PBGC Releases 4062(e) Enforcement Guidelines

ERISA section 4062(e) addresses situations in which an employer ceases operations at a facility in any location and, as a result, separates more than 20% of its employees who participate in the employer's defined benefit plan. If a 4062(e) event occurs, the employer is subject to a liability that equals the plan's unfunded benefit liabilities (measured on a termination basis) at the time of the event times the percentage reduction in active plan participants. The liability is meant to provide financial protection for the plan if it terminates in a distress or involuntary termination within five years after the 4062(e) event. Employers and practitioners have been particularly concerned about these provisions over the last several years because the Pension Benefit Guaranty Corporation (or PBGC), which enforces this requirement, has taken an extremely expansive view of what constitutes a section 4062(e) event.