Pension Benefit Guaranty Corporation 94-6 Septembe r 28, 1994 RE FE RE NC E: [*1] 400 7(a) P ayment of P remiums. D ue Da tes >4007( e)> >29 CFR 2610 .26( b)> >29 CFR 2617 .28( b)> OP INI ON : You have reques ted an opini on fr om the Pensi on Benef it Guarant y Corpor ati on ("PBGC") on whether an indi vidual who acted as plan administr ator is personall y liable t o PB GC for prem iums when the plan spons or has ceased o perations, gone bankr upt, and been li quidat ed. You a lso ask t hat we ide nti fy the part ies fr om whom PBGC will seek paymen t of prem iums, p enalties, a nd inte rest und er these circum stance s. According to the hypothetical po sed in your letters, in 1984 Company X ceased ope rations , filed for b ankru ptcy, and was liquidated. Comp any X was the plan sponsor of a tax-quali fied defined benefit pension plan (the "Plan"). The Plan was sub stantially overfun ded. Company X's bankruptc y tr ustee did not t erminat e the Pla n. However, an indi vidual appointed by C omp any X prio r to the bankr uptcy as pl an admi nis tra tor of the Plan ( whom you ref erre d to as "A") termi nated the Plan and completed the dis tri buti on of t he Pla n' s as set s, les s a r eser ve f or the Plan's contingent liabilities, by December 31, 1990. You st ate, and we a ssu me sol ely for purpos es of thi s opi nion , t hat the Plan w as t ermi nate d [*2] in a standard

ter minat ion, purs uant to s ecti on 4041(b) of t he Employ ee Ret ire ment Income Secur it y Act of 1974 ("E RIS A" ), as am end ed, 2 9 U .S.C. § 134 1(b ) (19 88 a nd S upp . IV 1 992 ). A disput e arose over whether A continu ed as plan adminis trat or aft er Company X was li quidat ed. You stat e that at the ti me Com pany X ceased op erations and at al l ti mes thereafter A acted as plan adm inistrator , and tha t A "assumed . . . respo nsib ilit y" in 1989 "in order to t erminat e [the Plan]. " For purposes of Title IV of ERISA, the t erm ' plan administrator' means either the perso n spe cifically de signated as such by the p lan do cum ent, or the plan sponsor if no such designation is made. ERIS A § § 3(1 6)(A ), 400 1(a) (1), 2 9 U .S.C. § § 10 02( 16) , 130 1(a) (1). Y ou d o no t state whether A was appoint ed pursuant to th e Plan document, or wheth er the Plan document def ines t he ter m "plan adm inistrator ." For purposes of this opinion, however, we will assum e that A was the plan a dmin istrator a s that term is define d in E RIS A. For plan years beginning before January 1, 1988, sect ion 4007(a) of ERISA, 29 U.S.C. § 1307(a) (1982), st ated that the "pla n adminis trat or of each pl an shall pay t he prem iums im pos ed b y the [*3] corp oratio n und er this title with respect to the pla n as they b eco me d ue." For p lan yea rs begi nni ng on or a ft er J anu ary 1, 1 988, sec ti on 4007 (a) of ERI SA, 29 U.S .C. § 1307(a) states, "The designated payor of each plan shall pay t he premiums i mposed by the cor poration under thi s t it le wi th r espect to t hat plan when t hey a re due ." n1 n1 Sectio n 40 07 o f ER ISA was am end ed b y section 933 1(c) of the O mnib us B udge t Rec onc ili ati on Act of 1987 ("OBRA"), Pub. L. 100- 203, 101 Stat. 1330, 1330-368 (1987). The eff ecti ve date was establish ed b y section 933 1(f) of O BR A, 10 1 Sta t. 133 0, 13 30-3 69 ( 198 7). For a single-e mplo ye r pension p lan, the t erm "design ated payor" mean s the contri butin g sponsor or pl an administrator. ERISA § 4007(e)(1)(A), 29 U.S.C. § 1307(e) (1)(A ). M oreover, each member o f the contri buting sp on so r's contro lled gro up is join tl y and seve ral ly li able for premi ums. ERISA § 4007(e) (2), 29 U.S.C. § 1307 (e)(2); 29 C.F. R. § 2 610. 