USERRA Benefits Under Title IV of ERISA, 59093-59096 [E9-27573]

Download as PDF Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations letters.2 A number of these comments expressed the view that the final rules raise significant issues of law and policy. Among these, some expressed disagreement with the final rules’ interpretation of the statutory exemption, and further questioned the adequacy of the class exemption’s conditions in mitigating against the potential for investment adviser selfdealing. On March 20, 2009, the Department adopted the 60-day extension of the final rule’s effective and applicability date for agency review of questions of law and policy raised by commenters (74 FR 11847). On May 22, 2009, in order to afford the Department additional time to consider the issues raised by commenters, the Department adopted a further delay of these dates until November 18, 2009 (74 FR 23951). The Department believes that the complexity and significance of the issues involved justify delaying the effective and applicability dates of the final rule for an additional 180 days. This additional time will allow the Department to complete its analysis of the issues of law and policy and determine the appropriate steps to be taken. Accordingly, the Department is adopting herein a 180 day delay of the effective and applicability date of the final rule published on January 21, 2009. With the adoption of this delay, the effective and applicability date of the final rule will be May 17, 2010. List of Subjects in 29 CFR Part 2550 Employee benefit plans, Exemptions, Fiduciaries, Investments, Pensions, Prohibited transactions, Reporting and recordkeeping requirements, and Securities. ■ For the reasons set forth above, the publication on January 21, 2009 (74 FR 3822), of the final rule amending 29 CFR Part 2550, is further amended as follows: PART 2550—RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY 1. The authority citation for part 2550 is revised to read as follows: jlentini on DSKJ8SOYB1PROD with RULES ■ Authority: 29 U.S.C. 1135; and Secretary of Labor’s Order No. 6–2009, 74 FR 21524 (May 7, 2009). Secs. 2550.401b–1, 2550.408b–1, 2550.408b–19, 2550.408g–1, and 2550.408g–2 also issued under sec. 102, Reorganization Plan No. 4 of 1978, 5 U.S.C. App. Sec. 2550.401c–1 also issued under 29 U.S.C. 1101. Sections 2550.404c–1 and 2550.404c–5 also issued under 29 U.S.C. 2 These comments are available on the Department’s Web site at: https://www.dol.gov/ebsa/ regs/cmt-investmentadvicefinalrule.html. VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 1104. Sec. 2550.407c–3 also issued under 29 U.S.C. 1107. Sec. 2550.404a–2 also issued under 26 U.S.C. 401 note (sec. 657(c)(2), Pub. L. 107–16, 115 Stat. 38, 136 (2001)). Sec. 2550.408b–1 also issued under 29 U.S.C. 1108(b)(1). Sec. 2550.408b–19 also issued under sec. 611(g)(3), Public Law 109–280, 120 Stat. 780, 975 (2006). § 2550.408g–1 [Amended] 2. Section 2550.408g–1 is amended by removing the date ‘‘November 18, 2009’’ and adding in its place ‘‘May 17, 2010’’ in paragraph (g). ■ Signed at Washington, DC, this 10th day of November 2009. Phyllis C. Borzi, Assistant Secretary, Employee Benefits Security Administration, Department of Labor. [FR Doc. E9–27532 Filed 11–16–09; 8:45 am] BILLING CODE 4510–29–P PENSION BENEFIT GUARANTY CORPORATION 29 CFR Parts 4001 and 4022 RIN 1212–AB19 USERRA Benefits Under Title IV of ERISA AGENCY: Pension Benefit Guaranty Corporation. ACTION: Final rule. SUMMARY: The Uniformed Services Employment and Reemployment Rights Act of 1994 (‘‘USERRA’’) provides that an individual who leaves his or her job to serve in the uniformed services is generally entitled to reemployment by his or her previous employer and, upon reemployment, to receive credit for benefits, including employee pension plan benefits, that would have accrued but for the employee’s absence due to the military service. This final rule amends PBGC’s regulation on Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) to address a narrow but important issue regarding PBGC’s guarantee of benefits for participants who are serving in the uniformed services at the time that their pension plan terminates. Under PBGC’s existing regulations, a benefit is guaranteed only if the participant satisfies the conditions for entitlement to the benefit on or before the plan’s termination date. PBGC is providing an exception to this rule in the unique circumstances of persons serving in the uniformed services as of the plan’s termination date, consistent with USERRA’s statutory mandate to treat such persons, upon reemployment, as if they had never left the employ of their PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 59093 former employer. This final rule provides that so long as a service member is reemployed within the time limits set by USERRA, even if the reemployment occurs after the plan’s termination date, PBGC will treat the participant as having satisfied the reemployment condition as of the termination date. This will ensure that the pension benefits of reemployed service members, like those of other employees, would generally be guaranteed for periods up to the plan’s termination date. DATES: Effective December 17, 2009. (See Applicability in SUPPLEMENTARY INFORMATION.) FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, or Constance Markakis, Attorney, Legislative and Regulatory Department, Pension Benefit Guaranty Corporation, Suite 12300, 1200 K Street, NW., Washington, DC 20005–4026, 202–326–4024. (TTY and TTD users may call the Federal relay service toll-free at 1–800–877–8339 and ask to be connected to 202–326–4024.) SUPPLEMENTARY INFORMATION: Background Pension Benefit Guaranty Corporation (‘‘PBGC’’) administers the singleemployer pension plan termination insurance program under Title IV of the Employee Retirement Income Security Act of 1974 (‘‘ERISA’’). When a covered plan terminates in either a distress termination under section 4041(c) of ERISA, or an involuntary termination (one initiated by PBGC) under section 4042 of ERISA, PBGC typically becomes statutory trustee of the plan with responsibility for paying benefits in accordance with the provisions of Title IV. The amount of benefits paid by PBGC under a terminated, trusteed plan is generally determined as of the plan’s termination date.1 Under section 4022(a) of ERISA, PBGC guarantees the payment of nonforfeitable benefits 1 Section 404 of the Pension Protection Act of 2006 (‘‘PPA 2006’’), Public Law 109–280, added sections 4022(g) and 4044(e) of ERISA, which provide that, when an underfunded plan terminates during the bankruptcy of the plan sponsor, the date the sponsor’s bankruptcy petition was filed is treated as the termination date of the plan for purposes of determining the amount of benefits PBGC guarantees and the amount of benefits in priority category 3 in the section 4044 asset allocation. These changes apply to plan terminations that occur during the bankruptcy of the plan sponsor if the bankruptcy filing date is on or after September 16, 2006. See PBGC proposed rule on Bankruptcy Filing Date Treated as Plan Termination Date for Certain Purposes, 73 FR 37390 (Jul. 1, 2008). For convenience, this preamble generally will refer to the plan’s termination date, although in many cases this reference will instead apply to the bankruptcy filing date. E:\FR\FM\17NOR1.SGM 17NOR1 59094 Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations under the plan, subject to the limitations of section 4022(b), as of the date the plan terminates. Under § 4022.3 of PBGC’s regulation on Benefits Payable in Terminated Single-Employer Plans, PBGC guarantees the amount, as of the termination date, of a benefit provided under the plan (subject to certain limitations) if ‘‘the benefit is, on the termination date, a nonforfeitable benefit.’’ To be guaranteed, the benefit must also qualify as a pension benefit as defined in § 4022.2, and the participant must be entitled to the benefit under § 4022.4. The amount of any additional nonguaranteed benefits payable from the plan’s assets under section 4044 or PBGC’s recoveries under section 4022(c) of ERISA is also determined as of the termination date. Section 4001(a)(8) of ERISA and § 4001.2 define a ‘‘nonforfeitable benefit’’ with respect to a plan as: jlentini on DSKJ8SOYB1PROD with RULES A benefit for which a participant has satisfied the conditions for entitlement under the plan or the requirements of this Act (other than the submission of a formal application, retirement, completion of a required waiting period, or death in the case of a benefit which returns all or a portion of a participant’s accumulated mandatory employee contributions upon the participant’s death), whether or not the benefit may subsequently be reduced or suspended by a plan amendment, an occurrence of any condition, or operation of this Act or the Internal Revenue Code of 1986. Guaranteed benefits under Title IV of ERISA are benefits with respect to which a participant has satisfied the conditions for entitlement under the plan as of the termination date. Therefore, plan benefits such as an early retirement subsidy or disability retirement benefit with respect to which a participant has not satisfied the conditions for entitlement (e.g., a yearsof-service requirement or the onset of disability) as of the termination date are not guaranteed.2 On July 29, 2009 (at 74 FR 37666), PBGC published in the Federal Register a proposed rule to address the interaction of Title IV’s requirement that benefits be nonforfeitable on the termination date in order to be guaranteed with the rights of reemployed service members in their employee pension benefit plans under the Uniformed Services Employment and Reemployment Rights Act of 1994 (‘‘USERRA’’), Public Law 103–353 (October 13, 1994). PBGC received no 2 ERISA section 4022(e) provides that a qualified preretirement survivor annuity under a singleemployer plan is not treated as forfeitable solely because the participant has not died as of the termination date. VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 public comments on the proposed rule and the final regulation is unchanged from the proposed regulation. Congress enacted USERRA to protect certain rights and benefits of employees who voluntarily or involuntarily leave civilian employment to serve in the uniformed services.3 Under USERRA, returning service members are generally entitled to reemployment in their preservice positions, with the status, pay, and benefits to which they would have been entitled had they not served in the uniformed services. The stated purposes of USERRA are— • To encourage noncareer service in the uniformed services by eliminating or minimizing the disadvantages to civilian careers and employment which can result from such service, • To minimize the disruption to the lives of persons performing service in the uniformed services as well as to their employers, their fellow employees, and their communities, by providing for the prompt reemployment of such persons upon their completion of such service under honorable conditions, and • To prohibit discrimination against persons because of their service in the uniformed services. 38 U.S.C. 4301. The provisions of USERRA are generally effective with respect to reemployments initiated on or after December 12, 1994. The Department of Labor (‘‘DOL’’) issued a final rule on USERRA, 70 FR 75246 (Dec. 19, 2005). The preamble to that rule states that, in construing USERRA and its implementing regulations, DOL intends to ‘‘apply with full force and effect’’ the interpretive maxim of the Supreme Court in Fishgold v. Sullivan Drydock and Repair Corp., 328 U.S. 275, 285 (1946), that legislation on reemployment rights for service members ‘‘is to be liberally construed for the benefit of those who left private life to serve their country in its hour of great need. * * *’’ 70 FR 75246. DOL’s final regulation on USERRA, codified at 20 CFR part 1002, covers various types of military training and service. Section 1002.6 provides: USERRA’s definition of ‘‘service in the uniformed services’’ covers all categories of military training and service, including duty performed on a voluntary or involuntary basis, in time of peace or war. Although most often understood as applying to National Guard and reserve military personnel, 3 Terms used in this final rule, such as ‘‘service in the uniformed services,’’ are intended to have the meaning provided under USERRA and the Department of Labor regulations implementing USERRA. For convenience, this preamble sometimes uses the term ‘‘military service’’ as shorthand for ‘‘service in the uniformed services.’’ PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 USERRA also applies to persons serving in the active components of the Armed Forces. Certain types of service specified in 42 U.S.C. 300hh–11 by members of the National Disaster Medical System are covered by USERRA. USERRA establishes specific rights for reemployed service members in their employee pension benefit plans. Each period of service performed by an individual in the uniformed services is deemed, upon reemployment, to constitute service with the employer(s) maintaining the plan for purposes of determining participation, vesting, and accrual of benefits under the plan. 38 U.S.C. 4318(a)(2)(A) and (B); 20 CFR 1002.259. As explained in the preamble to DOL’s final rule implementing USERRA, the reemployed service member is treated for pension purposes under the plan as though he or she had remained continuously employed. 70 FR at 75280.4 Entitlement to pension credit arises only where the returning service member is reemployed by his or her preservice employer.5 There is no entitlement to pension credit in cases in which an employee permanently and lawfully loses reemployment rights—for example, where an employee dies during the period of military service (however, see recent changes to the Internal Revenue Code 6), where an employer is excused from its reemployment obligations based on a statutory defense or where an employee 4 Consistent with this principle of treating a reemployed service member as if his or her employment had not been interrupted by military service, DOL’s final rule requires that any preparation time before entering military service or recuperation time (or period of hospitalization or convalescence) after completing service before reporting back to work, to the extent permitted by USERRA, be treated as continuous service with the employer upon reemployment for purposes of determining the employee’s pension entitlement. 20 CFR 1002.259; see 70 FR at 75276. 5 A service member who meets five eligibility criteria is entitled to be reemployed: The employee is absent from employment by reason of service in the uniformed services; the employee gives advance notice of the service; the employee has five years or less of cumulative service in the uniformed services with respect to the employment relationship with the employer; the service member makes a timely return to, or application for reinstatement in, his or her employment after completing service; and the employee receives an honorable discharge from service. 