Opinion ID: 441965
Heading Depth: 3
Heading Rank: 2

Heading: Plan Termination Insurance

Text: 7 Vesting and other plan improvements required by ERISA were not adequate, however, to protect participants in plans that terminated with insufficient funds to cover vested benefits. Throughout the deliberations that culminated in the enactment of ERISA, Congress was inundated with tragic stories of pension plan failures in which thousands of employees saw the destruction of the small measure of retirement security they had built up through decades of forced savings and deferred compensation. 6 Congress responded to this recurring tragedy by passing, as a major feature of comprehensive pension reform, a program of plan termination insurance. Under Title IV of ERISA, repeatedly hailed by legislators as one of the linchpins of the Act, 7 the newly-created PBGC would guarantee the payment of non-forfeitable (or vested) benefits--up to a statutorily-prescribed maximum monthly amount. 8 Section 4022(a) of ERISA, as it stood at the time of the Lidz plan's termination, 8 provided that, subject to the limitations contained in subsection (b) of this section, the [PGBC] shall guarantee the payment of all non-forfeitable benefits ... under the terms of a [terminated] plan .... One of the limitations on coverage in subsection (b) provides that, [e]xcept to the extent provided in paragraph (8), benefits under plans in effect less than sixty months are to be disregarded, and that 9 any increase in the amount of benefits under a plan resulting from a plan amendment which was made, or became effective, whichever is later, within 60 months before the date on which the plan terminates shall be disregarded. 10 ERISA Sec. 4022(b)(1)(B), 29 U.S.C. Sec. 1322(b)(1)(B). Paragraph (8) provides for the phase-in of such benefits at a rate of twenty percent or twenty dollars per month, whichever is greater, for each year the plan or the amendment has been in effect. ERISA Sec. 4022(b)(8), 29 U.S.C. Sec. 1322(b)(8). The purpose of Title IV's phase-in provision as we will describe the combined language of paragraphs (1) and (8) of section 4022(b), was to prevent abuse of the termination insurance program by plan administrators who might balloon benefits, and thus unfunded plan liabilities, in anticipation of termination. 9 The PGBC also contends that the provision was designed to ease the immediate financial burden on the PGBC and employers of the newly-instituted guarantee provisions of ERISA. 11 The precise contours of the phase-in provision, although foreshadowed in the House and Senate bills, were among the many details of Title IV hammered out in the conference committee. We will examine the corresponding provisions of the House and Senate bills, as well as the Conference Committee's explanation of its resolution of differences between them, in some detail in our discussion of the issues.