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Technical Update 00-6

Form 1-EZ
Technical Update 00-6: Form 1-EZ
December 20, 2000

Purpose

Based on suggestions from plan sponsors and pension practitioners, the PBGC is issuing a new, simplified premium form - the PBGC Form 1-EZ. This new form, which will be included in the 2001 Premium Payment Package, replaces the PBGC Form 1 and Schedule A for single-employer defined benefit plans that are exempt from the variable rate premium. More than 50 percent of PBGC-insured plans are exempt from the variable rate premium and will benefit from the new, simplified Form 1-EZ. (The new Form 1-EZ has no effect on the Form 1-ES filing for estimated premium payments.)

Background

All single-employer pension plans pay a basic flat rate premium of $19 per participant per year. The premium for multiemployer plans is $2.60 per participant per year. Underfunded single-employer pension plans pay an additional variable rate premium of $9 per $1,000 of unfunded vested benefits. Plans that qualify for an exemption do not pay the variable rate premium. Plans count participants and calculate unfunded vested benefits as of the "premium snapshot date" (generally, the last day of the prior plan year).

For plan years before 2001, a plan uses the following form(s) to make its final premium filing for the plan year:

  • A multiemployer plan -- Form 1 alone.
  • A single-employer plan (whether or not exempt from the variable rate premium) -- Form 1 and Schedule A.

Form 1-EZ

Beginning with the 2001 plan year, a single-employer plan that is exempt from the variable rate premium will use the new Form 1-EZ instead of the longer Form 1 and Schedule A to make its final premium filing for the plan year. Thus, a single-employer plan will file the new Form 1-EZ for a plan year if it qualifies for one of the following exemptions:

a) Plans With No Vested Participants. A plan qualifies for this exemption if, on the premium snapshot date, it has no participants with vested benefits.

b) Section 412(i) Plans. A plan qualifies for this exemption if, on the premium snapshot date, it is described in section 412(i) of the Internal Revenue Code (dealing generally with plans funded exclusively by individual insurance contracts).

c) Fully Funded Small Plans. A plan qualifies for this exemption if, on the premium snapshot date, it has fewer than 500 participants and no unfunded vested benefits.

d) Plans Terminating In Standard Terminations. A plan qualifies for this exemption if the plan administrator has issued notices of intent to terminate in a standard termination with a proposed termination date that is on or before the premium snapshot date. (The exemption is retroactively revoked if the plan does not make a final distribution of assets.)

e) Plans At The Full Funding Limit. A plan qualifies for this exemption if the plan's contributing sponsor(s) made contributions to the plan for the prior plan year in an amount at least equal to the full funding limitation for the prior year under section 302(c)(7) of ERISA and section 412(c)(7) of the Internal Revenue Code. (These contributions must be made on or before the earlier of the due date or payment date for the variable rate premium.)

Form 1 and Schedule A

All single-employer plans that are not exempt from the variable rate premium must complete PBGC Form 1 and Schedule A. The plan must file Form 1 and Schedule A even if plan assets exceed vested benefits and the plan thus owes no variable rate premium. (Having a variable rate premium of $0 is not the same as being exempt from the variable rate premium.)

Beginning with the 2001 plan year, a plan will make its final premium filing for the plan year using the following form(s):

  • A multiemployer plan -- Form 1 alone.
  • A single-employer plan that is exempt from the variable rate premium -- Form 1-EZ alone.
  • A single employer plan that is not exempt from the variable rate premium (even if the variable rate premium is zero) -- Form 1 and Schedule A.

Further Information about PBGC Forms

The PBGC will mail the Form 1-ES package early in January 2001, and will mail the Form 1, Schedule A, and Form 1-EZ package in early February 2001. However, these forms (and instructions) will be available on the PBGC Web site, www.pbgc.gov, in January 2001, and, for the first time, may be downloaded from the PBGC Web site and filed with the PBGC. (Only forms for 2001 or later plan years may be downloaded and filed.)

As in the past, the PBGC accepts not only the original forms provided in the Premium Payment Package, but also forms provided by a vendor that has received PBGC approval for an automated (computer-generated) version of the forms. Photocopies of the forms, however, are not acceptable. PBGC premium forms are designed for Optical Character Recognition (OCR) to allow us to process filings quickly and accurately. Currently, the OCR equipment cannot effectively scan photocopies.

Technical Update Number: 
00-6