Voglio sapere a riguardo di…

36610

Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations
khammond on DSKJM1Z7X2PROD with RULES2

of benefits and benefit increases described in section 4022Ab1 of ERISA, without regard to the time the benefit or benefit increase has been in effect. These conditions are intended to prevent excessive increases in benefits that would result in a transfer of SFA
beyond the payment of benefits at the level that participants were promised as of the date of enactment of section 4262, without being overly restrictive. The condition does not apply to the required reinstatement of benefits suspended under sections 305e9 or 4245a of ERISA or any restoration of benefits under 26 CFR 1.432e91e3.
The condition in 4262.16b1
restricts retrospective benefit increases by providing that a benefit or benefit increase must not be adopted during the SFA coverage period defined in 4262.2 of the regulation if it is in whole or in part attributable to service accrued or other events occurring before the adoption date of the amendment.
This condition is needed because retroactive increases in benefits harm the funded position of the plan without improving expected future plan income.
The condition in 4262.16b2
restricts prospective benefit increases by providing that a benefit or benefit increase must not be adopted during the SFA coverage period unless the plan actuary certifies that employer contribution increases projected to be sufficient to pay for the benefit increase have been adopted or agreed to, provided that these increased contributions were not included in the determination of SFA. The plan sponsor must demonstrate that a benefit increase is paid for in the statement of compliance described under 4262.16i. This condition is intended to guard against plans implementing significant benefit increases that may accelerate plan insolvencies and hasten an inability to pay plan-level benefits.
However, plans still have the flexibility to offer active participants more attractive benefit accruals when the plan is able to afford them.
These conditions on benefit increases are in addition to the limitations under section 305f1B of ERISA and corresponding section 432f1B of the Code applicable to plans in critical status.
b Allocation of Plan Assets Section 4262.16c imposes a condition on a plan that receives SFA
relating to the allocation of plan assets.
This condition requires that, during the SFA coverage period, plan assets, including SFA, must be invested in permissible investments as described in 4262.14 sufficient to pay for at least 1

VerDate Sep<11>2014

17:51 Jul 09, 2021

Jkt 253001

year or until the date the plan is projected to become insolvent, if earlier of projected benefit payments and administrative expenses.
By imposing investment constraints on SFA assets in section 4262l of ERISA and providing PBGC the authority to impose additional constraints on asset allocation in section 4262m, the statute contemplates a desire to prevent excessive risk-taking by plans that receive SFA. PBGC views the gradual increase in the proportion of assets allocated to fixed income as a plan approaches insolvency as a sensible and prudent approach to investing over a gradually shortening time horizon. However, PBGC is interested in whether this condition is seen as preventing plans from achieving reasonable investment objectives. PBGC
encourages interested parties to respond, and provide supporting data, to the following questions:
Will the requirement to maintain 1
year or until the date the plan is projected to become insolvent, if earlier of benefit payments and administrative expenses in investment grade fixed income assets result in an allocation that is significantly different from the allocation that the plans investment policy after receiving SFA would otherwise attain?
What are the advantages and disadvantages of PBGC not imposing any conditions under section 4262m of ERISA on asset allocation compared to the proposed condition requiring 1 year or until the date the plan is projected to become insolvent, if earlier of benefit payments and administrative expenses in investment grade fixed income?
Could an alternative condition, or modification of the condition under 4262.16c, better achieve the objective of preventing excessive risk-taking by plans while allowing plans to meet their investment objectives?
c Contribution Decreases, Allocating Contributions and Other Practices Section 4262.16d of the regulation imposes reasonable conditions on a plan that receives SFA relating to contribution decreases to ensure that SFA is used for the exclusive purpose of paying benefits and reasonable administrative expenses and is not effectively transferred to contributing employers through decreased contribution obligations. Similarly, 4262.16e imposes reasonable conditions relating to allocation of income or expenses with another employee benefit plan and other practices.
For the condition on contribution decreases, 4262.16d provides that
PO 00000

Frm 00014

Fmt 4701

Sfmt 4700

during the SFA coverage period, the contributions required for each CBU
must not be less than, and the definition of the CBUs must not be different from, those set forth in collective bargaining agreements or plan documents in effect on March 11, 2021 including agreed to contribution rate increases through the expiration date of the collective bargaining agreements.
The regulation provides an exception to this condition where the plan sponsor determines that the risk of loss to plan participants and beneficiaries is lessened by the reduction. Where the reduction affects annual contributions over $10 million and over 10 percent of all employer contributions, PBGC must also determine that the change lessens the risk of loss to participants and beneficiaries. Information required to be submitted to PBGC for a request for approval of a proposed changed is described in 4262.16d2. The exception is intended, for example, to allow a contributing employer to reduce contributions below collectively bargained rates so that the employer may continue in business and not be forced to withdraw in conjunction with a bankruptcy. This condition generally is intended to prevent reductions in contribution rates that may accelerate plan insolvencies, while providing limited flexibility for employers with extenuating financial circumstances.
With respect to the allocation of contributions and other practices during the SFA coverage period, 4262.16e prohibits a decrease in the proportion of income contributions, investment returns, etc. or an increase in the proportion of expenses allocated to a plan that receives SFA. This prohibition applies to written or oral agreements or practices other than a written agreement in existence on March 11, 2021, to the extent not subsequently amended or modified under which income or expenses are divided or to be divided between a plan that receives SFA and one or more other employee benefit plans.
Among the practices covered by this prohibition is any allocation or reallocation of contribution rates from the plan receiving SFA to a newly formed pension plan. Similarly, plan expenses can be paid by a plan only if they are properly allocable to that plan.
Accordingly, another prohibited practice is a change in the allocation of expenses with other benefit plans that serves to increase the proportion of expenses to be paid by the plan receiving SFA.
However, the prohibition under 4262.16e does not apply to a good faith allocation of contributions
E:FRFM12JYR2.SGM

12JYR2