[Federal Register Volume 76, Number 179 (Thursday, September 15, 2011)]
[Notices]
[Pages 57082-57083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-23692]


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PENSION BENEFIT GUARANTY CORPORATION


Premium Penalty Relief; Alternative Premium Funding Target 
Election Relief

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice.

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SUMMARY: Executive Order 13563 on Improving Regulation and Regulatory 
Review directs agencies to review and improve their regulatory 
processes. As a result of this regulatory review, and in response to 
comments by premium payers and pension professionals, PBGC is providing 
relief from certain premium penalties and in certain situations 
involving alternative premium funding target elections.

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Manager, 
Regulatory and Policy Division, Legislative and Regulatory Department, 
1200 K Street, NW., Washington, DC 20005-4026, 202-326-4024 or 
[email protected]. (TTY and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4024).

SUPPLEMENTARY INFORMATION: 
    As a result of PBGC's regulatory review under Executive Order 13563 
and in response to comments by premium payers and pension 
professionals, PBGC is granting relief in several situations:
     For 2011 and later plan years, PBGC will waive premium 
penalties assessed solely because payments are late by not more than 
seven calendar days.
     For 2010 and later plan years, PBGC is providing relief 
similar to, but more expansive, than the relief provided in Technical 
Update 10-2 (Variable Rate Premiums; Alternative Premium Funding Target 
Elections; Box 5 Relief).\1\
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    \1\ http://www.pbgc.gov/res/other-guidance/tu/tu10-2.html .
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     For 2008 and 2009 plan years, PBGC will waive premium 
penalties for late premiums in connection with certain box 5 errors.

Seven Day Rule

    Under ERISA section 4007 and PBGC's regulation on Payment of 
Premiums (29 CFR part 4007), late payment charges--interest and late 
payment penalties--apply to required annual premium payments that are 
not timely made. Penalties (but not interest) may be waived in 
accordance with the premium payment regulation. PBGC's premium penalty 
policy is set forth in the appendix to the premium payment regulation.
    For plan years beginning after 2010, PBGC will automatically waive 
premium payment penalties that are assessed solely because premium 
payments are late by not more than seven calendar days.\2\ In applying 
this policy, PBGC will assume that each premium payment was made seven 
calendar days before it was actually made. All other rules will then be 
applied as usual. If the result of this procedure is that no penalty 
would arise, then any penalty assessed on the basis of the actual 
payment dates will be waived. Filers may seek reconsideration of late 
payment penalties assessed in circumstances to which the relief under 
this Notice does not apply.
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    \2\ The premium penalty relief described in this notice does not 
apply to late payment interest charges, to penalties for failure to 
timely file required premium information, or to penalties for late 
payment of termination premiums.
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Alternative Premium Funding Target Elections

    For plan years beginning after 2007, PBGC's premium regulations 
allow a plan to elect to use the alternative premium funding target to 
calculate its variable rate premium (VRP). The regulations require that 
such an election be filed with PBGC before the VRP due date. A plan 
makes an election by

[[Page 57083]]

checking box 5 in part II (Alternative Premium Funding Target Election) 
of the comprehensive premium filing for the first plan year to which 
the election applies.\3\ If an election to use the alternative premium 
funding target is not in effect, the plan must calculate its VRP using 
the standard premium funding target.\4\
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    \3\ Premium information must be submitted electronically. PBGC 
provides on its Web site,  http://www.pbgc.gov, filing instructions 
that include an illustrative form with a line number for each data 
element. This Notice refers to those line numbers.
    \4\ This Notice will refer to use of the alternative premium 
funding target as the ``alternative method'' and to use of the 
standard premium funding target as the ``standard method.''
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    For 2008 and 2009 plan years, over ninety-five percent of the plans 
that used the alternative method filed valid elections to do so. 
However, some plans that used the alternative method did not make a 
valid election to do so and later requested that PBGC treat them as 
having made a valid election. In response, on June 16, 2010, PBGC 
issued Technical Update 10-2, under which a plan was deemed to have 
made a valid election if certain conditions were met.
    Most plans with box 5 errors for 2008 or 2009 plan years were 
eligible for the Technical Update 10-2 relief or were granted similar 
relief upon reconsideration based on the facts and circumstances. PBGC 
spent considerable time reviewing requests for reconsideration to 
ensure that due process was followed, that plans with similar 
situations were treated consistently, and that discretion was exercised 
fairly and reasonably. To date, PBGC has denied fewer than 50 requests 
for reconsideration with respect to box 5 errors in 2008 or 2009 plan 
years.
    Premium payers and pension professionals requested further relief 
from box 5 errors, including relief for plan years starting after 2009 
and relief for plans that did not qualify for the Technical Update 10-2 
relief for 2008 and 2009 plan years.

