Compliance August 21, 2013

Groups Make Suggestions for PBGC Missing Participants Program

August 21, 2013 (PLANSPONSOR.com) – The ERISA Industry Committee (ERIC), along with others, commented on a request for information (RFI) regarding a missing participants program.
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In a letter to the Pension Benefit Guaranty Corporation (PBGC), ERIC, along with the Plan Sponsor Council of America (PSCA) and the U.S. Chamber of Commerce, expressed support of the agency’s efforts to implement a missing participants program.

“ERIC believes that a missing participant program run by the PBGC would create a win-win situation for both [plan] sponsors and participants, as terminating plans oftentimes cannot find lost participants, and participants many times don’t know where to look for lost benefits or cannot find their former plan,” said Kathryn Ricard, ERIC’s senior vice president for Retirement Policy, in a separate statement.

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The letter recommended that the PBGC create a program where fiduciaries of terminating plans that transfer the accounts for missing participants to the PBGC can be confident that: (1) the funds will be handled appropriately; (2) the account will be charged no more than reasonable fees; (3) once found, the participant will be able to obtain an accounting of the manner in which their funds have been handled by the PBGC; and (4) the administrative burden is not significant. The group recommended that any program be optional, as provided in the Pension Protection Act (PPA).

The group letter also encouraged the PBGC to coordinate with the U.S. Department of Labor (DOL) to provide fiduciary relief for plans that use the missing participants program. However, they emphasized that the PBGC should not delay the creation of the program in order to obtain this relief.

The letter was responding to the PBGC’s June 2013 RFI, indicating that the agency is soliciting information about a new missing participant program for participants in certain terminating defined contribution (DC) plans (see "Upfront: Missing Participants Program"). The PPA directed the agency to create a program whereby plan administrators of DC plans could transfer a missing participant’s benefits to the PBGC upon the termination of the plan.

In terms of the PBGC’s query about the creation of a single database for missing participants’ benefits, the letter recommended that the agency use information that plans already provide to the federal government, such as from Form 5500, so as not to impose a burden on plans to provide additional data.

As to the PBGC’s query about a “diligent search” for missing participants, the letter recommended the agency provide optional search services, ones which would satisfy the requirements of existing regulations such as PBCG Regulation Section 4050.4 and the Department of Labor’s FAB 2004-02.

The full text of the comment letter can be found here.

Compliance August 21, 2013

Court Finds Employer Owes Lifetime Health Benefits

August 21, 2013 (PLANSPONSOR.com) – A federal appellate court has ruled for employees who say their collective bargaining agreements (CBAs) with their employer guarantee them no-contribution lifetime health benefits.
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In affirming a district court ruling, the 6th U.S. Circuit Court of Appeals found the lower court did not err in interpreting the pre-2005 CBAs between M&G Polymers and its employees as vesting a right to lifetime contribution-free benefits to the pre-August 9, 2005 retirees. According to the court, the agreements indicated an intent to vest lifetime contribution-free benefits with language promising a “full contribution” to qualifying employees, and by linking health care benefits to pension benefits.

The major issue in the case was whether side letters, attempting to place a cap or limit on the amount of health care costs paid by the employer, were part of the CBAs. Again, the appellate court found the district court did not err in finding the cap agreements inapplicable. The court pointed to testimony of a union representative that, despite “search[ing] extensively,” he could not find “any document indicating [the letters] had been adopted or ratified by the local.”

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The court reached the conclusion that retirees had a vested right to health care benefits and, in the absence of evidence to the contrary, a vested right to contribution-free health care benefits. Those benefits could not be bargained away without retiree permission.

The district court’s decision reinstated retirees to the health plan bargained for in 2007 (see “Court Moves Forward Retirees’ Case for Lifetime Benefits”), but they argued that the 2007 CBA illegally increased their copays and deductibles. The court denied the retirees request to be reinstated into the pre-2007 plan finding that the changes were “reasonable in light of changes in health care.”

The 6th Circuit’s opinion is here.

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