PBGC Provides Relief From Premium Penalties
FOR IMMEDIATE RELEASE
November 23, 1999
In a regulatory change, the Pension Benefit Guaranty Corporation (PBGC) is expanding the circumstances under which pension plans can qualify for relief from premium payment penalties.
"This is part of our continuing effort to improve our customer service," said PBGC Executive Director David M. Strauss. "We are making it easier for our premium payers to qualify for 'safe-harbor' relief from the late payment penalty charges that may apply to estimated premium payments."
Under the amendment, PBGC would, for example, allow plan administrators to rely on the participant count reported on the previous year's premium payment form even if they or PBGC subsequently find the count is incorrect. Currently, if the estimated premium payment relies on an incorrect participant count for the prior year's payment, PBGC may impose a penalty for late payment. The relief applies only to penalty charges because, by law, PBGC cannot waive interest on underpayments.
PBGC received two comments on the proposed change that was published last April. Both comments praised PBGC's efforts but suggested that the relief should not be limited to premiums paid for 1999 and later plan years as proposed, but should be given for prior plan years as well. In response, PBGC is providing safe-harbor relief for prior plan years to all PBGC determinations issued on or after December 26, 1999.
In addition to the safe-harbor relief, the amendments, which appear in the November 26, 1999 Federal Register, codify PBGC's current penalty policy, which lowers penalties from 5% per month to 1% per month if a premium payer corrects an underpayment before they receive notice from PBGC about a possible premium underpayment.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 42 million American workers and retirees participating in more than 44,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.
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PBGC No. 00-08