Compliance April 10, 2003

Judge Denies PBGC Effort to Block Union's Data Request

October 16, 2002 (PLANSPONSOR.com) - A federal judge has turned aside efforts by the Pension Benefit Guaranty Corporation (PBGC) to block the United Steelworkers of America from getting data about pension plans the federal pension insurer is trying to seize.
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US District Judge Peter Economus of the Northern District of Ohio ruled that the PBGC wasn’t entitled to prevent the union from getting information on cases similar to the PBGC’s efforts to have Republic Technologies International’s plans terminated, Washington-based legal publisher BNA reported.

“Information regarding the PBGC’s practices in analogous scenarios is likely to assist the Court in ensuring that the PBGC’s selection of a termination date conformed with the PBGC’s general custom and practice,” Economus wrote. .

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On June 14, 2002, PBGC filed a complaint against Republic and asked that the court establish that date as the plans’ termination date.

The United Steelworkers of America asked to get involved in the lawsuit for the purpose of challenging PBGC’s termination of two of the pension plans.

In its request to intervene, the union demanded that PBGC turn over information regarding how it selected June 14, 2002, as the plans’ termination date. In addition, the union asked that PBGC supply the union with data the PBGC used in selecting plan termination dates in analogous situations.

PBGC filed a motion for a protective order barring the union from obtaining the requested information. In particular, PBGC argued that the court must grant it deference as to the selected termination date and that information regarding the selection of termination dates in other situations was irrelevant in that such decisions are made on a case-by-case basis.

Denying PBGC’s motion, Economus said rather than ruling on whether it owed deference to PBGC’s decision, he said he was allowing additional research regarding PBGC’s selected termination date.

Republic allied itself with the steelworkers union earlier this year to oppose the PBGC’s efforts. See  Republic Lines up with Steelworkers, Opposes PBGC Action  . The union said it was c oncerned that union members would be shortchanged by the PBGC.

The case is Pension Benefit Guaranty Corp. v. Republic Technologies International LLC, N.D. Ohio, No. 5:02 CV 01116, 10/11/02.

Compliance April 9, 2003

Study: Proposed Rules Would Hurt More DB Plans

April 9, 2003 (PLANSPONSOR.com) - Proposed pension regulations that include a new interpretation of age discrimination would invalidate more than two thirds of the defined benefit plans sponsored by Fortune 100 companies.
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Of the 72 surveyed companies with DB plans, 50 would fail under the proposed regulations while 22 would pass, according to the analysis sponsored by the Coalition to Preserve the Defined Benefit System and conducted by Watson Wyatt.   Eighteen companies do not currently offer defined benefit plans.

“The flaws in the proposed regulations will trip up pension plans that have never before been questioned and are clearly not discriminatory,” Kathy Cissna, director of retirement plans at R.J. Reynolds, testified at a two-day Washington public hearing conducted by the Treasury Department and Internal Revenue Service. “We’re afraid that the proposed regulations will force even more companies to abandon defined benefit plans, which provide a critical source of retirement income to millions of American workers.” Cissna represented the coalition.

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Treating DB Plans Differently

According to a news release, one of the coalition’s major concerns with the proposed regulations is the restrictive general rule that applies to defined benefit plans, and the way in which the proposed rules treat defined contribution and cash balance plans on one hand, and all other defined benefit plans on the other hand, Cissna said.   About 80% of all retirement plans are defined contribution or cash balance plans.

While commending federal regulators for their decision earlier this week to withdraw the portion of the proposed regulations that would have imposed new comparability nondiscrimination tests on cash balance plans (See  Regulators Pull Back Some Cash Balance Conversion Rules) , Cissna also called on them to consider several changes to the proposed regulations:

  • test age discrimination for all retirement plans on the same basis.   There should not be a different and more onerous age discrimination rule that applies to only 20% of the employer-sponsored plans.
  • adopt an accrued-to-date test rather than an annual test for determining accrual rates.
  • allow offset pension plan designs to test for discrimination on the basis of the gross benefit, not the net benefit.
  • maintain the existing rules for benefit delivery to employees who are older than the plan’s normal retirement age, particularly in situations where the plan does not suspend benefits or offset for in-service distributions.

For more information on the coalition, go to www.preservedb.com .

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