Administration

New PBGC Premium Date Could Help Funding

February 5, 2014 (PLANSPONSOR.com) – Large single employer and multiemployer defined benefit plans may get help with funding due to a later date for paying premiums to insure their plans.

By Rebecca Moore editors@plansponsor.com | February 05, 2014

The Pension Benefit Guaranty Corporation (PBGC) is moving the flat-rate premium due date for large plans to later in the premium payment year (see “PBGC Moves Premium Date for Large Plans”). A Segal Client Alert explains, since the mid-1980s, the PBGC has required large plans to pay estimated flat-rate premiums by February 28. This payment date was adopted to give the PBGC the use of more of its premium income earlier in the year. However, because most plans would not have a final participant count by February 28, large plans had to reconcile the earlier participant count in a filing/payment due on October 15, if necessary.

“The final rule makes October 15 the sole filing date for flat-rate premiums for large calendar-year plans. Plans are no longer required to make estimated premium payments or filings," says Serena Simons, Segal's senior vice president and leader of its national retirement compliance practice. "This ruling is a welcome change because it simplifies plan administration going forward, and also because it allows trustees to have the money to use for a longer period of the plan year, given the single premium payment amount is not adjusted for the time value of money."

Simons tells PLANSPONSOR: “The money is in the plan, the assets stay in the plan longer and the plan gets the benefit of those assets—primarily in the form of investment earnings. The trustees can use the earnings for any purpose they could otherwise use plan assets. Of course that includes leaving the earnings in the plan to improve plan funding.”

Final guidance on the proposed acceleration of the flat-rate premium payment for small plans is still to come.

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