Pension Benefit Guaranty Corporation 

76-97 

August 3, 1976 

REFERENCE: 

 [*1] 4082(c). Effective Date; Special Rules. Applicability of Title IV to Multiemployer Plan Terminations 

OPINION: 

 The Pension Benefit Guaranty Corporation (hereinafter referred to as the "PBGC") has reviewed the application

of * * * (the "Fund") for the discretionary payment of benefits guaranteed under Title IV of the Employee Retirement

Income Security Act of 1974 (the "Act"), authorized in § 4082(c) of the Act. 

The PBGC has determined, for the reasons stated below, that at the present time the basic statutory conditions in

§ 4082(c) of the Act authorizing the discretionary payment of guaranteed benefits of the Fund are satisfied. Thus, the

PBGC has made the critical policy determinations necessary for it to pay benefits under § 4082(c). In order to expedite

a final decision on your application, it is necessary to clarify certain points, specifically, (1) the date of termination of

the Fund under § 4048 of the Act; (2) the benefit entitlement of plan participants and the value of the Fund's assets as

of the date of termination; (3) the amount of employer liability; and (4) the terms of payment of employer liability,

worked out in the context of a review by the PBGC of any new defined benefit [*2] plans to which employers might be

contributing before their liability for the Fund's insufficiency has been fully paid. 

The Fund is a multiemployer plan to which § 4021 of the Act applies. Section 4082(c)(2) of the Act provides that

two conditions must be satisfied before the PBGC may exercise its discretion to pay benefits guaranteed under Title IV

with respect to a multiemployer plan that terminates on or after September 2, 1974 and prior to January 1, 1978. First,

the plan must have been "maintained during the 60 months immediately preceding the date on which the plan terminates."

Act, § 4082(c)(2)(A). The Fund has been in effect for more than 60 months prior to the date of termination and therefore

§ 4082(c)(2)(A) is satisfied. 

The second condition under § 4082(c)(2) of the Act is that the PBGC must determine that payments with respect

to the Fund will not "jeopardize the payments the Corporation anticipates it may be required to make in connection with

benefits guaranteed under this title with respect to multiemployer plans which terminate after December 31, 1977." Act,

§ 4082(c)(2)(B). Our staff has attempted to project the effect payment of guaranteed benefits provided [*3] by the Fund

will have on the PBGC's ability to guarantee benefits of multiemployer plans which terminate after 1977. Although the

PBGC is aware of other potential multiemployer plan terminations, there is only one other case in which an application

is now pending for discretionary coverage. Thus, the PBGC at present has no substantial basis for a finding that granting

payment of benefits under the Fund would jeopardize the PBGC's ability to pay benefits guaranteed under multiemployer

plans that terminate after December 31, 1977. Accordingly, the PBGC has determined, based on the data now available,

that in view of the estimated amount of funds needed to make payments for multiemployer plans that terminate after 1977

and the expected income of the statutory revolving fund for multiemployer plans, our ability to guarantee benefits

provided under multiemployer plans that terminate after 1977 would not be endangered if we were to extend

discretionary coverage to the Fund. 

Your attention is called to § 4082(c)(4) of the Act, which contains provisions that may limit the amount of benefit

payments that the PBGC may make. Under § 4082(c)(4)(C) of the Act, the PBGC may not make payments [*4]

pursuant to a discretionary guarantee that are derived directly or indirectly from amounts borrowed from the Treasury

under § 4005(c) of the Act. Accordingly, if the PBGC extends discretionary coverage to the Fund and in the future finds

it necessary to borrow money from the Treasury in order to meet its guarantee obligations with respect to multiemployer

plans, the PBGC will be required to reduce or terminate payment of guaranteed benefits. 

Also, the PBGC is required under § 4082(c)(4)(D) of the Act to reduce or cease discretionary benefit payments if

necessary "to avoid jeopardizing the ability of the [PBGC] to make payments of benefits guaranteed under [Title IV]

in connection with multiemployer plans which terminate after December 31, 1977, without increasing premium rates for

such plans." Based on information presently available, we have determined that payments with respect to the Fund would
not necessitate an increase in premiums for multiemployer plans. If discretionary coverage is extended, the PBGC will

periodically review the effect of payment of benefits pursuant to § 4082(c)(2) on the PBGC's ability to make payments

in connection with post-1977 multiemployer plan terminations [*5] without increasing the premium rates for

multiemployer plans. 

The PBGC hopes to resolve these matters promptly. Our representatives will contact you to make the necessary

arrangements. 

Kenneth L. Houck 

Executive Director