38 U.S.C. 4312(a)–(c). There are three statutory defenses that an employer may assert against a claim for USERRA benefits; the employer bears the burden of proving these defenses. 38 U.S.C. 4312(d). 6 The Heroes Earnings Assistance and Relief Tax Act of 2008 (‘‘HEART’’) amended the Internal Revenue Code with respect to the provision of certain benefits under an employee pension benefit plan for participants who die or become disabled while performing qualified military service. 26 U.S.C. 401(a)(37); 26 U.S.C. 414(u)(9). PBGC may provide additional guidance in the future regarding HEART provisions under Title IV. E:\FR\FM\17NOR1.SGM 17NOR1 Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations elects not to seek reemployment within the specified time frame.7 38 U.S.C. 4312(d)(1); see 70 FR at 75280. Plan termination, however, is not identified as a circumstance that results in a permanent and lawful loss of reemployment rights for purposes of computing an employee’s pension entitlement. In the case of a standard termination, under ERISA section 4041(b)(1)(D) and § 4041.28(a) of PBGC’s regulation on Termination of Single-Employer Plans, plan assets must satisfy all plan benefits through priority category 6 under section 4044 of ERISA. Priority category 6 includes benefits that, as of the termination date, are conditioned on a future event. Accordingly, even without these regulatory changes, a plan terminating in a standard termination must provide benefits relating to periods of military service through the termination date for participants who become reemployed in accordance with USERRA provisions, even if such reemployment occurs after the plan’s termination date.8 Section 4312(f) of USERRA describes the information that a service member must submit to an employer in order to establish that the individual meets the statutory requirement for reemployment, including information establishing that the individual’s application for reemployment is timely; that he or she has not exceeded the fiveyear military service limitation; and that the type of separation from military service does not disqualify the individual from reemployment. jlentini on DSKJ8SOYB1PROD with RULES Regulatory Changes Under USERRA, an individual who is reemployed following military service is entitled to the pension benefits that he or she would have earned if he or she had remained continuously employed. As noted above, Title IV of ERISA provides that, for a benefit to be nonforfeitable, the conditions for entitlement to the benefit must be satisfied on or before the plan’s termination date. In order to harmonize the significant federal mandate to protect service members’ rights and benefits under USERRA with Title IV’s 7 USERRA contains a broad prohibition against waivers of statutory rights. The preamble to DOL’s regulation on USERRA provides that an employee cannot waive USERRA’s right to reemployment until that right has matured, i.e., until the period of service is completed. 70 FR at 75257. 8 Under the final regulation, as explained below, such benefits would be in priority category 4 (covering guaranteed benefits) if the reemployment occurs after the plan’s termination date and if all other conditions are met. These benefits thus would continue to be part of benefit liabilities that would have to be provided in a standard termination. VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 rules on nonforfeitable benefits, PBGC is amending its regulation on Benefits Payable in Terminated Single-Employer Plans. This amendment provides that a participant will be deemed to have satisfied the reemployment condition for entitlement to the benefit as of the plan’s termination date, for purposes of PBGC’s guarantee, if PBGC determines, based on a demonstration by the participant or otherwise, that he or she became reemployed and entitled to the restoration of the pension benefit pursuant to USERRA, even if the reemployment occurred after the plan’s termination date. Thus, for example, if a participant had 14 years of pension service at the time he or she entered military service, and had spent one year in the military as of the plan’s termination date, the participant will be considered to have 15 years of service, for guarantee purposes, so long as he or she returns to his or her former employment within the bounds set by USERRA. When a plan termination occurs during the bankruptcy of the plan sponsor, PBGC treats the bankruptcy filing date as the plan’s termination date for certain purposes (see note 1). New § 4022.11 includes a provision that applies this concept to USERRA benefits. For example, if a participant is performing military service as of the bankruptcy filing date, any benefit relating to the period of military service that is accrued and vested through the bankruptcy filing date will be considered nonforfeitable if the participant becomes reemployed pursuant to USERRA after the bankruptcy filing date. PBGC will provide guidance on how individuals can establish, for purposes of their Title IV benefit, their entitlement to benefits under USERRA. Persons with questions about these benefits should contact PBGC’s Benefits Administration and Payment Department. PBGC emphasizes that the regulatory changes are very narrow, applying only to the unique circumstances presented by federal statutes affording special protection to the men and women serving the nation in the uniformed services. Except as provided in this amendment, a benefit will be treated as nonforfeitable only if all conditions for entitlement to the benefit have been satisfied on or before the termination date. This includes benefits such as disability benefits, subsidized early retirement benefits (e.g., ‘‘30 and out’’ benefits), and benefits that may be similar in certain respects to the benefits covered by this amendment, such as a benefit conditioned on an employee’s PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 59095 being reemployed after a period of layoff. Applicability The amendments made by this final rule will apply to reemployments under USERRA initiated on or after December 12, 1994. Starting December 17, 2009, PBGC will begin adjusting final benefit determinations of affected participants and make back payments with interest. Compliance With Rulemaking Guidelines PBGC has determined, in consultation with the Office of Management and Budget, that this final rule is not a ‘‘significant regulatory action’’ under Executive Order 12866. Regulatory Flexibility Act PBGC certifies under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et. seq.) that the amendments in this final rule will not have a significant economic impact on a substantial number of small entities. The amendments harmonize the requirements of USERRA with the nonforfeitable benefits requirements of Title IV of ERISA. Virtually all of the amendments affect only PBGC and persons who receive benefits from PBGC. Accordingly, as provided in section 605 of the Regulatory Flexibility Act, sections 603 and 604 do not apply. List of Subjects 29 CFR Part 4001 Pensions. 