PBGC Requests OMB Approval for Data Collection for ERISA Title IV Coverage Analysis
The Pension Benefit Guaranty Corporation ("PBGC") issued a notice (84 Federal Register 20168 (Wednesday, May 8, 2019)) informing the public that the PBGC has requested the Office of Management and Budget ("OMB") approve a collection of information necessary for the PBGC to determine, upon request by the plan, whether (or not) a plan is covered under Title IV of the Employee Retirement Security Income Act of 1974, as amended. The notice asks that OMB solicit public comment on the collection by June 7, 2019.
There is no cost for the filing of a coverage/non-coverage request, and the form covers standard coverage questions, noting that if a question arises about whether a plan is covered under Title IV, PBGC may (or may not) make a coverage determination. The notice explains also that information provided to PBGC will be confidential to the extent provided in the Freedom of Information Act and the Privacy Act. PBGC is requesting that OMB approve of the collection for three years.
PBGC insures most private-sector defined benefit pension plans, single-employer (a term that includes a non-bargained multiple-employer plan) or a collectively bargained multiemployer, if the plan qualifies for favorable tax treatment under Title II of ERISA, and is not specifically exempted under Title IV. Covered plans are required to pay premiums, based on type of plan, though PBGC notes on its website that the coverage and guaranty are not affected by the payment or nonpayment of the premiums.
As proposed, the form covers the four plan types for which coverage determinations are most frequently requested: (1) church plans, (2) plans that are established and maintained exclusively for the benefit of plan sponsor's substantial owners, (3) plans established and maintained by professional services employers that, since 1974, have had no more than 25 active participants, and (4) Puerto Rico-based plans that have made an election to be covered by ERISA.
Based on comments received on a PBGC notice issued in December 2018, PBGC added a pilot program to the proposed form to allow a plan not yet in existence to request an opinion from PBGC whether the sponsoring employer is a professional service employer, or whether all participants are substantial owners under Title IV.
The proposed form requests identifying information about the plan, the plan sponsor, and the plan administrator, and requests that the filer identify whether the request is for a determination of coverage or non-coverage under Title IV. The filer must identify the type of plan for which the coverage determination is requested, whether PBGC has ever issued a coverage determination for the plan, and whether the request is for a plan not yet established (as permitted by the pilot program).
The proposed form also requests the filer attach a copy of the plan document and any correspondence with the Internal Revenue Service concerning the plan, and that the filer acknowledge reading the form's instructions listing additional items that the PBGC may request. The form requires that the filer sign and certify, under penalty of perjury, to personal knowledge of the information and documents, and to the truth, accuracy and completeness of the information.
The form provides four separate sections requesting specific information on the specific type of plan for which the coverage determination is requested:
1) For substantial owner plans, the form first asks for a qualifying statement -- that the filer affirm that the participants in the plan are all substantial owners -- and then requests the identity and percentage of ownership of each participant, the compensation for each over a period of time, and the relevant documents such as contracts or partnership agreements, and identification of any familial relationships between or amongst the owners.
2) For small professional service employer plans, the form also requests a qualifying statement -- that the filer affirm that the plan has not covered more than 25 active participants since September 2, 1974. The filer is requested to provide detailed information about the services performed by each employer involved in the plan, and the names, ownership interest, education, titles, and licensing of the current owners of the plan sponsor, as well as all individuals who control the plan sponsor. The instructions to the form detail more information on the statutory definition of professional service employer, but indicate that the PBGC will entertain requests concerning other types of professionals not listed, such as financial advisors, on a case by case basis.
3) For church plans, the form simply requests whether the plan has made an election under section 410(d) of the Internal Revenue Code (the "Code") to be covered by ERISA, and, if so, to attach the election form, or whether the plan has received a church plan determination from the Internal Revenue Service under Code section 414(e), and, if so, to attach the determination. Although unstated, the implication is that PBGC will not make a church plan determination, but will accept such a determination made by the IRS.
4) For Puerto Rico-based plans, the form asks whether all of the participants either reside or work primarily in Puerto Rico, and whether the Plan has elected to be covered by Title IV. The filer is asked for more detail and documents about the plan, its trustees, any contract holders, qualification letters from the Puerto Rico government, and whether, and if so, when, the plan's trust was transferred from elsewhere in the United States.
The form also permits the filer to identify the request as concerning Title IV coverage of "other" exempted types of plans, identified in the form's instructions as including, for example, individual account plans, governmental plans, certain pre-ERISA plans, unfunded "top hat" plans, and others, and the form provides a blank box for the filer to specify the exemption and reasoning for the plan's coverage or non-coverage. The instructions also provide more detailed information about each of the four main types of exempted plans.
PBGC will identify the applicable internal review process, as determinations of non-coverage are appealable to the PBGC Appeals Board, and determinations of coverage are subject to reconsideration by a higher-ranking official within the issuing department.
This information collection proposal by PBGC, for the first time, provides a form and instructions to assist plans requesting certain standard coverage determinations. What is not included is a similar step-by-step process on some of the more problematic coverage determinations -- church plan status -- although PBGC will accept an IRS church plan determination -- and governmental plan status. The form also does not provide a process for other types of coverage questions, such as whether a plan is a single-employer plan or a multiemployer plan.