The Pension Benefit Guaranty Corporation (PBGC) proposed a stepped up enforcement program, with new penalties, for those who violate the notice requirement.
“Workers and retirees have a right to know the financial condition of their pension plan, and that they might lose some benefits if the plan terminates,” said Executive Director Bradley Belt. “This new penalty policy will give companies a stronger incentive to fulfill their obligation to keep plan participants informed.”
Under the proposed policy, available on PBGC’s website at www.pbgc.gov/regs , penalties for failure to issue an underfunding notice are tied primarily to the number of plan participants rather than the number of days of delinquency. The guideline penalty ranges from $5 to $100 per participant, depending on whether the failure is a first-time violation and whether the plan corrects the failure prior to audit.
The penalty rate would be prorated for failures corrected within a year and could be adjusted up or down by the PBGC based on the facts and circumstances of the case. A stepped-up audit program, with tougher enforcement and significantly higher penalties for repeated non-compliance, will also go along with the new policy.
As a bridge to the proposed program, the agency announced a Voluntary Correction Program (VCP) to encourage administrators to correct recent notice failures on their own. The VCP generally covers any 2002 or 2003 participant notice due before May 7, 2004, that is not as of that date the subject of a PBGC audit. Under the VCP, plan administrators may avoid the penalty that would apply for a participant notice failure for the 2002 or 2003 plan year by: 1) issuing a corrective notice in accordance with the VCP by the 2004 participant notice due date; and 2) notifying PBGC, within 30 days after the 2004 participant notice due date, that they are participating in the VCP.
Comments on the proposed penalty policy, which will appear in the Federal Register on May 7, 2004, must be received by July 6, 2004, and may be submitted electronically through the PBGC’s Web site.
More information about the VCP and the participant notice requirements is available at www.pbgc.gov/participantnotice .
The PBGC steps in to take over private-sector pension plans from ailing companies or those mired in bankruptcy proceedings who are no longer able to meet their pension obligations. it is funded by insurance premiums from covered companies and investment income.
« Catching Up on EGTRRA Conformity