PBGC Updates Premium Rates and Payment Deadlines
Earlier this year, the Pension Benefit Guaranty Corporation (“PBGC”) announced several changes affecting defined benefit pension plan sponsors in 2015, including changes to annual premium rates and scheduling. Sponsors of qualified defined benefit plans subject to ERISA’s plan termination insurance rules must pay plan termination insurance premiums to the PBGC annually.
For single-employer defined benefit plans, the PBGC charges two types of premiums:
- Flat rate premium. This is a fixed amount per participant. The PBGC raised the rate in 2015 by 16%, up from $49 to $57.
- Variable rate premium. This is based on how well the plan is funded. In 2015, the rate jumped up from $14 to $24 per $1,000 of unfunded vested benefits, and the cap was bumped up to $418 times the number of participants.
The PBGC also announced that the premium payment schedule transition rule for small pensions (generally with 100 or fewer participants) is now fully phased in. The premium due date now coincides with Form 5500 due dates. Thus, for calendar year plans, the due date is October 15.
In addition to the premium rate and payment changes, the PBGC made the following announcements:
Risk transfer activity reporting. Pension plans must now report information about the number of former employees involved in certain recent risk transfer activities — such as annuity purchases and lump sum windows. Because the reporting requirement for 2015 applies to a longer period than for subsequent years, plans may report reasonable estimates instead of exact counts.
Lookback rule approval. PBGC approval is required to start using the lookback rule in 2015, if the plan opted out in 2014. Approval is also required, with limited exceptions, to opt out of the lookback rule starting this year. The PBGC has expanded its lookback rule instructions to clarify the exceptions and to provide information on how to request approval.
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