The Pension Benefit Guaranty Corporation (PBGC) has issued proposed rules to make changes in the payment dates for premium payments for plan termination insurance. Also, the proposed rules would reduce some penalties when a premium-payment error is voluntarily corrected.
Payment Dates
Under current rules, the dates for payment of PBGC premiums are determined by the size of the plan and whether the payment is for the flat-rate premium or the variable-rate premium. The payment dates range from February 28 to October 15.
The PBGC proposes to make all premium payments due on October 15, the latest date under the current rules. Plans that are subject to both the flat-rate premium and the variable-rate premium would make a single payment.
In addition, the proposal would allow a plan to make an estimated variable-rate premium and do a true-up within six and one half months without any penalty. For terminating plans, the final premium would be due no later than the filing of the postdistribution certification. Other technical changes would be made to payment dates, particularly for small and new plans.
Penalties for Premium-Payment Errors
The PBGC currently applies a penalty rate of 5 percent per month for premium-payment errors. However, the rate is reduced to 1 percent per month for self-corrections. Currently, both of these penalties are capped at 100 percent.
The PBGC proposes to limit the penalty for self-correction to a maximum of 50 percent. This would encourage voluntary corrections of payment errors that are more than 50 months old. Other updating changes would also be made to the current rules.
For additional information, please contact the author, Steven D. Kittrell, or any other member of McGuireWoods’ employee benefit team.