Companies will now get a seven-day grace period for paying PBGC premiums, and the federal pension insurer will waive late penalties caused by filing errors when plan sponsors decide how to calculate their premiums.
However, the agency is not allowed to waive the interest on the penalties.
The changes, announced Wednesday by the Pension Benefit Guaranty Corp., are effective immediately. They were spurred by requests from employer groups seeking more flexibility of what they considered clerical errors, and by a White House mandate to ease regulatory burdens whenever possible.
Companies that pay their premiums up to seven days past the due date will not have to pay a penalty to PBGC, although the agency is required by statute to charge the interest on the penalty. In addition, the agency is offering penalty relief for plan years after 2007 for pension plans electing to use a variable rate premium calculation method instead of the standard calculation.
The changes will be published in the Federal Register on Wednesday.
“This is one example of what PBGC needs to do to encourage people to stay in defined benefit plans. Our mandate is to keep our customers,” Joshua Gotbaum, PBGC director, said in a news briefing.
He said his agency is committed to reducing the numerous regulatory burdens placed on defined benefit plans. “One way we do this is by being flexible and responsive, and giving companies a break when it makes sense to do so.”
“We want to give them a lot of credit for being responsive,” Lynn Dudley, senior vice president of policy for the American Benefits Council, a lobbying group, said in an interview. Her group and plan executives approached PBGC officials earlier this year about offering some relief in these areas. “This is really positive, and we’re hoping that we can continue that dialogue.”
PBGC officials said about 1,000 companies file late each year, which results in about $400,000 in penalties, which for some companies exceeded the amount of premiums due by as much as 100%.
“It was not a user-friendly process, and we decided we didn’t have to do that,” Mr. Gotbaum said. PBGC will continue to look for ways to “to ease regulatory burdens on its customers,” he said.