The Pension Benefit Guaranty Corp. will soon offer some relief to sponsors of single and multiemployer plans that are late paying premiums.
On Wednesday, the agency will propose a rule that would lower penalties for late payments and waive penalties for plans with a history of compliance. The proposed rule is expected to be posted in the Federal Register on Thursday.
The change is aimed at keeping more plans in the defined benefit system, given dramatic premium increases in recent years.
“One of the biggest interests I have since even before coming to PBGC is maintaining as many defined benefit plans as possible and keeping people in the system, and easing the burden on sponsors,” Director W. Thomas Reeder Jr. said in an interview.
The PBGC is authorized to assess penalties for unpaid premiums up to 100% of the overdue amount. PBGC officials decided that penalties attached to rising premiums were getting too high, and that they have the flexibility to assess less. Following a 60-day comment period on the proposal, which begins once it's posted in the Federal Register, they hope to have the rule finalized before 2016 plan year payments are due this October. “We are optimistic that people will like the rule,” Judith Starr, PBGC general counsel, said in the same interview.
Mr. Reeder said PBGC officials do not have the statutory authority to reduce premiums “but we are continually looking” for other ways to reduce burdens on plan sponsors. “I think people are going to respect the change in tone,” he said.
Under the proposal, sponsors that self-correct missed payments will be assessed half the current penalty of 1% per month missed; sponsors that do not self-correct will see their penalties cut to 2.5% from 5%.
Plan sponsors with a history of compliance that have paid on time for at least five years will get a one-time chance to self-correct with the same 0.5% per month missed penalty.