Premiums and HATFA and Hybrids, Oh My!

Never a dull moment for plan administrators and actuaries. And that’s even more true when you throw federal regulations into the mix. A panel discussion at ASPPA’s 2014 Annual Conference on Monday, Oct. 27 provided an update on regulatory changes affecting DB plans .

Pension Benefit Guaranty Corporation (PBGC) Senior Policy Actuary Amy Viener opened with her take on the new PBGC premium rules. And she gave credit where credit is due: “I hope you like the new rule. And you have ASPPA and ACOPA to thank for it,” Viener said. ASPPA and ACOPA had reported that timing issues regarding completing valuations by the premium due date weren’t limited to plans with year-end valuation dates. Some small plan actuaries had also reported difficulty completing valuation by premium date.

The PBGC’s solution includes a lookback rule by which small plans use the prior year’s valuation results as the basis for the current year’s variable rate premiums (VRPs). Opting out of it is possible, but was “intended to be a one-time thing,” Viener said.

As for premium due dates, that for mid-size and large plans remains Oct. 15; the PBGC is giving small plans an additional six and a half months because it would have been impossible for plans with valuation dates after Oct. 15 to meet an Oct. 15 due date.

Viener also outlined the new premium payment options: they can be paid online by going to www.pay.gov and selecting PBGC in a drop-down menu; they also can be paid through a check or electronic payments made through the automated clearinghouse. And while the PBGC now requires that participant count breakdowns be reported when premiums are paid, the PBGC does have some good news — the categories are the same as those on the Schedule SB.

Impact of HATFA

ASPPA Director of Retirement Policy and ACOPA Executive Director Judy Miller addressed the portions of the Highway and Transportation Funding Act (HATFA) that affect DB plan administration. Among them are provisions that stabilize MAP-21 funding and delay phase-out of the MAP-21 corridor percentages.

Thomas Finnegan, Principal at the Savitz Organization, also addressed some of the fallout of HATFA. Finnegan cited IRS Notice 2014-53, which provides transition rules for HATFA. But he indicated that it was not a radical departure for the IRS: “Not surprisingly, the IRS took a similar position as it did in Notice 2012-42,” he said. That notice contained the implementation rules for MAP-21.

Additional HATFA faIlout included:

• Irrevocable HATFA elections must be made by the later of Dec. 31, 2014 or the 2013 Form 5500 filing deadline.
• Plan sponsor elections generally must be made in writing to enrolled actuaries and plan administrators.
• According to PBGC Technical Update 14-1, applying HATFA for 2013 affects the 2014 variable rate premium (VRP) calculation, but the PBGC will not require recalculation of 2014 VRPs.
• Under PBGC Technical Update 14-2, actuarial valuation reports filed by the alternative due date may be based on either MAP-21 or HATFA rates.

But unanswered questions remain, Finnegan said:

• Is reporting under ERISA Section 4010 or on PBGC Form 10/200 eliminated due to HATFA?
•  Will penalties for late reporting be refunded?
• May 2013 HATFA changes be explained with the 2014 annual funding notice (AFN), rather than revising or redistributing?
• When will changes to model AFN language regarding HATFA and its impact on contribution requirements be available?

Cash Balance Regs

Finnegan also addressed the final cash balance regulations issued on Sept. 19. Among the provisions he highlighted were those concerning age discrimination. How they apply, said Finnegan, depends on whether the formula is lump sum based; subject to three-year vesting, market rate of return rules and conversion protections; and whether whipsaw relief applies. However, the age discrimination rules apply to all plans, he noted, not just hybrids.