29 C.F.R. Subpart A—General Provisions
Title 29 - Labor
This part sets forth the rules and procedures for terminating a single-employer plan in a standard or distress termination under section 4041 of ERISA, the exclusive means of voluntarily terminating a plan. The following terms are defined in §4001.2 of this chapter: affected party, annuity, benefit liabilities, Code, contributing sponsor, controlled group, distress termination, distribution date, EIN, employer, ERISA, guaranteed benefit, insurer, irrevocable commitment, IRS, mandatory employee contributions, normal retirement age, notice of intent to terminate, PBGC, person, plan administrator, plan year, PN, single-employer plan, standard termination, termination date, and title IV benefit. In addition, for purposes of this part: Distress termination notice means the notice filed with the PBGC pursuant to §4041.45. Distribution notice means the notice issued to the plan administrator by the PBGC pursuant to §4041.47(c) upon the PBGC's determination that the plan has sufficient assets to pay at least guaranteed benefits. Majority owner means, with respect to a contributing sponsor of a single-employer plan, an individual who owns, directly or indirectly, 50 percent or more (taking into account the constructive ownership rules of section 414(b) and (c) of the Code) of— (1) An unincorporated trade or business; (2) The capital interest or the profits interest in a partnership; or (3) Either the voting stock of a corporation or the value of all of the stock of a corporation. Notice of noncompliance means a notice issued to a plan administrator by the PBGC pursuant to §4041.31 advising the plan administrator that the requirements for a standard termination have not been satisfied and that the plan is an ongoing plan. Notice of plan benefits means the notice to each participant and beneficiary required by §4041.24. Participant means— (1) Any individual who is currently in employment covered by the plan and who is earning or retaining credited service under the plan, including any individual who is considered covered under the plan for purposes of meeting the minimum participation requirements but who, because of offset or similar provisions, does not have any accrued benefits; (2) Any nonvested individual who is not currently in employment covered by the plan but who is earning or retaining credited service under the plan; and (3) Any individual who is retired or separated from employment covered by the plan and who is receiving benefits under the plan or is entitled to begin receiving benefits under the plan in the future, excluding any such individual to whom an insurer has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. Plan benefits means benefit liabilities determined as of the termination date (taking into account the rules in §4041.8(a)). Proposed termination date means the date specified as such by the plan administrator in the notice of intent to terminate or, if later, in the standard or distress termination notice. Residual assets means the plan assets remaining after all plan benefits and other liabilities (e.g., PBGC premiums) of the plan have been satisfied (taking into account the rules in §4041.8(b)). Standard termination notice means the notice filed with the PBGC pursuant to §4041.25. State guaranty association means an association of insurers created by a State, the District of Columbia, or the Commonwealth of Puerto Rico to pay benefits and to continue coverage, within statutory limits, under life and health insurance policies and annuity contracts when an insurer fails. (a) Computation of time. The PBGC applies the rules in subpart D of part 4000 of this chapter to compute any time period under this part. A proposed termination date may be any day, including a weekend or Federal holiday. (b) Filing with the PBGC—(1) Method and date of filing. The PBGC applies the rules in subpart A of part 4000 of this chapter to determine permissible methods of filing with the PBGC under this part. The PBGC applies the rules in subpart C of part 4000 of this chapter to determine the date that a submission under this part was filed with the PBGC. (2) Where to file. See §4000.4 of this chapter for information on where to file. (c) Issuance to third parties. The following rules apply to affected parties (other than the PBGC). For purposes of this paragraph (c), a person entitled to notice under the spin-off/termination transaction rules of §4041.23(c) or §4041.24(f) is treated as an affected party. (1) Method and date of issuance. The PBGC applies the rules in subpart B of part 4000 of this chapter to determine permissible methods of issuance under this part. The PBGC applies the rules in subpart C of part 4000 of this chapter to determine the date that an issuance under this part was provided. (2) Omission of affected parties. The failure to issue any notice to an affected party (other than any employee organization) within the specified time period will not cause the notice to be untimely if— (i) After-discovered affected parties. The plan administrator could not reasonably have been expected to know of the affected party, and issues the notice promptly after discovering the affected party; or (ii) Unlocated participants. The plan administrator could not locate the affected party after making reasonable efforts, and issues the notice promptly in the event the affected party is located. (3) Deceased participants. In the case of a deceased participant, the plan administrator need not issue a notice to the participant's