The Pension Benefit Guaranty Corp. has proposed some relief for sponsors of single and multiemployer pension plans who are tardy on premium payments.
The federal agency charged with guarantying the country’s private-sector pension plans says that as premiums have risen, so have the penalties on late payments.
"We think penalties should be no more than necessary to encourage timely payments," said PBGC Director Tom Reeder in a release. Reeder was appointed and confirmed to lead the agency last year. "I'm committed to doing everything I can to help companies keep their pension plans."
Under the existing regime, PBGC has a two-tiered penalty structure that rewards self-correction.
If sponsors have to be notified by PBGC, the agency applies a 5 percent monthly charge on the amount of delinquent payment. When sponsors self-correct and advise PBGC of the late premium, they are only charged 1 percent of the late payment per month. Late penalties are capped at 100 percent and 50 percent, respectively.
Under the proposed new rule, those penalties would be reduced by half. And for sponsors with otherwise good payment histories and who pay late premiums promptly, the penalty will be reduced by 80 percent, according to a PBGC press release.
For a sponsor who owes $100,000 in late premiums and qualifies for the full reduction in late fees, a $5,000 fee would be reduced to $1,000.
The Bipartisan Budget Act of 2015 insisted on new increases in both the per-participant and variable premium rates single-plan sponsors pay to PBGC.
The per-participant amount for the flat-rate premium was raised to $64 for this year, up from $57 in 2015. The variable rate was raised to $30 per $1,000 of unfunded liabilities, up from $24 in 2015.
For plans beginning in 2017, the per-participant flat rate jumps to $68. The year after it increases to $73, and for plans beginning in 2019 it increases to $78.
The variable rate will be incrementally increased to $38 per $1,000 of unfunded liabilities by 2019.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
