The PBGC is stepping up its game by expanding the program it uses for locating missing pension plan participants and beneficiaries who are owed benefits.
The Pension Benefit Guaranty Corporation’s proposed rule on missing participants, issued Sept. 19, is another step federal agencies are taking to ensure employees are paid their pension benefits after plans terminate.
The PBGC’s current program is limited to missing participants of single-employer defined benefit plans that are insured by the agency. Under the proposal, many more missing participants would stand a chance of receiving benefits owed them from their terminated plans.
This would include missing participants of multiemployer plans, which generally include collectively bargained plans involving more than one employer.
The federal pension insurer would also offer a similar program to individual account defined contribution plans, such as 401(k) and profit-sharing plans. Such plans would have the option of transferring benefits to the PBGC. The agency “would then hold the money, add the missing participant to its online searchable database, and periodically search for the participant,” the PBGC said in a statement Sept. 19.
In addition, the proposal would make available a similar program to help missing participants of small plans covering professional service organizations.
The proposal would also alter the existing program for PBGC-insured single-employer plans. Those “changes relate primarily to how plans determine the amount of money to transfer to PBGC, better protection of key features of a participant’s benefit (e.g., early retirement subsidies), and reducing the burden of transferring benefits to PBGC,” the agency said.
Creation of Singular Database
Industry and consumer groups contacted by Bloomberg BNA Sept. 19 were just beginning to digest the details of the 108-page rule.
Jan Jacobson, senior counsel for retirement policy at the American Benefits Council in Washington, told Bloomberg BNA that her organization was happy that the PBGC will be developing a program to be offered to defined contribution plans. ABC represents primarily Fortune 500 companies that either sponsor or administer health and retirement benefit plans.
However, she said her initial reaction was disappointment that only terminated plans would be covered.
She also noted that the PBGC’s existing program would, under the proposed rule, require a $35-per-participant fee for participating plan sponsors. In addition, she said the definition of missing participant would be changed to include, in some circumstances, participants whose whereabouts plan sponsors actually know.
Will Hansen, senior vice president for retirement policy with the ERISA Industry Committee in Washington, a group that represents large employer sponsors, told Bloomberg BNA by e-mail that the proposal will create “a singular database for former participants to locate missing retirement funds.” This will strengthen the U.S. retirement system, he said. However, it’s important for the Department of Labor to “coordinate with the PBGC in extending safe harbor status (fiduciary protections) to plan sponsors who elect to use this new program under the PBGC,” he said.
“As more and more workers transfer jobs during their career, the likelihood of missing retirement funds will only increase,” Hansen said. So a central database will hopefully help former participants in locating their funds, he said.
The proposed rule is scheduled to be published in the Federal Register on Sept. 20.
Source: Bloomberg BNA