17 (b) The conferees may wish to consider adopting the rules of the Senate amendment, except that they may wish to authorize regulations to provide for alternative methods to indemnity bonds in order to assure that a withdrawing substantial employer will contribute its fair share in the event of a plan termination. (c) The conferees may wish to use the same definition of "multiemployer plan" for the insurance provisions as they agreed to for purposes of the participation provisions, above. In addition, the conferees may wish to provide that, if a plan has more than one employer, but does not qualify as a multiemployer plan under this definition, then the Corporation would be authorized to provide by regulations for allocations of employer liability among the employers in the plan and that such regulations should generally follow the rules for multiemployer plans. (4) The conferees may wish to provide that the Government lien on account of the employer's liability is to be subordinate to all liens perfected 120 days prior to the termination date and also subordinate to all claims of general creditors existing as of the date of enactment of the insurance provisions.* (5) The conferees may wish to authorize the Corporation to work out an arrangement whereby private insurers would insure employers against liability for terminations of their plans, but with the Corporation also authorized to provide a governmental insurance against employer liability if a satisfactory private plan cannot be arranged. The conferees may also wish to allow the Corporation to specify the extent to which all employers must purchase the insurance against employer liability (whether the insurance arrangement is public or private) and to permit the Corporation the discretion to determine circumstances under which employer liability insurance benefits would not be paid an employer despite that employer's purchase of the insurance. If a combination of governmental and private insurance is chosen, the conferees may wish to allow the Corporation to require each employer to determine within three years after the effective date whether to take private or the public insurance. (6) The conferees may wish to provide that where there is a technical plan termination for purposes of the Internal Revenue Code (e.g., a stopping of further accruals), this is not necessarily to be a termination for purposes of the insurance provisions (although the Corporation could make it such a termination), Not all staff members agree with this suggestion. Page numbers Page numbers 143, 59 62 (133) 60 61 18 but that it would be a reportable event. The conferees may also wish to provide that the employer could still claim business deductions for contributions to the plan under the same rules as would apply to regular ongoing plans. (7) The conferees may wish to consider adopting rules along the line of the Senate amendment relating to a successor employer's liability arising from the termination of a predecessor employer's plan. (8) The conferees may wish to consider adopting rules along the line of the Senate amendment relating to termination of a substantial facility. 19. Distribution of Assets upon Termination (1) The bill provides for priorities in distribution (b) vested benefits of employees already receiving benefits or entitled to choose early retirement (except for disability), (c) other vested benefits, (d) other accrued benefits, (e) interest on employee contributions, (f) remaining liabilities proposed in the plan for payment upon termination, and (g) pro rata to each person entitled to receive a distribution on account of priorities (a) through (f). (2) If the assets are insufficient to cover all of the claims within a priority class (after satisfaction in full of the higher priority claims), then they are to be allocated pro rata within that class. However, the plan may grant priority of distribution to a subclass that is established on the basis of age or length of service, or both. (3) There is to be no double allocation of assets resulting from a benefit being includible in more than one priority category. That is, to the extent that a benefit is satisfied in a higher priority category, it is to be removed from entitlement in the lower priority category. (4) If there has been a plan amendment during the 5 years prior to termination and the assets are insufficient to cover all the priority categories, then allocations are to be made, first, in accordance with the benefit formula in effect 5 years before termination, and then in accordance with subsequent formulas, until the assets are exhausted. 