<nobr>Jun 16, 2011</nobr>

PBGC Issues Final Rule on Termination of Plans in Bankruptcy

The Pension Benefit Guaranty Corporation on June 14 published in the Federal Register a final rule reducing the amount of pension benefits guaranteed under PBGC's single-employer insurance program when a bankruptcy proceeding terminates a plan, implementing changes under the Pension Protection Act of 2006 (PPA). The rule also lowers the priority given to pension benefits in bankruptcy.

Under the PPA, when an underfunded pension plan terminates during the bankruptcy of the plan sponsor, the date that the sponsor's bankruptcy petition was filed is treated as the plan's termination date for purposes of determining (1) the amount of benefits PBGC guarantees, and (2) the amount of benefits in Priority Category 3 in the asset allocation.

In general, the changes seek to protect the PBGC from growth in its liabilities during bankruptcy proceedings by reducing claims on PBGC's funds.

The final rule is effective July 14, 2011. The statutory change applies if the bankruptcy petition was filed on or after September 16, 2006.

The final rule can be accessed by clicking on the link below.

Questions or comments on this issue should be addressed to Kathryn Ricard ( kricard@eric.org ).

Websites:

PBGC Final Rule on Terminating Plans in Bankruptcy Filings

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