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News & Policy

PBGC Simplifies Premium Rules

November 30, 2000

The Pension Benefit Guaranty Corporation (PBGC) today announced three changes to its premium regulations that simplify procedures and ease burdens for administrators of private defined benefit plans insured by PBGC. The changes become effective Jan. 1, 2001. Notice and details of the changes will be published in the Federal Register on Friday, Dec. 1, 2000.

"These changes are part of our ongoing efforts to improve service to plan sponsors and the pension professionals who assist them," said PBGC Executive Director David M. Strauss.

Under the first change, plan administrators now may pay a prorated premium for a short plan year rather than pay a full year's premium and request a refund or claim a credit against a future premium payment, as was necessary in the past.

The second change simplifies the definition of "participant" for premium purposes. Plans now may exclude from their participant counts individuals who do not have accrued benefits and for whom the plan has no other benefit liabilities. For example, a new plan will not have to pay a premium for its first year unless it provides credit for service before the plan began.

The third change simplifies the standard for claiming the variable-rate premium exemption for a plan that is fully insured -- that is, funded exclusively by individual insurance contracts. The exemption will now apply to a plan if it meets the requirements of Internal Revenue Code section 412 (i) on the premium snapshot date.

PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by about 43 million American workers and retirees participating in nearly 40,000 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. 01-09