Source: https://www.federalregister.gov/documents/2009/11/17/E9-27573/userra-benefits-under-title-iv-of-erisa
Timestamp: 2017-08-23 18:55:47
Document Index: 414417950

Matched Legal Cases: ['art 4022', '§\u20094022', '§\u20094022', '§\u20094022', '§\u20094041', '§\u20094022']

A Rule by the Pension Benefit Guaranty Corporation on 11/17/2009
Effective December 17, 2009. (See Applicability in SUPPLEMENTARY INFORMATION.)
59093-59096 (4 pages)
https://www.federalregister.gov/d/E9-27573 https://www.federalregister.gov/d/E9-27573
The Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) provides that an individual who leaves his or her job to serve in the uniformed services is generally entitled to reemployment by his or her previous employer and, upon reemployment, to receive credit for benefits, including employee pension plan benefits, that would have accrued but for the employee's absence due to the military service. This final rule amends PBGC's regulation on Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) to address a narrow but important issue regarding PBGC's guarantee of benefits for participants who are serving in the uniformed services at the time that their pension plan terminates. Under PBGC's existing regulations, a benefit is guaranteed only if the participant satisfies the conditions for entitlement to the benefit on or before the plan's termination date. PBGC is providing an exception to this rule in the unique circumstances of persons serving in the uniformed services as of the plan's termination date, consistent with USERRA's statutory mandate to treat such persons, upon reemployment, as if they had never left the employ of their former employer. This final rule provides that so long as a service member is reemployed within the time limits set by USERRA, even if the reemployment occurs after the plan's termination date, PBGC will treat the participant as having satisfied the reemployment condition as of the termination date. This will ensure that the pension benefits of reemployed service members, like those of other employees, would generally be guaranteed for periods up to the plan's termination date.
The amount of benefits paid by PBGC under a terminated, trusteed plan is generally determined as of the plan's termination date.[1] Under section 4022(a) of ERISA, PBGC guarantees the payment of nonforfeitable benefits Start Printed Page 59094under the plan, subject to the limitations of section 4022(b), as of the date the plan terminates. Under § 4022.3 of PBGC's regulation on Benefits Payable in Terminated Single-Employer Plans, PBGC guarantees the amount, as of the termination date, of a benefit provided under the plan (subject to certain limitations) if “the benefit is, on the termination date, a nonforfeitable benefit.” To be guaranteed, the benefit must also qualify as a pension benefit as defined in § 4022.2, and the participant must be entitled to the benefit under § 4022.4. The amount of any additional nonguaranteed benefits payable from the plan's assets under section 4044 or PBGC's recoveries under section 4022(c) of ERISA is also determined as of the termination date.
On July 29, 2009 (at 74 FR 37666), PBGC published in the Federal Register a proposed rule to address the interaction of Title IV's requirement that benefits be nonforfeitable on the termination date in order to be guaranteed with the rights of reemployed service members in their employee pension benefit plans under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), Public Law 103-353 (October 13, 1994). PBGC received no public comments on the proposed rule and the final regulation is unchanged from the proposed regulation.
Entitlement to pension credit arises only where the returning service member is reemployed by his or her pre-service employer.[5] There is no entitlement to pension credit in cases in which an employee permanently and lawfully loses reemployment rights—for example, where an employee dies during the period of military service (however, see recent changes to the Internal Revenue Code [6] ), where an employer is excused from its reemployment obligations based on a statutory defense or where an employee Start Printed Page 59095elects not to seek reemployment within the specified time frame.[7] 38 U.S.C. 4312(d)(1); see 70 FR at 75280. Plan termination, however, is not identified as a circumstance that results in a permanent and lawful loss of reemployment rights for purposes of computing an employee's pension entitlement.
