Mandatory PBGC e-Filing Begins Now

On June 1, 2006, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations¹ mandating the electronic filing of PBGC premium forms (Form 1-ES, the estimated premium payment, Form 1-EZ, Form 1 and Schedule A) and the payment of premiums. The PBGC believes that this move toward the electronic filing of PBGC premium forms, via its secure Web site, will increase the agency's efficiency, eliminate errors and lost filings, facilitate premium payments and speed refunds.

The PBGC has encouraged the voluntary electronic filing of PBGC forms since the 2004 plan year. It has provided detailed instructions on its Web site and has published proposed regulations requesting comments on the electronic filing process, thus enabling the agency to get the "bugs" worked out of their e-filing system and respond to comments for improvements prior to the official mandated filing date. Although the first filing year will most likely involve a few start-up issues for plan sponsors, the PBGC believes that ultimately, electronic filing will provide the plan sponsor with an easier and more streamlined, efficient filing process.

EFFECTIVE DATES

The effective dates for mandated electronic filings depends on the size of the plan. For plans with at least 500 participants at the end of the prior plan year's Form 5500, PBGC filings must be made electronically on and after July 1, 2006 for plan years beginning on and after January 1, 2006.

All plans with at least 500 participants must file Form 1-ES with estimated premium payment by the end of the second month after the end of the plan year. In addition, single and multiple employer plans of that size may also have to file the following forms:

• Form 1 or Form 1-EZ (reconciles Form 1-ES and is based on the number of participants at the end of the prior plan year on Form 5500) must be filed by 9˝ months after the end of the plan year.
• Schedule A (Filed as an attachment to PBGC Form 1 for single and multiple employer plans with variable rate premiums) is filed at the same time as Form 1.

For example, a single or multiple employer plan with 500 or more participants (considered a large plan), with a January 1st plan year is required to file PBGC forms as follows:

• PBGC Form 1-ES is due by the end of February.
• PBGC Form 1 with Schedule A or Form 1-EZ is due by October 15.

Form 1-EZ and Schedule A require Certification by the plan's actuary. Multiemployer plans do not file PBGC Schedule A or Form 1-EZ, because they are not subject to variable rate premiums.

Plans with fewer than 500 participants for the prior plan year are required to begin e-filing beginning with any filings due on and after January 1, 2007 for plan years beginning on and after January 1, 2007.

HOW TO FILE

Plan sponsors are not required to purchase special software to complete the PBGC premium forms (although the Form 1-EZ and Schedule A require calculations and certifications by the plan's actuary. These can all be accessed online from the My PAA section of the PBGC's Web site² for free. There are three methods that the PBGC has provided for electronic filing of the premium forms:

• Data entry directly into the "My PAA" Web site for each plan;
• Uploading premium filings from vendor or proprietary software that meets the PBGC's requirements. Uploaded files are immediately transferred to the PBGC's premium system for processing and posting to the appropriate plan account; and
• Importing premium filings created with Private-sector software that meets the PBGC's requirements. Imported files transfer the appropriate data into My PAA data entry fields to the appropriate plan account and can then be reviewed and submitted to the PBGC.

Plan sponsors with plans and premium forms that require an actuary's certification should consult with their service provider to determine which method will be used. However, multiemployer plans with flat rate premiums can just enter information into My PAA without an actuary's involvement.

While the initial e-filing process may seem onerous to some, the PBGC's instructions on the My PAA section of the Web site, are comprehensive, user friendly and provide a great deal of information to plan sponsors and practitioners. In limited circumstances, the PBGC may issue exemptions from the e-filing requirement to plan sponsors for good cause and in appropriate circumstances. However, a plan sponsor's lack of access to the internet does not appear to be one of them.

PREPARING TO e-FILE: RECOMMENDED STEPS

In preparation for the mandated electronic PBGC filings, plan sponsors should consider taking the following steps:

• Establish a plan filing coordinator. This is the person who typically oversees the plan's filing process. The plan's filing coordinator will establish a plan account on My PAA (establish a user name and password), assign various team members (depending on the filing method used), determine and assign the actuary if required and the plan administrator's name who will be certifying the filings. One account can contain all of the pension plans that require PBGC premium filings.
• Determine which electronic filing method will be used. Discuss with the plan sponsor's practitioners and IT personnel which electronic filing method is in the plan's best interest.
• Assign designated personnel to the account. These are individuals who will be permitted to work on the premium filings and authorize their individual tasks (e.g., create, edit, sign and submit, name the enrolled actuary; authorize payment and view account history).
• Determine how premium payments will be made. The PBGC permits payment by the following four methods: (1) automated clearing house, using a bank routing code and a checking or savings account that is specified for the plan; (2) electronic check, which is equivalent to writing a check and consists of entering a check number (voided) and the bank routing code; (3) credit card; and (4) paper check. For paper checks, the PBGC will provide a printed voucher and mailing instructions. It is likely that the PBGC will eliminate this option in the future.

Regardless of when a plan sponsor's next premium filing is due, it would be in its best interest to investigate the My PAA section of the PBGC's Web site, establish an account early and coordinate with those involved in the process to ensure a smooth transition to e-filing. This is likely to be only the first waive in mandated governmental electronic filings for employee benefit plans and plan sponsors can probably expect to see mandated Form 5500 filings on the horizon.

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

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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