estate if the estate is not entitled to a distribution. (4) Form of notices to affected parties. All notices to affected parties must be readable and written in a manner calculated to be understood by the average plan participant. The plan administrator may provide additional information with a notice only if the information is not misleading. (5) Foreign languages. The plan administrator of a plan that (as of the proposed termination date) covers the numbers or percentages in §2520.104b–10(e) of this title of participants literate only in the same non-English language must, for any notice to affected parties— (i) Include a prominent legend in that common non-English language advising them how to obtain assistance in understanding the notice; or (ii) Provide the notice in that common non-English language to those affected parties literate only in that language. [62 FR 60428, Nov. 7, 1997, as amended at 68 FR 61353, Oct. 28, 2003] When the President of the United States declares that, under the Disaster Relief Act (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, the Executive Director of the PBGC (or his or her designee) may, by issuing one or more notices of disaster relief, extend by up to 180 days any due date under this part. (a) Retention requirement—(1) Persons subject to requirement; records to be retained. Each contributing sponsor and the plan administrator of a plan terminating in a standard termination, or in a distress termination that closes out in accordance with §4041.50, must maintain all records necessary to demonstrate compliance with section 4041 of ERISA and this part. If a contributing sponsor or the plan administrator maintains information in accordance with this section, the other(s) need not maintain that information. (2) Retention period. The records described in paragraph (a)(1) of this section must be preserved for six years after the date when the post-distribution certification under this part is filed with the PBGC. (3) Electronic recordkeeping. The contributing sponsor or plan administrator may use electronic media for maintenance and retention of records required by this part in accordance with the requirements of subpart E of part 4000 of this chapter. (b) Availability of records. The contributing sponsor or plan administrator must make all records needed to determine compliance with section 4041 of ERISA and this part available to the PBGC upon request for inspection and photocopying (or, for electronic records, inspection, electronic copying, and printout) at the location where they are kept (or another, mutually agreeable, location) and must submit such records to the PBGC within 30 days after the date of a written request by the PBGC or by a later date specified therein. [68 FR 61353, Oct. 28, 2003] If a plan administrator fails to provide any information required under this part within the specified time limit, the PBGC may assess a penalty under section 4071 of ERISA of up to $1,100 a day for each day that the failure continues. The PBGC may also pursue any other equitable or legal remedies available to it under the law, including, if appropriate, the issuance of a notice of noncompliance under §4041.31. (a) Suspension upon formal challenge to termination—(1) Notice of formal challenge. (i) If the PBGC is advised, before its review period under §4041.26(a) ends, or before issuance of a notice of inability to determine sufficiency or a distribution notice under §4041.47(b) or (c), that a formal challenge to the termination has been initiated as described in paragraph (c) of this section, the PBGC will suspend the termination proceeding and so advise the plan administrator in writing. (ii) If the PBGC is advised of a challenge described in paragraph (a)(1)(i) of this section after the time specified therein, the PBGC may suspend the termination proceeding and will so advise the plan administrator in writing. (2) Standard terminations. During any period of suspension in a standard termination— (i) The running of all time periods specified in ERISA or this part relevant to the termination will be suspended; and (ii) The plan administrator must comply with the prohibitions in §4041.22. (3) Distress terminations. During any period of suspension in a distress termination— (i) The issuance by the PBGC of any notice of inability to determine sufficiency or distribution notice will be stayed or, if any such notice was previously issued, its effectiveness will be stayed; (ii) The plan administrator must comply with the prohibitions in §4041.42; and (iii) The plan administrator must file a distress termination notice with the PBGC pursuant to §4041.45. (b) Existing collective bargaining agreement. For purposes of this section, an existing collective bargaining agreement means a collective bargaining agreement that has not been made inoperative by a judicial ruling and, by its terms, either has not expired or is extended beyond its stated expiration date because neither of the collective bargaining parties took the required action to terminate it. When a collective bargaining agreement no longer meets these conditions, it ceases to be an “existing collective bargaining agreement,” whether or not any or all of its terms may continue to apply by operation of law. (c) Formal challenge to termination. A formal challenge to a plan termination asserting that the termination would violate the terms and conditions of an existing collective bargaining agreement is initiated when— (1) Any procedure specified in the collective bargaining agreement for