PBGC Information on Premium Increases and the Move to Mandatory e-Filing

On February 8, 2006, the Pension Benefit Guaranty Corporation (PBGC) issued information on paying premiums in light of the following¹:

• The premium increases for single employer and multiemployer defined benefit plans that were part of the Deficit Reduction Act of 2005, which President Bush signed into law on February 8, and
• The PBGC's initiative to move to mandatory e-filing anticipated to begin July 1, 2006.

PAYING THE HIGHER PREMIUMS

The PBGC confirms that the higher per capita premiums - $30 for single employer plans² and $8.00 for multiemployer plans, both indexed - and the new special premium of $1,250 per participant that applies to certain distress terminations of underfunded single employer plans³ must be paid for the 2006 plan year, even though forms with the old rates have been issued. For calendar-year plans, estimated payments due by February 28 will need to be paid at the higher rate. Plan sponsors that have already filed estimated premiums at the old rate, must submit an amended filing to reflect the higher premiums by the plan's original filing deadline of February 28 to be considered filed timely. The PBGC advises that plan sponsors utilizing paper forms should cross off the old premium rates and insert the new premium rates prior to submitting the forms.

The PBGC expects to issue soon the revised 2006 final filing forms and instructions: Form 1-EZ, Form 1 and Schedule A.⁴ In addition, information about paying the new special premium for underfunded terminating plans is being prepared.

Plan sponsors are reminded that the PBGC assesses interest on the amount owed on the Form 1 for plans required to complete Form 1-ES, so plan sponsors should be careful to avoid underestimating participant counts and flat premiums when completing Form 1-ES. This interest assessment is not obvious on either the Form 1-ES or the Final Form.

COMING SOON: MANDATORY e-FILING

The PBGC intends to require electronic filing of the PBGC premium forms (Form 1-ES, Form 1-EZ, Form 1 and Schedule A) and the payment of premiums, starting this year. Under a proposed PBGC regulation, ⁵ premium-related filings for plans with at least 500 participants will be required to be filed electronically on and after July 1, 2006. All other plans will have to start e-filing beginning in 2007.

Although the effective date for e-filing will not be finalized until the PBGC publishes a final rule in the Federal Register (expected by early spring), the PBGC encourages plan sponsors to begin to prepare now for e-filing. Plan sponsors may already begin e-filing and payment premiums electronically. Information regarding the e-filing process and answers to many questions can be found on the PBGC's Web site.⁶

Segal Company consultants can be retained to work with pension plan sponsors and their attorneys to comply with the PBGC requirements, including e-filing.

1	To see the PBGC information, click here. (To return to the Compliance Alert text, click here.)
2	The amount or timing of this increase could be modified by the pension reform legislation currently under consideration in Congress. For example, the House pension reform bill would phase it in over 3 to 5 years, and the Senate version would set a much lower rate for new pension plans or those sponsored by small employers. Also, unlike the Deficit Reduction Act, the pension reform legislation is likely to expand the applicability of PBGC variable-rate premiums. (To return to the Compliance Alert text, click here.)
3	For more information about the premium increases and how they will be indexed, see The Segal Company's February 3, 2006 Compliance Alert, "PBGC Premiums Increased Significantly by the 2005 Deficit Reduction Act". (To return to the Compliance Alert text, click here.)
4	To access premium forms and instructions available on the PBGC's Web site, click here. (To return to the Compliance Alert text, click here.)
5	To see the proposed regulation, click here. (To return to the Compliance Alert text, click here.)
6	To access the PBGC's information site on establishing an e-filing account, click here. (To return to the Compliance Alert text, click here.)

Compliance Alert, The Segal Company’s periodic electronic newsletter summarizing important developments affecting benefit plan compliance, is for informational purposes only. It is not intended to provide authoritative guidance. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.

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