Relief for Plan Years Beginning After 2009

    PBGC has taken steps to reduce box 5 errors for 2010 and later plan 
years. The agency has modified its online Premium Filing application 
(MyPAA) to provide additional ``error check'' or ``alert'' notices. 
PBGC assists vendors with their systems and encourages vendors to have 
similar error check and alert notices as MyPAA. PBGC urges all filers 
to check filings to avoid making errors, pay close attention to the 
MyPAA warnings, and print and save receipts showing that filings are 
actually submitted.
    Despite these efforts, PBGC still occasionally finds box 5 errors. 
PBGC is providing relief similar to, but more expansive, than the 
relief provided in Technical Update 10-2 for plan years beginning after 
2009. Specifically, relief is available where the plan used the 
alternative method to determine the VRP for the applicable plan year 
without filing a valid election to do so for the applicable plan year 
or a prior plan year. Similar relief is available where the plan used 
the standard method, but inadvertently made an election to use the 
alternative method for the applicable plan year (e.g., box 5 was 
checked because of an errant mouse click).
    In either case, PBGC bases its determination of which method was 
used to determine the VRP for the applicable plan year solely on the 
information reported in line 7d(1) of part III (Premium Information). 
For example, if ``alternative'' is checked, PBGC determines that the 
alternative method was used.
    If an election to use the alternative method is invalid solely 
because the filing was submitted after the due date, relief is 
available only if the filing is not an amendment of a timely filing in 
which the plan used the standard method to determine the VRP and the 
filing is submitted by the earlier of:
     The 90th day after the filing due date.
     The 30th day after the date of any PBGC notification that 
no filing has been received.\5\
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    \5\ PBGC generally notifies plans within 30 days of the filing 
due date.
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    PBGC is contacting plans entitled to this relief to explain the 
options and actions required, if any (e.g., whether the inconsistent 
filing must be amended). Plans that do not qualify for this relief may 
seek reconsideration based on the facts and circumstances.

Premium Penalty Relief for 2008 and 2009 Plan Years

    In situations where a plan with a box 5 error for 2008 or 2009 plan 
years was not eligible for the Technical Update 10-2 relief and a 
request for reconsideration was denied (or not submitted), the plan was 
required to amend the applicable premium filing and recalculate the VRP 
using the standard method. In some cases, this resulted in additional 
premium being due. Because the additional premium was paid after the 
due date, late payment charges (penalties and interest) were assessed 
on the additional premium. In many cases, the late payment penalties 
were equal to 100 percent of the additional premium. In response to 
concerns of premium payers and pension professionals, PBGC will waive 
premium penalties in connection with these errors for 2008 and 2009 
plan years.
    PBGC will also waive premium penalties for plans that used the 
standard method but inadvertently checked box 5 and were required to 
recalculate the VRP using the alternative method.
    PBGC will contact plans entitled to this penalty relief. If a plan 
entitled to this relief has already paid the late payment penalty, the 
penalty amount will be converted into a credit that can be used to 
offset future premiums. If a plan entitled to this relief has not 
amended the relevant filing and paid the additional premium due, PBGC 
will waive the penalty only if the filing is amended and the additional 
premium paid within 30 days of the notification.

Contact information

    For questions, contact Robert Callahan of the Financial Operations 
Department at 202-326-4067, ext. 3258, or [email protected] or 
Bill O'Neill, at 202-346-4067, ext. 6758, or [email protected].

    Issued in Washington, DC this 9th day of September, 2011.
Joshua Gotbaum,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2011-23692 Filed 9-14-11; 8:45 am]
BILLING CODE 7709-01-P