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PBGC Proposals Mirror ACOPA Recommendations

ASEA Monthly

In a big win for ACOPA and the lobbying efforts of its members, the Pension Benefit Guaranty Corporation (PBGC) is expected to finalize a proposal that would allow employers to request coverage determinations prior to establishment of a plan, as part of a new formal process where the PBGC would accept requests for coverage determinations for defined benefit pension plans.

The PBGC in early May submitted to the Office of Management and Budget (OMB) for review under the Paperwork Reduction Act draft forms and instructions to be used for coverage determinations, including a supporting statement addressing public comments on the proposed forms and instructions, and noting specifically the comment requesting that employers be allowed to request coverage determinations before creating and sponsoring pension plans.

The American Retirement Association (ARA) submitted a comment letter to the PBGC in February on this topic. In that letter, the ARA/ACOPA explained that “…whether or not a plan is covered by the PBGC is often a question raised before the decision to create a plan has been made, and this question can impact the decision itself to create a plan as well as its design.” As the PBGC notice acknowledges, the letter recommended the flexibility to allow prospective coverage determinations before a plan is fully established, that can be requested at the option of the plan sponsor filing for the coverage determination.

The ARA comment letter also made a number of general comments, most of which were adopted by the PBGC.

Subsequently, in early April 2019, Lauren Okum, ACOPA President-elect, and Marty Pippins, ACOPA Executive Director, met with the PBGC Director and his staff to discuss these issues in person. The primary focus was coverage determination situations involving substantial owners and professionals – as well as the desirability of obtaining coverage determinations prior to the establishment of a plan.

All in all, the result of the in-person meeting and the comment letter was highly successful. A few weeks later, PBGC announced that although PBGC cannot provide coverage determinations for plans that do not exist, in limited situations employers will be able to use the soon-to-be issued coverage forms to request an Opinion Letter about whether a plan in the process of being created is likely to be covered by the PBGC. This only covers situations involving substantial owner plans and situations involving professional service employers with under 25 individuals – the exact situations that ACOPA most cares about. This is a highly successful result of the in-person meeting and comment letter ­– and a great outcome for ARA and ACOPA members and their clients.

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