resolving disputes under the agreement commences; or (2) Any action before an arbitrator, administrative agency or board, or court under applicable labor-management relations law commences. (d) Resolution of challenge. Immediately upon the final resolution of the challenge, the plan administrator must notify the PBGC in writing of the outcome of the challenge, provide the PBGC with a copy of any award or order, and, if the validity of the proposed termination has been upheld, advise the PBGC whether the proposed termination is to proceed. The final resolution ends the suspension period under paragraph (a) of this section. (1) Challenge sustained. If the final resolution is that the proposed termination violates an existing collective bargaining agreement, the PBGC will dismiss the termination proceeding, all actions taken to effect the plan termination will be null and void, and the plan will be an ongoing plan. In this event, in a distress termination, §4041.42(d) will apply as of the date of the dismissal by the PBGC. (2) Termination sustained. If the final resolution is that the proposed termination does not violate an existing collective bargaining agreement and the plan administrator has notified the PBGC that the termination is to proceed, the PBGC will reactivate the termination proceeding by sending a written notice thereof to the plan administrator, and— (i) The termination proceeding will continue from the point where it was suspended; (ii) All actions taken to effect the termination before the suspension will be effective; (iii) Any time periods that were suspended will resume running from the date of the PBGC's notice of the reactivation of the proceeding; (iv) Any time periods that had fewer than 15 days remaining will be extended to the 15th day after the date of the PBGC's notice, or such later date as the PBGC may specify; and (v) In a distress termination, the PBGC will proceed to issue a notice of inability to determine sufficiency or a distribution notice (or reactivate any such notice stayed under paragraph (a)(3) of this section), either with or without first requesting updated information from the plan administrator pursuant to §4041.45(c). (e) Final resolution of challenge. A formal challenge to a proposed termination is finally resolved when— (1) The parties involved in the challenge enter into a settlement that resolves the challenge; (2) A final award, administrative decision, or court order is issued that is not subject to review or appeal; or (3) A final award, administrative decision, or court order is issued that is not appealed, or review or enforcement of which is not sought, within the time for filing an appeal or requesting review or enforcement. (f) Involuntary termination by the PBGC. Notwithstanding any other provision of this section, the PBGC retains the authority in any case to initiate a plan termination in accordance with the provisions of section 4042 of ERISA. (a) Plan benefits. A participant's or beneficiary's plan benefits are determined under the plan's provisions in effect on the plan's termination date. Notwithstanding the preceding sentence, an amendment that is adopted after the plan's termination date is taken into account with respect to a participant's or beneficiary's plan benefits to the extent the amendment— (1) Does not decrease the value of the participant's or beneficiary's plan benefits under the plan's provisions in effect on the termination date; and (2) Does not eliminate or restrict any form of benefit available to the participant or beneficiary on the plan's termination date. (b) Residual assets. In a plan in which participants or beneficiaries will receive some or all of the plan's residual assets based on an allocation formula, the amount of the plan's residual assets and each participant's or beneficiary's share thereof is determined under the plan's provisions in effect on the plan's termination date. Notwithstanding the preceding sentence, an amendment adopted after the plan's termination date is taken into account with respect to a participant's or beneficiary's allocation of residual assets to the extent the amendment does not decrease the value of the participant's or beneficiary's allocation of residual assets under the plan's provisions in effect on the termination date. (c) Permitted decreases. For purposes of this section, an amendment shall not be treated as decreasing the value of a participant's or beneficiary's plan benefits or allocation of residual assets to the extent— (1) The decrease is necessary to meet a qualification requirement under section 401 of the Code; (2) The participant's or beneficiary's allocation of residual assets is paid in the form of an increase in the participant's or beneficiary's plan benefits; or (3) The decrease is offset by assets that would otherwise revert to the contributing sponsor or by additional contributions. (d) Distress terminations. In the case of a distress termination, a participant's or beneficiary's benefit liabilities are determined as of the termination date in the same manner as plan benefits under this section.
Title 29: Labor
PART 4041—TERMINATION OF SINGLE-EMPLOYER PLANS
Subpart A—General Provisions
§ 4041.1 Purpose and scope.
§ 4041.2 Definitions.
§ 4041.3 Computation of time; filing and issuance rules.
§ 4041.4 Disaster relief.
§ 4041.5 Record retention and availability.
§ 4041.6 Effect of failure to provide required information.
§ 4041.7 Challenges to plan termination under collective bargaining agreement.
§ 4041.8 Post-termination amendments.
