PBGC Reduces Penalties For Late Premium Payments
The Pension Benefit Guaranty Corporation (PBGC) is reducing penalties for late payment of premiums, in an effort to reduce regulatory costs and make it easier for plan sponsors to maintain traditional pension plans. As premiums have risen, so have the penalties for late payment, because they are calculated as a percentage of the premiums. The final rule, implementing the changes first proposed in April, was published in the Federal Register on September 23 and becomes effective on October 24. Under the final rule, penalty rates and caps are both cut in half. For sponsors with a good payment history and that pay promptly following notification of late payment, the PBGC will reduce the penalty an additional 80%.
PBGC Offers to Hold Missing 401(k) Participant Benefits
The Pension Benefit Guaranty Corporation (PBGC) is proposing to expand its existing Missing Participants Program to cover terminated 401(k)s and “most other defined contribution [DC] plans and certain defined benefit [DB] plans [not] currently covered by the program.” Instead of establishing an individual retirement account (IRA) at a financial institution for each missing participant, more plans would have the option of transferring benefits to the agency itself. Under the PBGC’s proposed rule, published in the Federal Register on September 20, the program would be expanded to cover missing participants in most terminated defined contribution plans. Comments may be submitted to the PBGC on or before November 21.
Comments About Qualified Plan Document Requirements
In Announcement 2016-32, the Treasury and the Internal Revenue Service (IRS) request comments about methods they propose, to facilitate plan sponsor compliance with qualified plan document requirements, particularly in light of the changes to the IRS’ determination letter program. The methods relate to “incorporation by reference,” “circumstances under which plan provisions may not be required,” “conversion to a preapproved plan” and other relevant actions or guidance. Comments may be submitted in writing on or before December 15. Final Rule for Partial Annuities in DB Plans
The Internal Revenue Service (IRS) has issued a final rule modifying minimum present value requirements for partial annuity distribution options under defined benefit (DB) plans. The IRS believes many participants, rather than receiving a single-sum payment, are better served by having the option to receive a portion of their retirement benefits in annuity form, along with accelerated payments for the remainder of their benefits. In its regulation, the IRS says that, in the case of a defined benefit plan that offers a single-sum or other form of accelerated distribution as an optional form of benefit in addition to the required qualified joint and survivor annuity (QJSA), many participants have been reluctant to elect lifetime payments to insure against unexpected longevity—instead they choose an accelerated distribution form, to maximize their liquidity.
Updates to Employee Plans Compliance Resolution System
The Internal Revenue Service (IRS) has issued Revenue Procedure 2016-51, updating the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of Sections 401(a), 403(a), 403(b), 408(k) or 408(p) of the Internal Revenue Code (IRC) but that have not met these requirements for a period of time. It addresses changes to the determination letter program, the Audit Closing Agreement Program and modifications to user fees. The revenue procedure modifies and supersedes Revenue Procedure 2013-12, the prior consolidated statement of the correction programs under the Employee Plans Compliance Resolution System (EPCRS).