29 CFR Part 4022 Pension insurance, Pensions. For the reasons given above, PBGC is amending 29 CFR parts 4001 and 4022 as follows. ■ PART 4001—TERMINOLOGY 1. The authority citation for part 4001 continues to read as follows: ■ Authority: 29 U.S.C. 1301, 1302(b)(3). 2. In § 4001.2, add a new definition in alphabetical order to read as follows: ■ § 4001.2 Definitions. * * * * * PPA 2006 bankruptcy termination means a plan termination to which section 404 of the Pension Protection Act of 2006 applies. Section 404 of the Pension Protection Act of 2006 applies to any plan termination in which the termination date occurs while bankruptcy proceedings are pending with respect to the contributing sponsor of the plan, if the bankruptcy proceedings were initiated on or after E:\FR\FM\17NOR1.SGM 17NOR1 59096 Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations September 16, 2006. Bankruptcy proceedings are pending, for this purpose, if a contributing sponsor has filed or has had filed against it a petition seeking liquidation or reorganization in a case under title 11, United States Code, or under any similar Federal law or law of a State or political subdivision, and the case has not been dismissed as of the termination date of the plan. * * * * * PART 4022—BENEFITS PAYABLE IN TERMINATED SINGLE–EMPLOYER PLANS 3. The authority citation for part 4022 continues to read as follows: ■ Authority: 29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 1344. 4. In § 4022.2, amend the first paragraph by removing the words ‘‘plan year, proposed termination date, substantial owner’’ and adding in their place ‘‘plan year, PPA 2006 bankruptcy termination, proposed termination date, statutory hybrid plan, substantial owner.’’ ■ 5. Add new § 4022.11 to subpart A to read as follows: ■ jlentini on DSKJ8SOYB1PROD with RULES § 4022.11 Guarantee of benefits relating to uniformed service. This section applies to a benefit of a participant who becomes reemployed after service in the uniformed services that is covered by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). (a) A benefit described in paragraph (b) of this section that would satisfy the requirements of § 4022.3(a) and (c) (together with any benefit earned for the period preceding military service) except for the fact that the participant was not reemployed on or before the termination date will be deemed to satisfy those requirements if PBGC determines, based upon a demonstration by the participant or otherwise, that he or she became reemployed after the termination date and entitled to the benefit under USERRA. (b) A benefit described in this paragraph (b) is a benefit attributable to a period of service commencing before the termination date and ending on the termination date during which the participant was serving in the uniformed services as defined in 38 U.S.C. 4303(13) (or was in a subsequent reemployment eligibility period) and to which the participant is entitled under USERRA. (c) Example: A plan’s vesting requirement is 5 years of service with the employer. A participant has VerDate Nov<24>2008 15:56 Nov 16, 2009 Jkt 220001 completed 4 years of service when he leaves employment for uniformed service. The plan terminates while the participant is in military service. As of the termination date, the participant would have had 5 years of service and 5 years of benefit accruals if he had remained continuously employed. Upon reemployment after the termination date but within the time limits set by USERRA, the participant would have had 6 years of service under the plan for vesting and benefit accrual purposes, if the plan had not terminated. PBGC would treat the participant as having a vested, nonforfeitable plan benefit with 5 years of vesting service and benefit accruals as of the termination date. (d) In the case of a PPA 2006 bankruptcy termination, ‘‘bankruptcy filing date’’ is substituted for ‘‘termination date’’ each place that ‘‘termination date’’ appears in this section. Issued in Washington, DC, this 10th day of November 2009. Vincent K. Snowbarger, Acting Director, Pension Benefit Guaranty Corporation. Issued on the date set forth above pursuant to a resolution of the Board of Directors authorizing publication of this final rule. Judith R. Starr, Secretary, Board of Directors, Pension Benefit Guaranty Corporation. [FR Doc. E9–27573 Filed 11–16–09; 8:45 am] BILLING CODE 7709–01–P DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AB03 Financial Crimes Enforcement Network; Amendment to the Bank Secrecy Act Regulations— Administrative Ruling System AGENCY: Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. ACTION: Final rule. SUMMARY: FinCEN is issuing this final rule to amend the procedures for publicly issuing an administrative ruling1 relating to the Bank Secrecy Act (‘‘BSA’’). Reliance on these administrative rulings is limited to persons who are similarly situated to the original recipient of an applicable administrative ruling. To disseminate its interpretations in a more timely and efficient manner, FinCEN will use its 1 ‘‘Administrative ruling’’ is the title FinCEN uses to represent documents commonly referred to as interpretative rules. PO 00000 Frm 00064 Fmt 4700 Sfmt 4700 website to make these administrative rulings available to the public.2 DATES: Effective Date: December 17, 2009. FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs Division, FinCEN (800) 949–2732 and select option 6. SUPPLEMENTARY INFORMATION: I. Background A. Statutory and Regulatory Background The BSA, Titles I and II of Public Law 91–508, as amended, codified at 12 U.S.C. 1829b, 1951–1959, and 31 U.S.C. 5311–5314 and 5316–5332, authorizes the Secretary of the Treasury (the ‘‘Secretary’’), among other things, to issue regulations requiring financial institutions to keep records and file reports that the Secretary determines ‘‘have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence matters, including analysis, to protect against international terrorism.’’ 3 The Secretary’s authority to administer the BSA and its implementing regulations has been delegated to the Director of FinCEN.4 FinCEN has interpreted the BSA through implementing regulations that appear at 31 CFR Part 103. In 1987, the Department of the Treasury’s Office of Financial Enforcement 5 established an administrative ruling system to ensure uniform guidance and effective and efficient dissemination of official Treasury interpretations of the BSA.6 The administrative ruling system was designed to: provide financial institutions with binding ruling interpretations of Part 103; and to provide interpretations of hypothetical situations.7 31 CFR 103.85 requires that the interpretations intended to have precedential value be published periodically in the Federal Register and yearly in the Appendix to Part 103. 2 FinCEN’s criteria for determining whether a particular ruling will be published is located under the heading ‘‘Rulings’’ on the FinCEN Web site at https://www.fincen.gov. 3 31 U.S.C. 5311. 4 See Treasury Order 180–01 (Sept. 26, 2002). 5 The Office of Financial Enforcement originally had authority to issue regulations implementing the BSA. In 1994, the Treasury Department merged the Office of Financial Enforcement with FinCEN and granted FinCEN the authority to implement the BSA. 6 See 52 FR 35545 (Sep. 22, 1987) (final rule instituting an administrative ruling system). 7 If the subject situation is hypothetical, it must include ‘‘a statement justifying why the particular situation described warrants the issuance of a ruling.’’ 31 CFR 103.81(6). E:\FR\FM\17NOR1.SGM 17NOR1

