ERISA Technical Release 91-1

ERISA Technical Release 91-1, 05/08/1991

The purpose of this release is to alert the public to recent amendments of Title

I of the Employee Retirement Income Security Act (ERISA) which, among other

things, require that advance notification be provided to the Secretary of Labor

and the Secretary of the Treasury, as well as other persons, of an intended

transfer of excess pension assets from a defined benefit plan to a retiree

health benefit account, described in section 401(h) of the Internal Revenue Code

(the Code), which is part of such plan.

General

The requirements relating to advance notification of transfers to retiree health

benefit accounts are contained in section 101(e), added to ERISA as part of

Omnibus Budget Reconciliation Act of 1990 (OBRA '90, Pub. L. 101-508).

Section 101(e)(1) describes the plan administrator's obligation to provide

advance written notification of transfers to participants and beneficiaries.

Section 101(e)(2)(A) describes the employer's obligation to provide advance

written notification to the Secretaries of Labor and Treasury, as well as to the

administrator and each employee organization representing participants in the

plan, and section 101(e)(2)(B) describes the information required to be

contained in the notification. OBRA '90 also added a new section 420 to the Code

which sets forth the conditions under which transfers (referred to as “qualified

transfers”) can be made after December 31, 1990 from a defined benefit plan to a

retiree health benefit account.

Section 101(e) requires that advance notifications must be provided not later

than 60 days before the date of a qualified transfer. Administrators and

employers who fail to satisfy the advance notification requirements of section

101(e) may, in the discretion of the court, be liable in an amount of up to $100

a day from the date of such failure (See: Sections 502(c)(1) and 502(c)(3), as

amended by OBRA '90).

The Department of Labor is considering whether there are any issues regarding

the notice requirements of section 101(e) which should be clarified by means of

regulatory guidance.

Notifications Furnished to Participants and Beneficiaries

Section 101(e) requires that advance notifications provided to participants and

beneficiaries contain the following: (1) the amount of excess pension assets;

(2) the portion to be transferred; (3) the amount of health benefits liabilities

expected to be provided with the assets transferred; and (4) the amount of

pension benefits of the participant which will be nonforfeitable immediately

after the transfer. [NOTE: 29 C.F.R. § 2520.104b-1 describes the manner in which

disclosures required under Part 1 of Title I of ERISA must be furnished to

participants and beneficiaries. These requirements would apply to notifications

under section 101(e) in the absence of regulations providing otherwise.]

Notifications Filed with the Secretaries

In accordance with the provisions of section 3004 of ERISA, relating to the

coordinating of functions between the Secretary of Labor and the Secretary of

the Treasury, the filing of the advance notification described in section

section 101(e)(2) of ERISA with the Secretary of Labor shall also constitute a

filing of that notice with the Secretary of the Treasury. The Department of

Labor will forward to the Internal Revenue Service copies of the required

notifications or the information contained therein.

Pursuant to section 101(e)(2)(B) advance notifications are required to contain

the following: 1) identification of the plan from which the transfer is made

[NOTE: for identification and processing purposes, notifications should contain

the name, address and EIN of the employer and the name, EIN and PN of plan]; 2)

the amount of the transfer; 3) a detailed accounting of assets projected to be

held by the plan immediately before and after the transfer; and 4) the current

liabilities under the plan at the time of transfer. Notifications should include

the filing date and the date on which the transfer is intended to take place.

Notifications required to be filed with the Secretaries pursuant to section

101(e)(2) must be sent to:

Section 101(e)(2) Notice

Room N5644

Division of Reports, PWBA

U.S. Department of Labor

200 Constitution Avenue, N.W.

Washington, D.C. 20210

All notices under section 101(e)(2) filed with the Department of Labor will be

available for public inspection in the Public Documents Room, N5507, 200

Constitution Avenue, N.W., Washington, D.C. 20210.