PBGC issues proposed regs to make premium payment rules less burdensome

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed regulations designed to make its premium payment rules more effective and less burdensome. The proposed regulations would, among other things, simplify due dates, coordinate the due date for terminating plans with the termination process, make conforming and clarifying changes to the variable-rate premium rules, and provide for relief from various penalties. The proposed regulations would be effective starting in 2014. Comments on the proposed rules are due by September 23, 2013.

The premium proposal is the Agency’s latest response to an Obama Administration directive to reduce burdens placed on the business community. “If we can’t cut the premiums, we can at least cut the hassle,” PBGC Director Josh Gotbaum said in a news release.

Due date changes

Under current rules, large plans pay the flat-rate premium early in the premium payment year and the variable-rate premium later in the year. Mid-size plans pay both the flat- and variable-rate premiums by that same later due date. Small plans pay the flat- and variable-rate premiums in the following year. The PBGC proposes to simplify the due date rules by providing that all annual premiums for plans of all sizes will be due on the same day in the premium payment year — the historical variable-rate premium due date.

Premium changes

Some small plans determine funding level 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 proposes that small plans generally use prior-year figures for the variable-rate premium. To facilitate the due date changes, no variable-rate premium would generally be owed for a plan’s first year of coverage or for the year in which a plan completed a standard termination.

In addition, the PBGC proposes to clarify 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 proposed regulations would reduce the 1% penalty cap from 100% to 50%.

The PBGC also proposes to codify in its regulations 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 would be 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 would also be made.

Source: PBGC News Release No. 13-11, July 23, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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