Agencies

Pension Benefit Guaranty Corporation

[Federal Register Volume 74, Number 220 (Tuesday, November 17, 2009)]
[Rules and Regulations]
[Pages 59093-59096]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27573]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4001 and 4022

RIN 1212-AB19


USERRA Benefits Under Title IV of ERISA

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: The Uniformed Services Employment and Reemployment Rights Act 
of 1994 (``USERRA'') provides that an individual who leaves his or her 
job to serve in the uniformed services is generally entitled to 
reemployment by his or her previous employer and, upon reemployment, to 
receive credit for benefits, including employee pension plan benefits, 
that would have accrued but for the employee's absence due to the 
military service. This final rule amends PBGC's regulation on Benefits 
Payable in Terminated Single-Employer Plans (29 CFR part 4022) to 
address a narrow but important issue regarding PBGC's guarantee of 
benefits for participants who are serving in the uniformed services at 
the time that their pension plan terminates. Under PBGC's existing 
regulations, a benefit is guaranteed only if the participant satisfies 
the conditions for entitlement to the benefit on or before the plan's 
termination date. PBGC is providing an exception to this rule in the 
unique circumstances of persons serving in the uniformed services as of 
the plan's termination date, consistent with USERRA's statutory mandate 
to treat such persons, upon reemployment, as if they had never left the 
employ of their former employer. This final rule provides that so long 
as a service member is reemployed within the time limits set by USERRA, 
even if the reemployment occurs after the plan's termination date, PBGC 
will treat the participant as having satisfied the reemployment 
condition as of the termination date. This will ensure that the pension 
benefits of reemployed service members, like those of other employees, 
would generally be guaranteed for periods up to the plan's termination 
date.

DATES: Effective December 17, 2009. (See Applicability in SUPPLEMENTARY 
INFORMATION.)

FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, or Constance 
Markakis, Attorney, Legislative and Regulatory Department, Pension 
Benefit Guaranty Corporation, Suite 12300, 1200 K Street, NW., 
Washington, DC 20005-4026, 202-326-4024. (TTY and TTD users may call 
the Federal relay service toll-free at 1-800-877-8339 and ask to be 
connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION: 

Background

    Pension Benefit Guaranty Corporation (``PBGC'') administers the 
single-employer pension plan termination insurance program under Title 
IV of the Employee Retirement Income Security Act of 1974 (``ERISA''). 
When a covered plan terminates in either a distress termination under 
section 4041(c) of ERISA, or an involuntary termination (one initiated 
by PBGC) under section 4042 of ERISA, PBGC typically becomes statutory 
trustee of the plan with responsibility for paying benefits in 
accordance with the provisions of Title IV.
    The amount of benefits paid by PBGC under a terminated, trusteed 
plan is generally determined as of the plan's termination date.\1\ 
Under section 4022(a) of ERISA, PBGC guarantees the payment of 
nonforfeitable benefits

