PBGC Finalizes Mediation Program and Expands It to Cover Fiduciary Breach Cases | Practical Law

PBGC Finalizes Mediation Program and Expands It to Cover Fiduciary Breach Cases | Practical Law

The Pension Benefit Guaranty Corporation (PBGC) announced that the PBGC's Pilot Mediation Program, which started in 2017, is now permanent, and the PBGC has added fiduciary breach cases to the categories of disputes covered by the program. Through this program, eligible defined benefit plan sponsors may participate in mediation with the PBGC to help resolve certain early warning program, termination liability collection, and fiduciary breach cases.

PBGC Finalizes Mediation Program and Expands It to Cover Fiduciary Breach Cases

Practical Law Legal Update w-018-7210 (Approx. 4 pages)

PBGC Finalizes Mediation Program and Expands It to Cover Fiduciary Breach Cases

by Practical Law Employee Benefits & Executive Compensation
Published on 25 Jan 2019 • USA (National/Federal)
The Pension Benefit Guaranty Corporation (PBGC) announced that the PBGC's Pilot Mediation Program, which started in 2017, is now permanent, and the PBGC has added fiduciary breach cases to the categories of disputes covered by the program. Through this program, eligible defined benefit plan sponsors may participate in mediation with the PBGC to help resolve certain early warning program, termination liability collection, and fiduciary breach cases.
On January 24, 2019, the Pension Benefit Guaranty Corporation (PBGC) announced that the PBGC's Pilot Mediation Program, which the PBGC started in 2017, is now a permanent program. Through this program, eligible defined benefit plan sponsors may participate in mediation with the PBGC to help resolve certain:
The PBGC created the pilot program in October 2017 in response to the business community's comments and concerns (see Legal Update, PBGC Announces Mediation Pilot Program for Early Warning Program and Termination Liability Collection Cases).
The goals of the mediation program include:
  • Resolving disputes earlier.
  • Improving stakeholder relations.
  • Reducing the costs of lengthy negotiations and other proceedings.
  • Integrating alternative dispute resolution into the PBGC's dispute resolution process.
The PBGC has engaged the Federal Mediation and Conciliation Service to serve as intermediaries in the dispute resolution processes. Under the program, the PBGC and plan sponsors share the cost of the mediation sessions to avoid the appearance that either side is favored.

Eligibility for the Mediation Program

Eligibility for the mediation program is limited to:
  • Early warning program cases.
  • Termination liability collection cases.
  • Fiduciary breach cases. The pilot mediation program did not cover fiduciary breach cases. The PBGC added fiduciary breach cases to the categories of disputes covered by the mediation program when it was finalized.
The mediation program is not available in the following situations:
  • The plan sponsor has minimal ability to pay.
  • There is pending litigation.
  • The PBGC must act within a limited time period, and the plan sponsor refuses to sign a standstill or tolling agreement.
Eligible plan sponsors' participation in the mediation program is voluntary.

Timing of Mediation

In eligible termination liability cases, respondents have 120 days to satisfy their net worth disclosure requirements under 29 C.F.R. Section 4062.6. After that, the PBGC will review, verify, and analyze the information, and the parties may then engage in good faith negotiations. The PBGC will make mediation available within a reasonable time after it completes its review and analysis of the information.
In eligible early warning cases, companies will be advised of the availability of mediation at the outset of negotiation. The PBGC will offer mediation after it receives sufficient information in response to its requests for information. The timing of mediation in early warning program cases will depend on the timing of the business transaction raising concerns about the plan sponsor's ability to fund the plan. However, mediation must finish before the transaction's closing date, and the parties must have enough time before the closing date to either document the agreement reached in mediation or pursue legal action.
In eligible fiduciary breach cases, all demand letters will include an option to mediate.

Practical Implications

Sponsors of and counsel to defined benefit plans that are parties to early warning, termination liability, and fiduciary breach cases should be aware of the PBGC's mediation program and consider availing themselves of the program if possible. Mediation can save time and money for both the PBGC and private parties.