Pension Benefit Guaranty Corporation

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The Pension Benefit Guaranty Corporation (the “PBGC”) recently finalized its premium filing requirements for 2015.  In addition to higher premium rates and other more minor changes, plan sponsors are now required to report information about the number of former employees involved in certain risk transfer activities (i.e., annuity purchases and lump sum windows) that occurred at least sixty days prior to the premium filing date in the current premium payment year or during the prior premium payment year.   

The PBGC has recently initiated efforts to enhance retirement security for Americans by promoting lifetime income options (i.e., annuitized benefits).  As part of these efforts, as well as those of the IRS and U.S. Department of Labor, the PBGC issued final regulations regarding the treatment of rollovers from defined contribution plans to defined benefit plans for purposes of the PBGC’s statutory guarantees under Title IV of ERISA.  The PBGC regulations are intended “to encourage people to get lifetime income by removing barriers to moving their benefits from defined contribution plans to defined benefit plans.” The guidance also “removes the fear that the amounts rolled over would suffer under guarantee limits should [the] PBGC step in and pay benefits.”

This article highlights some recent developments that employers with Puerto Rico employee benefits arrangements should consider concerning compliance with U.S. federal laws on health care reform and the Patient Protection and Affordable Care Act (“ACA”), fiduciary duties under the Employee Retirement Income Security Act of 1974 (“ERISA”), and Pension Benefit Guaranty Corporation (“PBGC”) coverage issues.  A failure to comply with applicable U.S. federal laws in Puerto Rico may result in costly litigation and civil penalties as well as criminal penalties.