PBGC issues final regs simplifying its premium payment rules

The Pension Benefit Guaranty Corporation (PBGC) has issued final regulations designed to make its premium payment rules more effective and less burdensome.

“We want to help employers keep their pensions, and that means giving them more flexibility and less regulatory hassle,” said
PBGC Director Josh Gotbaum.

The regulations simplify and streamline due dates, coordinate the due date for terminating plans with the termination process, make conforming changes to the variable-rate premium rules, clarify the computation of the premium funding target, reduce the maximum penalty for delinquent filers that self-correct, and expand premium penalty relief. The regulations are effective April 10, 2014. The changes are generally applicable for plan years starting on or after January 1, 2014.

Note: In July 2013, the PBGC issued proposed regulations streamlining its premium payment rules. In January 2014, the PBGC issued final regulations on the part of the proposed rules that eliminated the early payment requirement for large plans’ flat-rate premiums. With the issuance of these final regulations, the PBGC has finalized the remainder of the proposed rules.

On its website, the PBGC announced that it has submitted the 2014 premium payment instructions (including illustrative forms) to the Office of Management and Budget (OMB). The PBGC said that it will make My PAA available for 2014 filings after the OMB approves the instructions. The PBGC said that it expects My PAA will be available for 2014 filings “well before” the first filing deadline for 2014 (October 15, 2014). Until then, the PBGC is not accepting 2014 filings.

Due date changes

As noted above, the PBGC recently eliminated the early due date for large plans’ flat-rate premiums. The PBGC has now completed the process of simplifying the due-date rules by making small plans’ premiums due at the same time as large and mid-size plans’ premiums. However, the final rules provide a transition rule that gives small plans more time to adjust to the new provisions. Thus, the due dates will not be completely uniform until 2015, at which point the due date for all calendar-year plans will be October 15.

Variable-rate premium changes

Some small plans determine funding levels too late in the year to be able to use current year figures for the variable-rate premium by the new uniform due date. To address this problem, the PBGC regulations generally allow small plans to use prior-year figures for the variable-rate premium (with a provision for opting to use current-year figures). To facilitate the due date changes, a plan will generally be exempt from the variable-rate premium for the year in which it completes a standard termination or (if it is small) for the first year of coverage.
In addition, the PBGC is clarifying the computation of the premium funding target for plans in “at-risk” status for funding purposes.

Penalty changes

Under current rules, the PBGC assesses late premium payment penalties at 1% per month for filers that self correct and 5% per month for those that do not. But both penalty schedules have the same cap — 100% of the underpayment. In order to preserve the incentive to self-correct, the PBGC regulations reduce the 1% penalty cap from 100% to 50%.

The regulations also codify the penalty relief policy for payments made not more than seven days late that it established in a notice that it issued in September 2011.

Other changes

The premium regulations are also amended to reflect the enactment of the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141). Other technical and clarifying changes are also made.

Source: 79 FR 13547, March 11, 2014.

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