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Volume X, Number 331

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Single-Employer Pension Plan Terminations

As the economic fallout from the Covid-19 pandemic continues, many employers with significant single-employer defined benefit pension plan liabilities are revisiting options to mitigate their pension exposure in an effort to reduce their annual expenses and to clean up their balance sheets. One option that is often considered is a termination of the pension plan.

However, terminations are only permitted under certain circumstances and have ramifications that must be carefully considered and managed. In particular, terminating an underfunded pension plan alone does not relieve an employer from liability for the plan, but the resulting liability can be negotiated with the Pension Benefit Guaranty Corporation and potentially reduced based on the employer's financial situation.

Under ERISA, a single-employer pension plan can only terminate in a standard termination, a distress termination, or an involuntary termination. Multiemployer plans and multiple-employer plans—plans with unrelated participating employers—are subject to different rules that are not addressed in this article.

© 2020 Proskauer Rose LLP. National Law Review, Volume X, Number 295
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About this Author

Justin Alex, Employment Attorney, Proskauer Rose Law Firm
Associate

Justin Alex is an Associate in the Washington, DC office and a member of the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center.

202.416.6816
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