EBSA, PBGC Issue Final Rules Addressing Pension Plans

Both the Department of Labor’s Employee Benefits Security Administration (EBSA) and the Pension Benefit Guaranty Corporation (PBGC) have issued final rules published in today’s Federal Register that affect employer-provided pension plans. The EBSA’s final rule (pdf) delays until May 17, 2010 the effective and applicability dates of final rules under the Employee Retirement Income Security Act (ERISA) and parallel provisions in the Internal Revenue Code (IRC) dealing with the provision of investment advice to participants and beneficiaries in individual account plans such as 401(k)s and individual retirement accounts (IRAs). The rules, which were issued during the final days of the Bush administration, would have permitted advisers affiliated with mutual funds, brokerage firms and other companies that sell investments to provide investment advice to 401(k) and IRA participants. EBSA’s Assistant Secretary Phyllis C. Borzi has already announced that the agency plans to withdraw and rework this rule, which would have gone into effect on November 18. On January 20, 2009, Chief of Staff Rahm Emanuel directed agency heads to consider delaying any rule that had not yet taken effect to give the new administration a chance to review the law and policy involved.

Meanwhile, the PBGC has also published a final rule (pdf) that will make it easier for a member of the military to qualify for pension benefits. Under current PBGC regulations, benefits under a terminated single-employer pension plan are guaranteed only if the participant satisfies the conditions for entitlement to that benefit on or before the plan’s termination date. The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) entitles military service members to return to their jobs after deployment and to receive credit for benefits, including employee pension plan benefits, that would have accrued during their military-related absence. The new PBGC rule address the scenario that occurs when a service member’s plan terminates while he or she is deployed. Under the new rule, the PBGC will consider the service member to have satisfied the conditions for benefits entitlement as of the plan’s termination date, so long as the service member is reemployed within the time limits set by USERRA. In other words, the rule will treat returning service members as if they had never left their employers at the time the plan terminates.

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