By Paula Aven Gladych
Defined benefit pension plan sponsors
in U.S. territories, like Puerto Rico, need to pay attention to changes to their Pension Benefit Guaranty Corporation coverage, according to Buck Consultants.
Generally, qualified defined benefit plans must be funded under a trust created or organized in the United States. This does not include U.S. territories. In the past, the PBGC took the position that the U.S. trust requirement did not apply to Puerto Rican qualified plans, even if they did make the ERISA
election that would 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 that otherwise met the tax qualification requirements of the U.S. tax code is subject to PBGC coverage.
Early last year, the PBGC withdrew both opinions and is expected to announce that only Puerto Rican qualified plans with Puerto Rican trusts whose plan administrator made an ERISA election would be subject to PBGC
coverage, Buck Consultants said in a brief.
Buck Consultants asserts that if employers do not want PBGC coverage and want to save on their PBGC premiums, they should position their plans so they fall outside the PBGC’s revised view of the coverage requirement for Puerto Rico and Guam employer plans.
Originally published on BenefitsPro.com