By Pension and Benefits Editorial Staff
The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule that amends its regulations on Rules for Administrative Review of Agency Decisions to clarify and make changes to the review process for certain agency determinations and to the procedures for requesting administrative review. The final regulations clarify, simplify, and make other editorial changes to the language, and codify PBGC practices. These amendments only apply to the PBGC's single-employer defined benefit plan program and are effective March 25, 2020.
Changes. The final regulations amend the PBGC's rules for administrative review of agency decisions. Specifically, the regulations:
- Subject all coverage determinations to appeal;
- Subject all determinations concerning the allocation of a trusteed plan's assets upon plan termination to appeal, except for determinations concerning the distribution of residual assets, which remain subject to reconsideration;
- Clarify that, consistent with the PBGC's long-standing practice, when it makes an initial determination effective on the date of issuance, a person aggrieved by the initial determination has no right to request reconsideration of, or appeal, the determination;
- Clarify where to send requests for extensions on appeals and extensions for reconsideration; and
- Clarify that persons seeking administrative review may request information in the PBGC's possession by using its procedures for requests under the Freedom of Information Act and the Privacy Act.
Coverage determinations. The PBGC notes that different review procedures are currently used to determine Title IV coverage. An initial determination that a plan is covered is subject to reconsideration by the PBGC department that issued the original determination. An initial determination that a plan is not covered is subject to appeal to the PBGC Appeals Board. Based on the small number of requests in recent years and the movement to Appeals Board single member decisions for routine cases instead of the three-member Appeals Board and other process improvements, the PBGC is making all coverage determinations subject to appeal to the PBGC Appeals Board.
Asset allocation determinations. According to the PBGC, when an underfunded pension plan terminates, the PBGC must assign benefits payable to each participant to one or more of six priority categories and allocate the plan's assets to the benefits in each category in a prescribed sequential order. Participants and their beneficiaries may appeal initial determinations of their benefit entitlements and amounts of benefits payable, as provided in their individual benefit determinations. Consistent with the PBGC's long-standing practice, the PBGC clarifies that the right to appeal an individual benefit determination necessarily includes the right to appeal a participant's or beneficiary's benefit entitlement and the amount of benefit payable based on the value of the benefits assigned to specific priority categories and the PBGC's allocation of assets available to pay benefits to those categories. However, the PBGC will continue to subject determinations involving the distribution of residual assets to the reconsideration process.
Administrative review process. Current regulations specify that initial determinations made by the PBGC will not become effective until the time for filing a request for reconsideration or an appeal has elapsed. However, under an exception, the PBGC may, in its discretion, order that an initial determination is effective on the date of issuance. For example, when the PBGC makes an initial determination under ERISA Sec. 4042 that the statutory criteria for termination are met, the initial determination states that it is effective on the date of issuance. When PBGC makes an order that an initial determination is effective on the date of issuance, any person aggrieved by the initial determination has exhausted all available administrative remedies and may seek judicial review of the PBGC's determination in an appropriate court.
The PBGC clarifies the exception by providing that the exception does not apply to initial determinations related to a participant's or beneficiary's benefit entitlement and the amount of benefit payable under a covered plan, to whether a domestic relations order is or is not qualified, and to whether benefits are payable under ERISA Sec. 4050 and part 4050. The PBGC further clarifies that when the PBGC issues an order making an initial determination effective on the date of issuance, a person aggrieved by the initial determination has no right to request review under subparts C and D, consistent with the PBGC's long-standing practice.
Extensions of time. The final regulations delete ERISA Reg. §4003.4(b), concerning requests for extensions of time related to disaster relief, and reorganize the section to contain a single paragraph concerning a request for an extension of time when a document is required to be filed within a certain period. In addition, the PBGC is including language that provides that requests for extensions of time for the submission of appeals should be sent to the Appeals Board while requests for extensions of the submission of requests for reconsideration should be sent to the department that issued the initial determination.
Obtaining information. Current regulations provide that a person may request the PBGC's assistance in obtaining relevant information in the possession of a third party, but are silent about obtaining information in the PBGC's possession. The PBGC has become aware through the Office of the PBGC Participant and Plan Sponsor Advocate that participants seeking administrative review are often unaware of their ability to request relevant information under the Freedom of Information Act and Privacy Act by using PBGC procedures. To make the information-gathering process more efficient and transparent for persons seeking administrative review, the PBGC is reorganizing ERISA Reg. §4003.3 to clarify that persons may request information using PBGC's procedures for FOIA and Privacy Act requests. The PBGC is adding language concerning a request for the PBGC's assistance in obtaining materials not in the possession of the PBGC to clarify that such a request must be submitted to the Appeals Board or the department responsible for reviewing the initial determination.
Reconsideration. The final regulations clarify the form and content requirements that a request for reconsideration must include. In addition, the PBGC is adding a provision to clarify that a decision on a request for reconsideration constitutes a final PBGC action, which is binding on all persons who participated in the request.
The final regulations also make clarifications and other editorial changes to part 4003.
Source: 85 FR 10279.
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