19 (5) In the case of a plan to which only participants contribute, the first two priority classes are to be interchanged with first priority being given to vested benefits for those receiving benefits or generally entitled to begin receiving benefits upon termination, and second priority being given to employee contributions. (6) If the present value of the accrued benefits of employees not entitled to coverage is at least 25 percent of the value of the benefits of covered employees for five consecutive years, the House bill provides that the plan is to file a report, and the Secretary is to determine whether a partial termination has taken place. In other cases, as when participants are excluded by a plan amendment, benefits or employee contributions are reduced, or vesting or eligibility requirements are made more restrictive, the Secretary of Labor is to judge, according to all the facts and circumstances, whether a partial termination has taken place. (7) The Secretary may vary these distribution priorities, after a hearing, if to do so would further the purposes of Title I of the bill, protect plan participants and beneficiaries, prevent a substantial increase in plan costs or administrative burdens or a substantial decrease in benefit levels or employee compensation, and if the application of the priority schedule is detrimental to plan participants. (8) No corresponding provision. Senate amendment. (1) The amendment provides for distribution of plan assets, in the event of termination, in the following order of priorities: (a) voluntary employee contributions, (b) mandatory employee contributions, (c) benefits in pay status at least 3 years (at the benefit level existing 3 years before termination), (d) other insured benefits. (2) Essentially the same as the House bill. (3) Essentially the same as the House bill. (4), (5), (6), and (7) No comparable provisions. (8) In cases of voluntary terminations of uninsured plans not yet in existence on the date of enactment of the Act (and those already in existence if they have no written provision governing allocation of assets upon a termination), the same priorities are to apply, with the exception that all insured benefits will have the same priority status as those benefits in pay status for 3 years. Staff comment.— (1) The conferees may wish to consider providing that, upon termination of a plan covered by the insurance provisions, the plan assets would be allocated in the following order of priorities: (a) to voluntary employee contributions, then Page numbers 64 (135) 65 (136) 143, 144 473 (130, 337) 473 (130, 337) 473 (130, 338) 494 (133) (5 (1) 26. Recovery of Por Payments The House contains no provision Renate amendment. The Comoration a in general. gym the *«**6* ** * *ormer a temnated Dian's ner eft, pa iment regin within three years prior to fermiration free san aorta interstate commerce. The amount reconerat, & a rest red 57 the amount the Dian participart rod na e perelied onder an annuity emmencing at 86 and by the amount of his insured benefite (reduced or n'a pro rata share of his compang's babu ty to the Corporation. for the insurance Payment subject to persevery are not to include there made on account of death or deability. The Corporation may waive recovery of certain amounts if thecary would cause substantial hardship to the parfipant or his beneficiary In the event of a distribution to an owner-emplovee that exceeds $10.000 and creates or increases unfunded sested liabilities the three year lookback period would not begin until the Corporation is informed of the distribution (which is a reportable event). 21 Staff comment.--The conferees may wish to provide for recapture of any aggregate of $10,000 distributed to a plan participant in any 12-month period in the three years preceding termination, except distributions made under life annuities. Payments subject to recovery are not to include those made on account of death or disability. The Corporation may waive recovery of certain amounts if recovery would cause substantial hardship to the participant or his beneficiary. 21. Liability on Withdrawal of Substantial Employers in Multiemployer Plan House bill. Since employees in multiemployer plans are not liable for the Corporation's losses under the House bill, there is no provision similar to the Senate amendment provision fixing liabilities to substantial employers in multiemployer plans caused by insurance losses to the Corporation. Senate amendment. The plan administrator of a multiemployer plan is required to inform the Corporation of the withdrawal of a substantial employer in the multiemployer plan within 60 days. (A substantial owner is defined as one who for two consecutive years has contributed at least 10 percent of employer contributions to a multiemployer plan and who, following the required notification by the plan administrator as to his status as a substantial owner, does not withdraw from the plan within two years.) Following its notification, the Corporation has two alternative procedures available. the In one of these, the substantial employer must pay or deposit a bond in the amount of his potential liability. His potential liability is computed as the share (with the share determined according to that employer's proportion of the total employer contributions to plan within the past five years) of the total plan liability that would have existed if the plan had terminated when that employer withdrew from it. If the substantial employer desposits a bond, the Corporation may require the bond to be up to 150 percent of this potential liability. If the plan terminates within five years, the payment or bond is forfeited for the benefit of the plan. If there is no termination, the payment or bond is to be returned to the substantial employer or cancelled. Alternatively, the Corporation may, if the withdrawal causes a significant reduction in the amount of plan contributions, require the plan fund to be allocated between those participants no longer under the plan because of the withdrawal and those participants still covered. That portion of the fund allocable Page numbers 143 482 (330) 483 (331) 484 484 (333) |