The Pension Benefit Guaranty Corporation has modified the Comprehensive Premium Filing Instructions for 2018 Plan Years. The PBGC made the announcement on Sept. 4.
The PBGC made the modifications on pages 2 and 35 of the instructions. On page 2, the PBGC updated payment address information; on page 35, the PBGC made changes to clarify the application of a variable-rate premium exemption.
Page 35 now says that some single-employer plans are exempt from the variable-rate premium; others may have a variable-rate premium of $0. In both cases, this section must be completed in accordance with the following instructions.
A single-employer plan may claim an exemption from the variable-rate premium if it meets the requirements for any of these exemptions:
New or newly covered small plans other than continuation plans. A plan qualifies for this exemption if it is a new or newly covered plan and a small plan, but not a continuation plan.
Standard termination — closing out in current year. A plan qualifies for this exemption if it makes a final distribution of assets in a standard termination during the premium payment year. This means that by year-end, benefits for participants covered by the plan on the unfunded vested benefits (UVB) valuation date will be distributed in accordance with PBGC’s standard termination regulation, and PBGC coverage of such benefits will cease.
This exception may be claimed in anticipation of a full distribution by plan year-end even if that hasn’t happened by the time the filing is submitted. However, the final distribution is not completed by the end of the year, the exemption will not apply. In that case, the filing will need to be amended accordingly and late payment charges will be assessed on any variable-rate premium owed and paid after the applicable due date.
To avoid the possibility of late payment charges arising if the final distribution takes longer than expected, one can consider the alternative approach described in the “Short Plan Years” part of the “Who Must File.”
Standard termination — proposed termination date in a prior year. A plan qualifies for this exemption if notices of intent to terminate in a standard termination were issued in accordance with ERISA Section 4041(a)(2), setting forth a proposed termination date before the beginning of the premium payment year. To qualify for this exemption, it is not necessary that the plan make a final distribution of assets during the premium payment year. However, this exemption is conditioned on the plan’s ultimately making a final distribution of assets in full satisfaction of its obligations under the standard termination. If that doesn’t happen, the premium that would otherwise have been required will be due retroactive to the applicable due date.
Plans with no vested participants. A plan qualifies for this exemption if it has no participants with vested benefits as of the UVB valuation date.
Section 412(e)(3) plans (formerly called 412(i) plans). A plan qualifies for this exemption if it is described in Internal Revenue Code Section 412(e)(3) and associated regulations on the UVB valuation date.
If an exemption applies, check the applicable box to indicate which exemption applies and skip to item 8. If more than one exemption applies, check all applicable boxes.
Additional information for practitioners is available on the PBGC’s Employers & Practitioners web page.
The PBGC made the modifications on pages 2 and 35 of the instructions. On page 2, the PBGC updated payment address information; on page 35, the PBGC made changes to clarify the application of a variable-rate premium exemption.
Page 35 now says that some single-employer plans are exempt from the variable-rate premium; others may have a variable-rate premium of $0. In both cases, this section must be completed in accordance with the following instructions.
A single-employer plan may claim an exemption from the variable-rate premium if it meets the requirements for any of these exemptions:
New or newly covered small plans other than continuation plans. A plan qualifies for this exemption if it is a new or newly covered plan and a small plan, but not a continuation plan.
Standard termination — closing out in current year. A plan qualifies for this exemption if it makes a final distribution of assets in a standard termination during the premium payment year. This means that by year-end, benefits for participants covered by the plan on the unfunded vested benefits (UVB) valuation date will be distributed in accordance with PBGC’s standard termination regulation, and PBGC coverage of such benefits will cease.
This exception may be claimed in anticipation of a full distribution by plan year-end even if that hasn’t happened by the time the filing is submitted. However, the final distribution is not completed by the end of the year, the exemption will not apply. In that case, the filing will need to be amended accordingly and late payment charges will be assessed on any variable-rate premium owed and paid after the applicable due date.
To avoid the possibility of late payment charges arising if the final distribution takes longer than expected, one can consider the alternative approach described in the “Short Plan Years” part of the “Who Must File.”
Standard termination — proposed termination date in a prior year. A plan qualifies for this exemption if notices of intent to terminate in a standard termination were issued in accordance with ERISA Section 4041(a)(2), setting forth a proposed termination date before the beginning of the premium payment year. To qualify for this exemption, it is not necessary that the plan make a final distribution of assets during the premium payment year. However, this exemption is conditioned on the plan’s ultimately making a final distribution of assets in full satisfaction of its obligations under the standard termination. If that doesn’t happen, the premium that would otherwise have been required will be due retroactive to the applicable due date.
Plans with no vested participants. A plan qualifies for this exemption if it has no participants with vested benefits as of the UVB valuation date.
Section 412(e)(3) plans (formerly called 412(i) plans). A plan qualifies for this exemption if it is described in Internal Revenue Code Section 412(e)(3) and associated regulations on the UVB valuation date.
If an exemption applies, check the applicable box to indicate which exemption applies and skip to item 8. If more than one exemption applies, check all applicable boxes.
Additional information for practitioners is available on the PBGC’s Employers & Practitioners web page.
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