Defined benefit pension plan sponsors in U.S. territories, likePuerto Rico, need to pay attention to changes to their PensionBenefit Guaranty Corporation coverage, according to BuckConsultants.

|

Generally, qualified defined benefit plans must be funded undera trust created or organized in the United States. This does notinclude U.S. territories. In the past, the PBGC took the positionthat the U.S. trust requirement did not apply to Puerto Ricanqualified plans, even if they did make the ERISA election thatwould allow them to have their trust be treated as a U.S.trust.

|

But, for Guam, the PBGC took a completely different position,stating that a plan established in Guam with a non-U.S. trust thatotherwise met the tax qualification requirements of the U.S. taxcode is subject to PBGC coverage.

|

Early last year, the PBGC withdrew both opinions and is expectedto announce that only Puerto Rican qualified plans with PuertoRican trusts whose plan administrator made an ERISA election wouldbe subject to PBGC coverage, Buck Consultants said in a brief.

|

Buck Consultants asserts that if employers do not want PBGCcoverage and want to save on their PBGC premiums, they shouldposition their plans so they fall outside the PBGC’s revised viewof the coverage requirement for Puerto Rico and Guam employerplans.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.