US - The US Treasury has ruled companies cannot transfer their pension plans to an unrelated firm under current law, but has put forward a framework of principles to guide the development of legislation to allow such transactions.
However, it said future legislation could permit such transactions, in circumstances where the transaction was in the best interest of plan participants, their beneficiaries, employers, and the pension insurance system.
The legislative framework was developed by the Treasury Department, the Labor Department, the Commerce Department, and the Pension Benefit Guaranty Corporation.
Under the framework, a pension plan, or portion of it, under which benefits were no longer accruing, could be transferred to an entity unrelated to the employer or former employer.
A number of conditions would have to be met for this to occur, including providing plan participants, their representatives, and ERISA regulator with advance notice of a plan transfer. Once such notice was given, the parties to the transaction would be required to provide regulators information necessary to review and approve the proposed transaction.
The conditions also set out that only financially strong entities in well-regulated sectors would be permitted to acquire a pension plan in a plan transfer transaction. The parties to the transaction would be required to demonstrate that participants' benefits and the pension insurance system would be exposed to less risk as a result of the transfer, and that the transfer would be in the best interests of the participants and beneficiaries.
Limitations on transfers would be imposed to limit undue concentration of risk, and transferees and members of their controlled groups would assume full responsibility for the liabilities of transferred plans and would have to comply with post-transaction reporting and fiduciary requirements.
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