To begin to understand PBGC’s new administrative review regulations, it is helpful to understand the basics of PBGC’s terms and processes. The PBGC’s administrative review regulations have always provided procedures for persons aggrieved by PBGC initial determinations to give these people an opportunity to present their positions before a final decision is made by the PBGC.
The administrative review system has two separate processes in place for people to present their positions: 1) reconsiderations; and 2) appeals. For cases involving reconsiderations, aggrieved persons will present their case directly to a high-level official within the same PBGC department that issued the initial determination. Most reconsideration cases relate to premiums, interest, and late payment penalties.
For cases involving appeals, the decisionmaker reviewing the initial determination is not from the same department that issued the determination. Rather, the PBGC Appeals Board provides an independent review of the initial determination. Decisions by the Appeals Board can either be made by a three-member panel or by an individual member. Most appeals cases are in connection with benefit entitlement or amounts.
Now that the basics of PBGC’s administrative review are laid out, there are five major provisions of PBGC’s final rule, including:
- Subjecting all coverage determinations to appeal;
Originally, case resolution under the appeals process took longer and required more PBGC resources than the reconsideration process did. The appeals process was improved once the PBGC allowed single-member decisions in the appeals process, as opposed to only three-member panel decisions. To maintain consistency, PBGC’s final rule subjects all coverage determinations to the appeals process. If the Appeals Board is considering a plan sponsor’s request that a plan is treated as not covered under ERISA, the Appeals Board will attempt to notify plan participants so that they may participate in the discussion process.
- Subjecting all determinations concerning the allocation of a trustee plan’s assets upon plan termination to appeal, except for determinations concerning the distribution of residual assets, which remain subject to reconsideration;
Section 4044(d) of the Employee Retirement Income Security Act (ERISA) describes how residual assets of an employer-initiated standard termination plan may be distributed to the employer or participants and beneficiaries. In such a termination, a plan’s assets must at least satisfy the plan’s benefit liabilities and in some cases, may exceed all benefit liabilities under the plan and produce residual assets. However, in plans that terminate in distress or involuntary termination, PBGC typically becomes the statutory trustee and rarely has residual assets to distribute. In either case, aggrieved persons will still be able to either bring the initial determination to the Appeals Board or have the case reconsidered, depending on how the plan terminated.
- Clarifying that, consistent with PBGC’s long-standing practice, when the PBGC makes an initial determination effective on the date of issuance, a person aggrieved by that determination has no right to request reconsideration or appeal the determination;
When the PBGC does make an initial determination that is effective on the date of issuance, for an aggrieved person to receive a possible remedy, they may seek judicial review of the initial determination in an appropriate court.
- Clarifying where to send requests for an extension on appeals and extensions for reconsideration; and
If a person is seeking an extension of time for the submission of an appeal, they should send their request to the Appeals Board. If a person is seeking an extension of time about a reconsideration, that request should be sent to the department that issued the initial determination.
- Clarifying that persons seeking administrative review may request information in the PBGC’s possession by using the agency’s procedures for requests under the Freedom of Information Act (FOIA) and the Privacy Act
In such cases where the requested materials are not in the PBGC’s possession, a request for such materials may be submitted to the Appeals Board or the department responsible for reviewing the initial determination. The PBGC’s final rule takes effect on March 25, 2020.
Mark Johnson, Ph.D., J.D., is an experienced pension and ERISA expert. As a former ERISA Plan Managing Director and plan fiduciary for a Fortune 500 company, Dr. Johnson has practical knowledge of plan documents as well as an in-depth understanding of ERISA obligations. He works as an expert consultant and witness on 401(k), ESOP and pension fiduciary liability; retiree medical benefit coverage; third party administrator disputes; individual benefit claims; pension benefits in bankruptcy; long-term disability benefits; and cash conversion balances.