The recent pandemic has forced the hand of numerous establishments across the United States to release employees from their current positions. With over 26 million Americans now filing for unemployment in as little as five weeks, the COVID-19 virus has certainly formed an enormous financial whirlpool we haven’t seen before.
Therefore, businesses sponsoring pension plans must remember that a drop in their staff could mean alerting the Pension Benefit Guaranty Corporation or PBGC under the ERISA Act, or the Employee Retirement Income Security Act.
ERISA Section 4043 indicates that plan sponsors and administrators need to inform the PBGC of specific events that could hint concerns with a pension plan or company. Greater than a dozen reportable events at an establishment means a decline in active plan participants. This includes a natural disaster, discontinuance of a company or operation, restriction or restructuring, a mass layoff, or an early retirement incentive program.
Subsequently, under ERISA Section 4062(e), a plan sponsor is required to describe if there is a permanent termination of operations at a specific facility, resulting in a workforce decrease of more than 15% of the total amount of workers qualified to join any employee defined contribution pension plan or employee defined benefit.
An active participant reduction reportable event transpires when the amount of active plan participants in a plan shrinks below 80% of the amount of active participants at the start of the plan year. The occurance can happen either from a “single-cause event” or an “attrition event”
If you are an individual involved in the management of an employee retirement plan, you can face personal exposure to claims alleging breach of fiduciary duty. Colonial Surety Company offers fiduciary liability insurance for plan sponsors in our ERISA fidelity bond packages, which come with an ERISA bond, fiduciary liability insurance, and cyber liability insurance. Cyber liability insurance protects the pension and the business from cyber breaches. Fully protect your plan, yourself, and your company all in one place, instantly online. Contact us today to get your coverage online, instantly.