In this post we highlight three new PBGC premium relief items:
1. Seven Day Rule – for waiver of late premium penalties in 2011 and later.
2. “Alternative” premium method election relief – for 2010 and later years.
3. Waiver of certain “alternative” method penalties – for 2008 and 2009.
Below is a detailed summary of each relief item along with background information.
1. Seven Day Rule
Background: If a plan sponsor does not make their annual PBGC pension insurance payments on time, then there are late payment penalties and late payment interest.
Relief: For plan years beginning in 2011 and later, the PBGC will automatically waive penalties due solely to late payment as long as the payments are not more than 7 days late. Note that late payment interest is set by ERISA and cannot be waived by the PBGC.
2. “Alternative” premium method election relief – for 2010 and later years
Background: For 2007 and later, plan sponsors could elect to use an “alternative” method to calculate their variable rate premium (VRP). However, the method to make this election involved a two-step process that included checking the infamous Box 5 (more details in previous post). The PBGC previously offered one-time relief in 2010 for Box 5 errors.
Relief: The PBGC’s official determination of which method (alternative or standard) was used to determine the VRP will now be based solely on information reported on line 7(d)(1) of Part III in the comprehensive filing. They are also incorporating additional error checks and alerts within the MyPAA premium filing system to help avert future problems.
3. Waiver of certain “alternative” method penalties – for 2008 and 2009
Background: If there was a Box 5 error made in 2008 or 2009 and the plan sponsor was not eligible for previous relief, then they were required to recalculate premium using the “standard” method. This resulted in (1) higher premium amounts and (2) late payment penalties and interest on the additional premium due.
Relief: PBGC will waive the late payment penalty in these cases. Penalties will also be waived if the plan sponsor used the “standard” method and accidentally checked Box 5 (for “alternative” method election).