In the case of a standard termination, under ERISA section 4041(b)(1)(D) and § 4041.28(a) of PBGC's regulation on Termination of Single-Employer Plans, plan assets must satisfy all plan benefits through priority category 6 under section 4044 of ERISA. Priority category 6 includes benefits that, as of the termination date, are conditioned on a future event. Accordingly, even without these regulatory changes, a plan terminating in a standard termination must provide benefits relating to periods of military service through the termination date for participants who become reemployed in accordance with USERRA provisions, even if such reemployment occurs after the plan's termination date.[8]
Under USERRA, an individual who is reemployed following military service is entitled to the pension benefits that he or she would have earned if he or she had remained continuously employed. As noted above, Title IV of ERISA provides that, for a benefit to be nonforfeitable, the conditions for entitlement to the benefit must be satisfied on or before the plan's termination date. In order to harmonize the significant federal mandate to protect service members' rights and benefits under USERRA with Title IV's rules on nonforfeitable benefits, PBGC is amending its regulation on Benefits Payable in Terminated Single-Employer Plans. This amendment provides that a participant will be deemed to have satisfied the reemployment condition for entitlement to the benefit as of the plan's termination date, for purposes of PBGC's guarantee, if PBGC determines, based on a demonstration by the participant or otherwise, that he or she became reemployed and entitled to the restoration of the pension benefit pursuant to USERRA, even if the reemployment occurred after the plan's termination date. Thus, for example, if a participant had 14 years of pension service at the time he or she entered military service, and had spent one year in the military as of the plan's termination date, the participant will be considered to have 15 years of service, for guarantee purposes, so long as he or she returns to his or her former employment within the bounds set by USERRA.
When a plan termination occurs during the bankruptcy of the plan sponsor, PBGC treats the bankruptcy filing date as the plan's termination date for certain purposes (see note 1). New § 4022.11 includes a provision that applies this concept to USERRA benefits. For example, if a participant is performing military service as of the bankruptcy filing date, any benefit relating to the period of military service that is accrued and vested through the bankruptcy filing date will be considered nonforfeitable if the participant becomes reemployed pursuant to USERRA after the bankruptcy filing date.
PBGC emphasizes that the regulatory changes are very narrow, applying only to the unique circumstances presented by federal statutes affording special protection to the men and women serving the nation in the uniformed services. Except as provided in this amendment, a benefit will be treated as nonforfeitable only if all conditions for entitlement to the benefit have been satisfied on or before the termination date. This includes benefits such as disability benefits, subsidized early retirement benefits (e.g., “30 and out” benefits), and benefits that may be similar in certain respects to the benefits covered by this amendment, such as a benefit conditioned on an employee's being reemployed after a period of layoff.
The amendments made by this final rule will apply to reemployments under USERRA initiated on or after December 12, 1994. Starting December 17, 2009, PBGC will begin adjusting final benefit determinations of affected participants and make back payments with interest.
PBGC has determined, in consultation with the Office of Management and Budget, that this final rule is not a “significant regulatory action” under Executive Order 12866.
PBGC certifies under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et. seq.) that the amendments in this final rule will not have a significant economic impact on a substantial number of small entities. The amendments harmonize the requirements of USERRA with the nonforfeitable benefits requirements of Title IV of ERISA. Virtually all of the amendments affect only PBGC and persons who receive benefits from PBGC. Accordingly, as provided in section 605 of the Regulatory Flexibility Act, sections 603 and 604 do not apply.
For the reasons given above, PBGC is amending
PPA 2006 bankruptcy termination means a plan termination to which section 404 of the Pension Protection Act of 2006 applies. Section 404 of the Pension Protection Act of 2006 applies to any plan termination in which the termination date occurs while bankruptcy proceedings are pending with respect to the contributing sponsor of the plan, if the bankruptcy proceedings were initiated on or after Start Printed Page 59096September 16, 2006. Bankruptcy proceedings are pending, for this purpose, if a contributing sponsor has filed or has had filed against it a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under any similar Federal law or law of a State or political subdivision, and the case has not been dismissed as of the termination date of the plan.
Issued in Washington, DC, this 10th day of November 2009.
3. Terms used in this final rule, such as “service in the uniformed services,” are intended to have the meaning provided under USERRA and the Department of Labor regulations implementing USERRA. For convenience, this preamble sometimes uses the term “military service” as shorthand for “service in the uniformed services.”
7. USERRA contains a broad prohibition against waivers of statutory rights. The preamble to DOL's regulation on USERRA provides that an employee cannot waive USERRA's right to reemployment until that right has matured, i.e., until the period of service is completed. 70 FR at 75257.
8. Under the final regulation, as explained below, such benefits would be in priority category 4 (covering guaranteed benefits) if the reemployment occurs after the plan's termination date and if all other conditions are met. These benefits thus would continue to be part of benefit liabilities that would have to be provided in a standard termination.
[FR Doc. E9-27573 Filed 11-16-09; 8:45 am]