The provision would clarify what constitutes a “substantial cessation of operations” under Section 4062(e) the Employee Retirement Income Security Act (ERISA), and was originally included in legislation (S. 2511) passed by the Senate under Unanimous Consent (“UC”) on Sept. 17, 2014. The House narrowly passed a procedural hurdle vote on the measure Thursday and may vote on final passage late Thursday. The Senate will have to concur on the bill before it goes to the President for his signature.
The House and Senate are expected to clear a short-term Continuing Resolution for a few days to keep the government from shutting down on Friday.
The reforms in S. 2511 would address a growing problem attributable to the Pension Benefit Guaranty Corporation’s (PBGC) aggressive enforcement actions under Section 4062(e). Under Section 4062(e), companies are required to post security with the PBGC in the event that a company shuts down a major facility and, as a result, lays off a substantial portion of its workforce. PBGC has in recent years started interpreting this rule in a new way that interferes in routine minor business transactions, such as the sale of small business units where no employee loses his or her job.
The new rules also impose massive liabilities on employers that are disproportionate to the size of the transaction. This is causing significant problems, driving more companies out of the pension system and preventing companies from entering into beneficial transactions that can improve their business. S. 2511 would return Section 4062(e) to its original purpose by (1) only imposing liability where there has been a major downsizing, and (2) making the liability imposed on employers reasonable.
FEI urged Congress to address this issue in a letter to the House and Senate on Nov. 19, 2014, in which FEI outlined the association’s remaining legislative priorities for the lame duck session of the 113th Congress.
For more information, contact Karen Lapsevic, Director, Government Affairs, at 202-626-7809 or [email protected]