[[Page 59094]]

under the plan, subject to the limitations of section 4022(b), as of 
the date the plan terminates. Under Sec.  4022.3 of PBGC's regulation 
on Benefits Payable in Terminated Single-Employer Plans, PBGC 
guarantees the amount, as of the termination date, of a benefit 
provided under the plan (subject to certain limitations) if ``the 
benefit is, on the termination date, a nonforfeitable benefit.'' To be 
guaranteed, the benefit must also qualify as a pension benefit as 
defined in Sec.  4022.2, and the participant must be entitled to the 
benefit under Sec.  4022.4. The amount of any additional nonguaranteed 
benefits payable from the plan's assets under section 4044 or PBGC's 
recoveries under section 4022(c) of ERISA is also determined as of the 
termination date.
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    \1\ Section 404 of the Pension Protection Act of 2006 (``PPA 
2006''), Public Law 109-280, added sections 4022(g) and 4044(e) of 
ERISA, which provide that, when an underfunded plan terminates 
during the bankruptcy of the plan sponsor, the date the sponsor's 
bankruptcy petition was filed is treated as the termination date of 
the plan for purposes of determining the amount of benefits PBGC 
guarantees and the amount of benefits in priority category 3 in the 
section 4044 asset allocation. These changes apply to plan 
terminations that occur during the bankruptcy of the plan sponsor if 
the bankruptcy filing date is on or after September 16, 2006. See 
PBGC proposed rule on Bankruptcy Filing Date Treated as Plan 
Termination Date for Certain Purposes, 73 FR 37390 (Jul. 1, 2008). 
For convenience, this preamble generally will refer to the plan's 
termination date, although in many cases this reference will instead 
apply to the bankruptcy filing date.
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    Section 4001(a)(8) of ERISA and Sec.  4001.2 define a 
``nonforfeitable benefit'' with respect to a plan as:

A benefit for which a participant has satisfied the conditions for 
entitlement under the plan or the requirements of this Act (other 
than the submission of a formal application, retirement, completion 
of a required waiting period, or death in the case of a benefit 
which returns all or a portion of a participant's accumulated 
mandatory employee contributions upon the participant's death), 
whether or not the benefit may subsequently be reduced or suspended 
by a plan amendment, an occurrence of any condition, or operation of 
this Act or the Internal Revenue Code of 1986.

    Guaranteed benefits under Title IV of ERISA are benefits with 
respect to which a participant has satisfied the conditions for 
entitlement under the plan as of the termination date. Therefore, plan 
benefits such as an early retirement subsidy or disability retirement 
benefit with respect to which a participant has not satisfied the 
conditions for entitlement (e.g., a years-of-service requirement or the 
onset of disability) as of the termination date are not guaranteed.\2\
---------------------------------------------------------------------------

    \2\ ERISA section 4022(e) provides that a qualified 
preretirement survivor annuity under a single-employer plan is not 
treated as forfeitable solely because the participant has not died 
as of the termination date.
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    On July 29, 2009 (at 74 FR 37666), PBGC published in the Federal 
Register a proposed rule to address the interaction of Title IV's 
requirement that benefits be nonforfeitable on the termination date in 
order to be guaranteed with the rights of reemployed service members in 
their employee pension benefit plans under the Uniformed Services 
Employment and Reemployment Rights Act of 1994 (``USERRA''), Public Law 
103-353 (October 13, 1994). PBGC received no public comments on the 
proposed rule and the final regulation is unchanged from the proposed 
regulation.
    Congress enacted USERRA to protect certain rights and benefits of 
employees who voluntarily or involuntarily leave civilian employment to 
serve in the uniformed services.\3\ Under USERRA, returning service 
members are generally entitled to reemployment in their pre-service 
positions, with the status, pay, and benefits to which they would have 
been entitled had they not served in the uniformed services. The stated 
purposes of USERRA are--
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    \3\ Terms used in this final rule, such as ``service in the 
uniformed services,'' are intended to have the meaning provided 
under USERRA and the Department of Labor regulations implementing 
USERRA. For convenience, this preamble sometimes uses the term 
``military service'' as shorthand for ``service in the uniformed 
services.''
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     To encourage noncareer service in the uniformed services 
by eliminating or minimizing the disadvantages to civilian careers and 
employment which can result from such service,
     To minimize the disruption to the lives of persons 
performing service in the uniformed services as well as to their 
employers, their fellow employees, and their communities, by providing 
for the prompt reemployment of such persons upon their completion of 
such service under honorable conditions, and
     To prohibit discrimination against persons because of 
their service in the uniformed services.

38 U.S.C. 4301. The provisions of USERRA are generally effective with 
respect to reemployments initiated on or after December 12, 1994.
    The Department of Labor (``DOL'') issued a final rule on USERRA, 70 
FR 75246 (Dec. 19, 2005). The preamble to that rule states that, in 
construing USERRA and its implementing regulations, DOL intends to 
``apply with full force and effect'' the interpretive maxim of the 
Supreme Court in Fishgold v. Sullivan Drydock and Repair Corp., 328 
U.S. 275, 285 (1946), that legislation on reemployment rights for 
service members ``is to be liberally construed for the benefit of those 
who left private life to serve their country in its hour of great need. 
* * *'' 70 FR 75246.
    DOL's final regulation on USERRA, codified at 20 CFR part 1002, 
covers various types of military training and service. Section 1002.6 
provides:

    USERRA's definition of ``service in the uniformed services'' 
covers all categories of military training and service, including 
duty performed on a voluntary or involuntary basis, in time of peace 
or war. Although most often understood as applying to National Guard 
and reserve military personnel, USERRA also applies to persons 
serving in the active components of the Armed Forces. Certain types 
of service specified in 42 U.S.C. 300hh-11 by members of the 
National Disaster Medical System are covered by USERRA.

