The Pension Benefit Guaranty Corporation (PBGC) on April 27 announced that it is proposing amendments to its premium payments regulation. The proposal applies to both single-employer and multiemployer plans.
The penalty for late payment of a premium is a percentage of the amount paid late multiplied by the number of full or partial months the amount is late, subject to a floor of $25 (or the amount of premium paid late, if less). There are currently two penalty levels: 1% per month (with a 50% cap) and 5% per month (capped at 100%). The lower rate applies to “self-correction” — that is, where the premium underpayment is corrected before the PBGC gives notice that there is or may be an underpayment.
The PBGC argues that applying a lower penalty rate to self-correction recognizes that it is desirable for a plan to catch and fix its own mistakes, whatever its compliance history may be. The PBGC has concluded that a demonstrated commitment to premium compliance also merits recognition, even if a plan corrects an underpayment (of which it is likely unaware) only after notice from PBGC.
What it Would Do
The proposal would lower the penalties imposed for late payment of premiums by all plans, and would provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. It would cut the rates and caps in half (to 0.5% with a 25% cap and 2.5% with a 50% cap, respectively) and eliminate the floor.
The proposed amendments would also create a new penalty waiver that would apply to underpayments by plans with good compliance histories if corrected promptly after notice from the PBGC. Under the proposal, PBGC would waive 80% of the penalty otherwise applicable to such a plan. Thus, the penalty would be reduced from 2.5% per month (with a 50% cap) to 05% per month (with a 25% cap) — the same result as if the plan had self-corrected.
The automatically waiver of 80% of penalties assessed at the higher (2.5%) rate has two conditions, however. A plan would have to have a five-year record of premium compliance and correction would need to be prompt.
Public Comment Invited
The PBGC invites comments on the proposed rule. They are due June 27, 2016.
Comments, which must include the Regulation Identifier Number (RIN) 1212–AB32, may be submitted by any of the following methods:
PBGC proposes to apply the changes described above to late premium payments for plan
years beginning after 2015.
The penalty for late payment of a premium is a percentage of the amount paid late multiplied by the number of full or partial months the amount is late, subject to a floor of $25 (or the amount of premium paid late, if less). There are currently two penalty levels: 1% per month (with a 50% cap) and 5% per month (capped at 100%). The lower rate applies to “self-correction” — that is, where the premium underpayment is corrected before the PBGC gives notice that there is or may be an underpayment.
The PBGC argues that applying a lower penalty rate to self-correction recognizes that it is desirable for a plan to catch and fix its own mistakes, whatever its compliance history may be. The PBGC has concluded that a demonstrated commitment to premium compliance also merits recognition, even if a plan corrects an underpayment (of which it is likely unaware) only after notice from PBGC.
What it Would Do
The proposal would lower the penalties imposed for late payment of premiums by all plans, and would provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. It would cut the rates and caps in half (to 0.5% with a 25% cap and 2.5% with a 50% cap, respectively) and eliminate the floor.
The proposed amendments would also create a new penalty waiver that would apply to underpayments by plans with good compliance histories if corrected promptly after notice from the PBGC. Under the proposal, PBGC would waive 80% of the penalty otherwise applicable to such a plan. Thus, the penalty would be reduced from 2.5% per month (with a 50% cap) to 05% per month (with a 25% cap) — the same result as if the plan had self-corrected.
The automatically waiver of 80% of penalties assessed at the higher (2.5%) rate has two conditions, however. A plan would have to have a five-year record of premium compliance and correction would need to be prompt.
Public Comment Invited
The PBGC invites comments on the proposed rule. They are due June 27, 2016.
Comments, which must include the Regulation Identifier Number (RIN) 1212–AB32, may be submitted by any of the following methods:
- on the federal eRulemaking Portal: http://www.regulations.gov. Follow the website
instructions for submitting comment;
- by sending an email to [email protected];
- by fax to (202) 326-4112; or
- by mail or hand delivery to: Regulatory Affairs Group, Office of the General Counsel,
Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC,
20005-4026.
PBGC proposes to apply the changes described above to late premium payments for plan
years beginning after 2015.
- Log in to post comments