In Brief: PBGC Issues Final PPA Regulation On Terminating Plans In Bankruptcy

On June 13, the Pension Benefit Guaranty Corporation ("PBGC") released a final rule that, in most cases, will reduce the amount of pension benefits guaranteed under the agency's single-employer insurance program when a pension plan is terminated in a bankruptcy case. The rule will also decrease the amount of pension benefits given priority in bankruptcy.

The rule (RIN: 1212-AA98) became effective on July 14. Under the final rule, the date on which a plan sponsor's bankruptcy petition is filed will be treated by PBGC as the plan's termination date for purposes of determining certain benefits guaranteed by PBGC. Pension plan benefits earned by participants after the bankruptcy petition date will not be guaranteed. The final rule also establishes the benefits entitled to "priority category 3" status in statutory procedures for allocating the assets of terminated plans. The final rule implements Sections 4022 and 4044(a)(3) of Title IV of the Employee Retirement