    USERRA establishes specific rights for reemployed service members 
in their employee pension benefit plans. Each period of service 
performed by an individual in the uniformed services is deemed, upon 
reemployment, to constitute service with the employer(s) maintaining 
the plan for purposes of determining participation, vesting, and 
accrual of benefits under the plan. 38 U.S.C. 4318(a)(2)(A) and (B); 20 
CFR 1002.259. As explained in the preamble to DOL's final rule 
implementing USERRA, the reemployed service member is treated for 
pension purposes under the plan as though he or she had remained 
continuously employed. 70 FR at 75280.\4\
---------------------------------------------------------------------------

    \4\ Consistent with this principle of treating a reemployed 
service member as if his or her employment had not been interrupted 
by military service, DOL's final rule requires that any preparation 
time before entering military service or recuperation time (or 
period of hospitalization or convalescence) after completing service 
before reporting back to work, to the extent permitted by USERRA, be 
treated as continuous service with the employer upon reemployment 
for purposes of determining the employee's pension entitlement. 20 
CFR 1002.259; see 70 FR at 75276.
---------------------------------------------------------------------------

    Entitlement to pension credit arises only where the returning 
service member is reemployed by his or her pre-service employer.\5\ 
There is no entitlement to pension credit in cases in which an employee 
permanently and lawfully loses reemployment rights--for example, where 
an employee dies during the period of military service (however, see 
recent changes to the Internal Revenue Code \6\), where an employer is 
excused from its reemployment obligations based on a statutory defense 
or where an employee

[[Page 59095]]

elects not to seek reemployment within the specified time frame.\7\ 38 
U.S.C. 4312(d)(1); see 70 FR at 75280. Plan termination, however, is 
not identified as a circumstance that results in a permanent and lawful 
loss of reemployment rights for purposes of computing an employee's 
pension entitlement.
---------------------------------------------------------------------------

    \5\ A service member who meets five eligibility criteria is 
entitled to be reemployed: The employee is absent from employment by 
reason of service in the uniformed services; the employee gives 
advance notice of the service; the employee has five years or less 
of cumulative service in the uniformed services with respect to the 
employment relationship with the employer; the service member makes 
a timely return to, or application for reinstatement in, his or her 
employment after completing service; and the employee receives an 
honorable discharge from service. 38 U.S.C. 4312(a)-(c). There are 
three statutory defenses that an employer may assert against a claim 
for USERRA benefits; the employer bears the burden of proving these 
defenses. 38 U.S.C. 4312(d).
    \6\ The Heroes Earnings Assistance and Relief Tax Act of 2008 
(``HEART'') amended the Internal Revenue Code with respect to the 
provision of certain benefits under an employee pension benefit plan 
for participants who die or become disabled while performing 
qualified military service. 26 U.S.C. 401(a)(37); 26 U.S.C. 
414(u)(9). PBGC may provide additional guidance in the future 
regarding HEART provisions under Title IV.
    \7\ USERRA contains a broad prohibition against waivers of 
statutory rights. The preamble to DOL's regulation on USERRA 
provides that an employee cannot waive USERRA's right to 
reemployment until that right has matured, i.e., until the period of 
service is completed. 70 FR at 75257.
---------------------------------------------------------------------------

    In the case of a standard termination, under ERISA section 
4041(b)(1)(D) and Sec.  4041.28(a) of PBGC's regulation on Termination 
of Single-Employer Plans, plan assets must satisfy all plan benefits 
through priority category 6 under section 4044 of ERISA. Priority 
category 6 includes benefits that, as of the termination date, are 
conditioned on a future event. Accordingly, even without these 
regulatory changes, a plan terminating in a standard termination must 
provide benefits relating to periods of military service through the 
termination date for participants who become reemployed in accordance 
with USERRA provisions, even if such reemployment occurs after the 
plan's termination date.\8\
---------------------------------------------------------------------------

    \8\ Under the final regulation, as explained below, such 
benefits would be in priority category 4 (covering guaranteed 
benefits) if the reemployment occurs after the plan's termination 
date and if all other conditions are met. These benefits thus would 
continue to be part of benefit liabilities that would have to be 
provided in a standard termination.
---------------------------------------------------------------------------

    Section 4312(f) of USERRA describes the information that a service 
member must submit to an employer in order to establish that the 
individual meets the statutory requirement for reemployment, including 
information establishing that the individual's application for 
reemployment is timely; that he or she has not exceeded the five-year 
military service limitation; and that the type of separation from 
military service does not disqualify the individual from reemployment.

Regulatory Changes

    Under USERRA, an individual who is reemployed following military 
service is entitled to the pension benefits that he or she would have 
earned if he or she had remained continuously employed. As noted above, 
Title IV of ERISA provides that, for a benefit to be nonforfeitable, 
the conditions for entitlement to the benefit must be satisfied on or 
before the plan's termination date. In order to harmonize the 
significant federal mandate to protect service members' rights and 
benefits under USERRA with Title IV's rules on nonforfeitable benefits, 
PBGC is amending its regulation on Benefits Payable in Terminated 
Single-Employer Plans. This amendment provides that a participant will 
be deemed to have satisfied the reemployment condition for entitlement 
to the benefit as of the plan's termination date, for purposes of 
PBGC's guarantee, if PBGC determines, based on a demonstration by the 
participant or otherwise, that he or she became reemployed and entitled 
to the restoration of the pension benefit pursuant to USERRA, even if 
the reemployment occurred after the plan's termination date. Thus, for 
example, if a participant had 14 years of pension service at the time 
he or she entered military service, and had spent one year in the 
military as of the plan's termination date, the participant will be 
considered to have 15 years of service, for guarantee purposes, so long 
as he or she returns to his or her former employment within the bounds 
set by USERRA.
    When a plan termination occurs during the bankruptcy of the plan 
sponsor, PBGC treats the bankruptcy filing date as the plan's 
termination date for certain purposes (see note 1). New Sec.  4022.11 
includes a provision that applies this concept to USERRA benefits. For 
example, if a participant is performing military service as of the 
bankruptcy filing date, any benefit relating to the period of military 
service that is accrued and vested through the bankruptcy filing date 
will be considered nonforfeitable if the participant becomes reemployed 
pursuant to USERRA after the bankruptcy filing date.
    PBGC will provide guidance on how individuals can establish, for 
purposes of their Title IV benefit, their entitlement to benefits under 
USERRA. Persons with questions about these benefits should contact 
PBGC's Benefits Administration and Payment Department.
    PBGC emphasizes that the regulatory changes are very narrow, 
applying only to the unique circumstances presented by federal statutes 
affording special protection to the men and women serving the nation in 
the uniformed services. Except as provided in this amendment, a benefit 
will be treated as nonforfeitable only if all conditions for 
entitlement to the benefit have been satisfied on or before the 
termination date. This includes benefits such as disability benefits, 
subsidized early retirement benefits (e.g., ``30 and out'' benefits), 
and benefits that may be similar in certain respects to the benefits 
covered by this amendment, such as a benefit conditioned on an 
employee's being reemployed after a period of layoff.

