In Disaster Relief Announcement 17-09, the PBGC announced that it is waiving certain penalties and extending certain deadlines in response to Hurricane Harvey. In accordance with the relief granted by the IRS in Tax Relief Notice TX-2017-09, the PBGC will provide relief relating to PBGC deadlines to persons responsible for meeting PBGC deadlines who reside or are located in the disaster area consisting of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton Counties in Texas (“Designated Persons“). The relief generally extends from August 23, 2017 through January 31, 2018 (the “Relief Period“). Importantly, the relief offered by the PBGC does not cover every situation in which relief may be warranted. For example, it does not provide relief for certain filings that involve particularly important or time sensitive information where there may be a high risk of substantial… Continue Reading
ERISA section 4042(a)(4) provides that the PBGC “may institute proceedings . . . to terminate a plan whenever it determines that the possible long-run loss of the corporation with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated.” The PBGC investigates potential candidates for involuntary termination under its early warning program. The PBGC recently issued guidance listing examples of situations that would trigger such an investigation. Some examples relate to corporate transactions (e.g., transferring the plan to a weaker sponsor or controlled group following a controlled group breakup) whereas others relate to the financial deterioration of the plan sponsor (e.g., downgrading of a plan sponsor’s credit ratings or a downward trend in cash flow). View a full list of the early warning triggers.
The PBGC issued a final rule implementing relief for penalties resulting from late payment of premiums. The final rule implements the changes reflected in the proposed rule published in April.Under the final rule, if the plan sponsor corrects the delinquency before being notified by the PBGC, the plan would be responsible for a monthly penalty of 0.5 percent of the late premium amount and, if the plan corrects the delinquency after being notified by the PBGC, it would be responsible for a monthly penalty premium of 2.5 percent. These penalties are reduced from 1 percent and 5 percent, respectively. In addition, if the sponsor has a good payment history and pays promptly after receiving the PBGC notice, the PBGC will waive 80 percent of the 2.5 percent penalty payment. Read the final rule.
PBGC Missing Participant Program to Include 401(k) Plans and Certain Other Plans That Terminate after 2017
The PBGC issued a proposed rule that would expand its existing missing participants program to cover terminated defined contribution plans, such as 401(k) and profit-sharing plans, as well as certain other plans not currently covered under the program, that voluntarily elect to participate. Under the program, for a low one-time fee, and following a diligent search, the terminating plan may transfer the account balances or accrued benefits of all missing participants to the PBGC. The PBGC will then maintain a centralized, online searchable directory of the missing participants and periodically search for the missing participants. In the proposed rule, the PBGC also modifies the criteria for a participant to be considered ”missing” and provides specific diligent search rules for plans to attempt to locate missing participants. Read the proposed rule.
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires certain civil penalties to be adjusted for inflation. PBGC released an interim final rule adjusting the maximum civil penalties provided for in Sections 4071 and 4302 of ERISA regarding failure to provide certain plan notices or other material information. The new maximum amounts are: $2,063 per day for Section 4071 penalties (up from $1,000 per day) and $275 per day for Section 4302 penalties (up from $100 per day). The adjusted amounts are effective August 1, 2016. The interim final rule is available here.
PBGC issued a proposed rule to lower the penalty rates charged for late premium payments and to provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. The penalty for a late premium payment is a percentage of the late payment amount multiplied by the number of full or partial months the amount is late, subject to a floor of $25 (or the amount of the late premium, if less). The lower rate applies to self-correction where the premium underpayment is corrected before PBGC gives notice that there is or may be an underpayment. This proposed rule would cut the rates and caps in half and eliminate the floor. The proposed rule would also create a new penalty waiver that would apply to underpayments by plans with good compliance histories if corrected promptly after notice from PBGC. PBGC proposes to apply these changes… Continue Reading
The IRS announced tax relief for victims of severe storms and flooding in the Texas-Houston area. This relief generally extends from April 17, 2016 through September 1, 2016, and covers taxpayers who reside or have a business in Fayette, Grimes, Harris, or Parker Counties. The relief also includes the filing of Forms 5500 with the IRS. The DOL has mirrored the IRS’s Form 5500 filing relief. In addition, PBGC is waiving certain penalties and extending certain deadlines. PBGC’s announcement provides relief relating to PBGC deadlines to persons responsible for meeting a PBGC deadline who are located in the disaster area for which the IRS has provided relief. If the IRS adds additional areas in connection with those filing extensions, any person responsible for meeting a PBGC deadline that is located in those additional areas will also be entitled to that relief. The IRS announcement is available here. The DOL announcement is… Continue Reading
The Pension Benefit Guaranty Corporation (PBGC) recently issued premium payment instructions for 2016. The filing requirements are substantially similar to those required in 2015, but the following are notable changes: (i) for flat-rate premiums – the per participant flat-rate premium for single employer plans is up from $57 to $64, and for multiemployer plans is up from $26 to $27; (ii) for variable-rate premiums – the rate per $1,000 of unfunded vested benefits is up from $24 to $30; and (iii) the cap on variable-rate premiums is up from $418 times the number of participants to $500 times the number of participants. A copy of the instructions can be found here.
President Obama recently signed into law the Bipartisan Budget Act of 2015, legislation which includes several provisions that impact defined benefit pension plans. First, the act increases PBGC premiums for single-employer pension plan sponsors and accelerates the premium due date for plan year 2025 by one month. Second, the act permits pension plan sponsors to apply to the U.S. Treasury Department for plan years after 2015 to use custom mortality tables based on plan experience and projected trends on mortality, which could improve funding levels if alternative tables more accurately represent their experiences. Lastly, the act extends for three years defined benefit pension plan funding stabilization provisions originally included in the Moving Ahead for Progress in the 21st Century Act (“MAP-21”) in 2012 and extended in the Highway and Transportation Funding Act of 2014 (“HATFA”). The act can be found here.
On September 11, 2015, the Pension Benefit Guaranty Corporation (“PBGC“) issued a final rule amending its regulation on Reportable Events and Certain Other Notification Requirements and released an updated set of frequently asked questions regarding the rule. The final rule provides plan sponsors and pension plans with increased flexibility to determine whether a waiver from reporting will apply. Under the final rule, reporting is generally limited to situations that pose the greatest threat to the pension insurance system. The final rule adds new or expands reportable event waivers, and instead of focusing solely on funding levels, some reportable event waivers are based on whether plans and their sponsors pose a risk of not being able to maintain their pension plan, the plan is small and poses little risk to the pension insurance system, or the sponsor is public and has already made disclosure. The new reportable events rule will apply… Continue Reading