26 (19 93). Any ent it y t hat is li abl e f or r equi red p remi ums is also lia ble for any i nteres t and penal ties assesse d with re spec t to such prem iums. 2 9 C .F.R. § 261 0.26 (a). Although the plan admin ist rat or has the duty of ensu ring that p remiu ms are [*4] p aid, the paym ents, alo ng with penalt ies and interest, may generally be paid fr om plan assets. n2 The conference committee report accompanying ERIS A makes thi s cl ear. "The plan is to be l iabl e for both t he pre miums for cover age of benefi ts and f or any penal ty as sessed

for fai lur e to pa y pre miums . Besi des t he pena lt y, the [PBGC] may al so cha rge i nter est for unpaid premi ums that are past due ." H .R. R ep. N o. 93 -128 0, 93 d C ong., 2 d Se ss. 365 (19 74) , reprin ted. in 1 974 U.S .C.C .A.N . 503 8, 51 45. n2 However, for si ngl e-empl oyer post -1987 plan years, premi ums ( and any rel ated int eres t an d penal ti es) may not be paid fr om plan ass ets for any plan year begi nni ng wi th t he pl an ye ar i n whi ch a di str ess or in volu ntar y t ermi nati on is ini tiated. 29 C.F.R. § 261 0.26(b). If a plan is termina ted in a standar d termin ation, PBG C has advis ed that "[d]is tri bution of a plan' s benefi t li abili ties in a standard terminati on without taking i nto account the plan' s premium obligation may result in the invalidat ion of the standard termina tion or a civil act ion by t he PBGC agains t t he pl an admi nis tra tor i n hi s or h er per sonal capaci ty ." 57 Fed. Reg. 59206 , 59214 (D ec. 14, 1992). Prem iums c ontinue to accrue [*5] unt il a plan' s assets ar e distri buted in a ter minat ion procedure or unt il a tr ust ee i s appoi nted pursu ant to s ecti on 4042 of ERISA, whi cheve r is earl ier . ERISA § 4007( a), 29 U.S. C. § 1307 (a). In a st andard termination, l iabili ty for PBGC premiums for all plan y ears through and including the plan year in w hich ass ets are di str ibut ed is a li abil it y t hat must be taken in to account i n determi ning wh ether plan a ssets are sufficient to sa tisfy all bene fit liabilities. 29 C .F.R. § 261 7.28 (b). A lth ough thi s regul ation was not i n eff ect when the Plan was te rminat ed, the regul ation that was th en in ef fect require d the pl an admini stra tor t o determin e the pl an' s suf fici ency for benefit liabil ities by reducing the est imated value of plan ass ets "by t he amoun t (e sti mated, when nece ssary) of all exp enses, fe es, and other lia bilities (inclu ding b enefit paym ents due before t he date t he plan admi nist rator pr oposes to di stri bute t he asset s) t hat the pl an has i ncurred or will incur prior to the pro pose d date of distribution." 29 C.F.R. § 2 617 .13(a) (1 990 ). The P lan's li ability for premiums, pen alties, and interest wa s plainly a liability that mu st be tak en into acco unt und er this reg ulation. Under [*6] t he fact s of y our hypoth etic al, i f th e remaini ng Plan as sets , i. e., t he reser ve, are suff icie nt t o cover the outstanding liabil ity f or premiums, interest and penalties, PBGC will look to those assets . However, if the r emaining assets are insuff icient and t he plan a dmin istrator d isregar ded the pre mium liability in determining whether t he statut ory requ ireme nts for a sta nda rd term ination h ad b een m et, the ad ministrato r wou ld be subje ct to pe rsona l liability. I hope thi s has been helpf ul t o you. I f you h ave any f urther questi ons, pl ease cont ac t Ralph Landy of my st aff at (20 2) 3 26-4 127 . Carol Connor Flowe Ge neral C ouns el