The rule adopts policy guidance on premium penalty waivers, including guidance on the meaning of “reasonable cause” for premium penalty waivers, according to a press release from the nation’s privage pension insurer.
The Employee Retirement Income Security Act (ERISA) Section 4007 authorizes the agency to assess penalties for not paying premiums in full and on time. The final rule said that the most common reason for waiving a penalty is reasonable cause.
According to the final rule, reasonable cause is generally found for:
- Circumstances Beyond Control: The violation arises from circumstances beyond the control of the person whose action or inaction may be the basis for a penalty assessment.
- Ordinary Business Care and Prudence: The failure could not be avoided by exercising ordinary business care and prudence. The size of the organization and of the premium involved may affect the ordinary business care and prudence that is expected in order to find reasonable cause.
The premium penalty policy appendix to the final rule includes examples of situations where reasonable cause might be found, including the sudden and unexpected absence or inability to act of a responsible individual. It also includes the destruction of relevant records or inability to comply resulting from a fire or other casualty or natural disaster and reasonable reliance on erroneous oral or written communication by a PBGC employee.
For the convenience of the public, this guidance is being codified as an appendix to PBGC’s premium payment regulation. It will become effective on December 18, 2006.