PBGC Makes Mediation Program Permanent

The Pension Benefit Guaranty Corporation (PBGC) has announced that its mediation program is now permanent. In addition, it reports, it has expanded the program. The PBGC launched a pilot mediation program in October 2017. 

The program originally offered mediation with certain termination liability collections and early warning programs. But it now also encompasses fiduciary breach cases. These three case areas entail the following:

• Early Warning Cases: The Early Warning Program identifies corporate transactions that may pose risks that could affect a plan sponsor’s ability to continue to support its pension plan.
• Termination Liability Cases: Termination liability refers to the PBGC’s claim against the plan sponsor and members of its controlled group for the amount of underfunding when a pension plan is terminated and transferred to the PBGC. The PBGC notes that sometimes opinions differ on the amount that can be collected, and it can take some time to resolve what the sponsor’s liability is.
• Fiduciary Breach Cases: These involve situations in which fiduciaries of terminated plans take actions that violate their duties of loyalty and prudence to participants. 

The PBGC’s goals for the Mediation Program are to: 

• resolve disputes early; 
• promote improved relations with stakeholders; 
• reduce the costs of protracted negotiations and other proceedings; and 
• make alternative dispute resolution an integral part of the agency’s dispute resolution process. 

The PBGC seeks to resolve cases in all three areas on a consensual basis without the need for litigation, and to do so in a way that is affordable.

Eligible Mediation Program participants are selected from the three program areas. Generally, cases will not be eligible if one of the following applies: 

• the plan sponsor has a minimal ability to pay; 
• there is a court proceeding pending; or 
• there is limited time to act and the plan sponsor has declined to sign a standstill or tolling agreement.

In eligible termination liability cases, respondents have 120 days to satisfy their disclosure requirements. The PBGC then will review, verify and analyze the information, and the parties may then engage in good faith negotiations. PBGC will make mediation available within a reasonable time after it completes its review and analysis of the information. 

In eligible Early Warning engagements, companies will be advised of the availability of mediation at the outset of negotiation. Mediation shall be available after PBGC receives sufficient responses to its information requests, but the timing of the transaction at issue will determine the window for mediation. Mediation must be completed before the date of the closing, with sufficient time left for the parties to document the mediated resolution or take legal action, if warranted. 

In eligible fiduciary breach cases, all demand letters sent in these matters will include an option to mediate. 

The Federal Mediation and Conciliation Service provides intermediaries in the PBGC’s dispute resolutions. Under the program, PBGC and plan sponsors share the cost of mediation sessions to avoid the appearance that either side is favored.