The Pension Benefit Guaranty Corp. is cutting in half the penalties for late premium payments and will allow a waiver of most penalties for plans that can demonstrate premium compliance.
The final rule is scheduled to be printed in the Federal Register on Friday, and it will become effective 30 days later. It applies to single-employer and multiemployer plans.
PBGC late payment penalties are a percentage of the amount paid late multiplied by the number of full or partial months the amount is late. Until the change, the two levels of penalty have been 1% per month for self-corrected payments, capped at 50% of the premium, and 5% per month when they are not self-corrected.
The new rule cuts the rates and caps in half, to 0.5% capped at 25% and 2.5% capped at 50%.
For plans with good compliance histories that promptly correct underpayments cited by the agency, the PBGC will waive 80% of the penalty.
The new rules will apply for plan years beginning after 2015.
The change, which was proposed in April, is part of the agency’s efforts to keep more plans in the defined benefit system after several significant premium increases in recent years. PBGC officials do not have statutory authority to reduce premiums, which are set by Congress, but Director W. Thomas Reeder Jr. said he is looking for other ways to reduce burdens on plan sponsors.