Applicability

    The amendments made by this final rule will apply to reemployments 
under USERRA initiated on or after December 12, 1994. Starting December 
17, 2009, PBGC will begin adjusting final benefit determinations of 
affected participants and make back payments with interest.

Compliance With Rulemaking Guidelines

    PBGC has determined, in consultation with the Office of Management 
and Budget, that this final rule is not a ``significant regulatory 
action'' under Executive Order 12866.

Regulatory Flexibility Act

    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act (5 U.S.C. 601 et. seq.) that the amendments in this final rule will 
not have a significant economic impact on a substantial number of small 
entities. The amendments harmonize the requirements of USERRA with the 
nonforfeitable benefits requirements of Title IV of ERISA. Virtually 
all of the amendments affect only PBGC and persons who receive benefits 
from PBGC. Accordingly, as provided in section 605 of the Regulatory 
Flexibility Act, sections 603 and 604 do not apply.

List of Subjects

29 CFR Part 4001

    Pensions.

29 CFR Part 4022

    Pension insurance, Pensions.

0
For the reasons given above, PBGC is amending 29 CFR parts 4001 and 
4022 as follows.

PART 4001--TERMINOLOGY

0
1. The authority citation for part 4001 continues to read as follows:


    Authority: 29 U.S.C. 1301, 1302(b)(3).


0
2. In Sec.  4001.2, add a new definition in alphabetical order to read 
as follows:


Sec.  4001.2  Definitions.

* * * * *
    PPA 2006 bankruptcy termination means a plan termination to which 
section 404 of the Pension Protection Act of 2006 applies. Section 404 
of the Pension Protection Act of 2006 applies to any plan termination 
in which the termination date occurs while bankruptcy proceedings are 
pending with respect to the contributing sponsor of the plan, if the 
bankruptcy proceedings were initiated on or after

[[Page 59096]]

September 16, 2006. Bankruptcy proceedings are pending, for this 
purpose, if a contributing sponsor has filed or has had filed against 
it a petition seeking liquidation or reorganization in a case under 
title 11, United States Code, or under any similar Federal law or law 
of a State or political subdivision, and the case has not been 
dismissed as of the termination date of the plan.
* * * * *

PART 4022--BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS

0
3. The authority citation for part 4022 continues to read as follows:

    Authority:  29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 
1344.


0
4. In Sec.  4022.2, amend the first paragraph by removing the words 
``plan year, proposed termination date, substantial owner'' and adding 
in their place ``plan year, PPA 2006 bankruptcy termination, proposed 
termination date, statutory hybrid plan, substantial owner.''

0
5. Add new Sec.  4022.11 to subpart A to read as follows:


Sec.  4022.11  Guarantee of benefits relating to uniformed service.

    This section applies to a benefit of a participant who becomes 
reemployed after service in the uniformed services that is covered by 
the Uniformed Services Employment and Reemployment Rights Act of 1994 
(USERRA).
    (a) A benefit described in paragraph (b) of this section that would 
satisfy the requirements of Sec.  4022.3(a) and (c) (together with any 
benefit earned for the period preceding military service) except for 
the fact that the participant was not reemployed on or before the 
termination date will be deemed to satisfy those requirements if PBGC 
determines, based upon a demonstration by the participant or otherwise, 
that he or she became reemployed after the termination date and 
entitled to the benefit under USERRA.
    (b) A benefit described in this paragraph (b) is a benefit 
attributable to a period of service commencing before the termination 
date and ending on the termination date during which the participant 
was serving in the uniformed services as defined in 38 U.S.C. 4303(13) 
(or was in a subsequent reemployment eligibility period) and to which 
the participant is entitled under USERRA.
    (c) Example: A plan's vesting requirement is 5 years of service 
with the employer. A participant has completed 4 years of service when 
he leaves employment for uniformed service. The plan terminates while 
the participant is in military service. As of the termination date, the 
participant would have had 5 years of service and 5 years of benefit 
accruals if he had remained continuously employed. Upon reemployment 
after the termination date but within the time limits set by USERRA, 
the participant would have had 6 years of service under the plan for 
vesting and benefit accrual purposes, if the plan had not terminated. 
PBGC would treat the participant as having a vested, nonforfeitable 
plan benefit with 5 years of vesting service and benefit accruals as of 
the termination date.
    (d) In the case of a PPA 2006 bankruptcy termination, ``bankruptcy 
filing date'' is substituted for ``termination date'' each place that 
``termination date'' appears in this section.

    Issued in Washington, DC, this 10th day of November 2009.
Vincent K. Snowbarger,
Acting Director, Pension Benefit Guaranty Corporation.
    Issued on the date set forth above pursuant to a resolution of 
the Board of Directors authorizing publication of this final rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. E9-27573 Filed 11-16-09; 8:45 am]
BILLING CODE 7709-01-P

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