Pension Benefit Guaranty Corporation 99-1 June 3, 1999 RE FE RE NC E: [* 1] >40 06(a )(3 )(E) > OP INI ON : I write i n response to your requ est that t he PBGC clari fy how t he var iabl e-r ate premi um requ ire ments of s ecti on 4006 of the Employee Retirement Income Security Act of 1974 (ERISA ) apply to a mul tiple-em plo yer plan. n1 Spe cifically, you ask whether you shoul d base vari able-r ate premi um determi nat ion s f or a mul ti ple- employ er pl an on the fund ing s tatu s of t he plan as a whole or on the st atus of fundi ng account s maint ained f or indi vidual co ntributin g employers

pursu ant to section 413(c) of the Int ernal Revenue Code (IRC ). We conclude that variable-rate premium determin ations for a mul tipl e-employ er plan a re governed by the f unding s tatu s of t he plan as a whole. n 1 A mu lti ple-empl oyer pla n is a sing le-e mployer pl an for pur poses of Tit le IV of ERISA (even though i t has multiple unrel ated contrib uting em ploye rs). See the de finition of " multiple -emp loyer p lan" in 29 CFR § 4001 .2 of the PB GC 's regulations. Your questi on aris es because the variab le -rat e premium provi sions in t he sta tut e refer to two t erms-- "unfunded current liabil ity" and "full funding li mitation"-- that are defin ed in oth er st atut ory provi sions , deali ng wit h plan funding. n2 Although the two definit ions do [*2] not themselves di stingui sh between multiple- employer plans and other singl e- employer plans, IR C sec tion 41 3(c) conta ins spe cial req uirem ents for a pplyin g plan funding rules ge nerally to multi ple- employer plans. In l ight of t he requirements of sect ion 413(c), you are uncertain w hether the variable-rat e premium provisions o perate the sam e way for multiple-emp loyer plans as they do for other single-emp loyer plans. n2 Und er ER ISA section 400 6(a) (3)(E )(ii) and (iii) (I), the amount of t he var iabl e-r ate premi um is based on "unf unded cu rren t l iabi li ty " as def ined in ERISA s ecti on 302 (d)(8 )(A) ( which is substan tially identica l to IRC sec ti on 412(l)(8)(A)). ERISA section 4006(a)(3)(E)(iv) provides an exemption fro m

the

variab le-rate p remiu m ba sed o n the " full funding li mitation" defined i n IRC section 412(c)(7) (which is substant ially identical to ERISA section 302(c)(7)). Under ERISA section 4006(a)(3)(E)(ii), t he varia ble-r ate premi um is $ 9 per $ 1,0 00 o f "unfun ded vested bene fits un der the pl an" (emphasi s suppli ed), and t he exempti on from th e vari able-r ate premi um in se ction 4006(a) (3)(E )(iv ) operates if "contri butions to the plan" are not l ess than the full funding li mitation [* 3] (emphasis supplied). The statut ory language thu s i ndica tes tha t t he var iabl e-r ate premi um and t he f ull fun ding li mit exempt ion a re bas ed on the fun di ng stat us of a plan as a whole. Th is is consist ent with t he purpose of PBGC premiums, whi ch is to fun d the t erminat ion in surance program under Title IV of ERISA. Under secti ons 4022, 4044, and 4061 of ERISA, the PBG C's i nsuranc e obligat ions ar e, as you point out, based on the fundi ng st atus of a plan i n it s enti rety , even i f th e plan is one tha t mainta ins sep arate fun ding a cco unts for individual con tributing employers. Accordi ngl y, it is the PBGC's opi nion tha t s ecti on 400 6 is to b e read as referr ing to the unfund ed cu rrent liab ility and full fu nding limitati on of a plan as a w hole, even i f s ecti on 413(c) requi res, for othe r pur poses, tha t t hey be determin ed employer-by-employer. T hus, a mul ti ple- employ er pl an i s t o dete rmin e it s unf unded ve ste d benef it s f or purposes of calculat ing it s va ri abl e- rat e pre miu m, and det ermi ne whe ther it qual if ies for the ful l f undi ng l imi t ex empti on from the variable- rate premium, in t he same way as a plan that has a single contr ibuting employer. If you have any furt her questions about thi s matter, plea se [ *4] cont act Deborah C. Murphy of my of fi ce at 202-326- 4024. James J. Keig htl ey Ge neral C ouns el