes PBGC and the plan 

administrator to set the termination date (either before or after litigation begins), and the 

former sponsor had no right to object. 
2008 Enrolled Actuaries Meeting Blue Book Page 21 

QUESTION 19 

Other: Private Equity Fund as "Trade or Business" for Controlled Group Purposes 

Can unincorporated private equity funds be subject to ERISA joint and several controlled 

group liability for underfunding when a pension plan sponsored by a company in their 

portfolio is terminated? 

RESPONSE 

Yes. Applying PBGC's longstanding interpretation of the controlled group rules, a private 

equity fund is a trade or business under common control with a plan sponsor if the fund 

meets the bright-line test of 80% or greater ownership of the plan sponsor. The PBGC 

Appeals Board has so held (available at http://www.pbgc.gov/apbletters/Decision--

(Liability within a group of companies) 2007-09-26.pdf). 

 
2008 Enrolled Actuaries Meeting Blue Book Page 22 

QUESTION 20 

Other: OMB “Good Guidance” Initiative 

Has PBGC implemented the good guidance practices adopted by OMB? 

RESPONSE 

Yes. PBGC has adopted procedures for approval of significant guidance documents in 

accordance with OMB's “Final Bulletin for Good Guidance Practices.” In addition, PBGC 

now has a page on its Web site with links to significant guidance documents approved under 

the new procedures, as well as past guidance that PBGC determined is significant guidance 

under OMB’s Bulletin. The Web site also provides a means for submitting comments on any 

significant guidance document that PBGC has issued. To date, PBGC has issued three 

significant guidance documents (all of which are technical updates) under the new 

procedures. 

The significant guidance Web page is at: http://www.pbgc.gov/practitioners/law-regulationsinformal-guidance/sguidance.html. 
2008 Enrolled Actuaries Meeting Blue Book Page 23 

QUESTION 21 

Other: Coverage – Paying Premiums to Obtain PBGC Coverage 

Section 4021 of ERISA describes what plans are and are not covered by the PBGC pension 

plan termination insurance program under Title IV of ERISA. For example, under section 

4021(b), coverage is not provided for government plans, substantial owner plans, or certain 

small professional service plans. 

Under Internal Revenue Code Section 404(a)(7)(C)(iv) as added by the Pension Protection 

Act of 2006, single-employer plans covered by ERISA section 4021 are not taken into 

account in determining the limit on deductions for plan contributions for plan sponsors 

maintaining a combination of defined contribution and defined benefit plans. Thus, a 

sponsor’s deductible limit might increase if a non-covered plan became a covered plan. 

If a plan is excluded from coverage under section 4021, may it become covered by paying 

premiums to PBGC? 

RESPONSE

No. See § 4007.9(b) of PBGC’s regulation on Payment of Premiums (29 CFR Part 4007). 
2008 Enrolled Actuaries Meeting Blue Book Page 24 

QUESTION 22 

Other: Availability of Draft Forms 

Are draft PBGC forms — such as those for premiums, annual employer reporting, or 

reportable events — available to the public before PBGC issues them in final form? 

RESPONSE 

Yes. When PBGC makes material changes to an information collection (such as forms and 

instructions for filing information with PBGC), it submits the information collection to the 

Office of Management and Budget (OMB) for approval. PBGC also notifies the public how 

to obtain a copy of the materials (including the draft forms and instructions) submitted to 

OMB and invites public comment. The notification may be part of a proposed rule or in a 

stand-alone notice published in the Federal Register. The public may obtain the draft forms 

and instructions by following the instructions in the applicable proposed rule or notice. For 

example, when PBGC published its proposed rule on the variable rate premium on May 31, 

2007, the rule stated: 

PBGC is submitting the information requirements under this proposed rule to the 

Office of Management and Budget for review and approval under the Paperwork 

Reduction Act. The OMB control number for this collection of information is 1212–

0009. Copies of PBGC’s request may be obtained free of charge by contacting the 

Disclosure Division of the Office of the General Counsel of PBGC, 1200 K Street, 

NW., Washington, DC 20005, 202–326–4040.