April 28, 2016
On April 28, 2016, the Pension Benefit Guaranty Corporation (PBGC) published proposed regulations that, if finalized, would reduce penalties by 50 percent for late payment of premiums and further reduce the penalty for certain plan sponsors making involuntary corrections. The changes would apply to all penalties for premium payments due for 2016 and later plan years.
Under the proposed regulations, the reduced penalty would be ½ percent of the missed premiums per month, up to a maximum of 25 percent, for voluntary corrections (i.e., when the plan sponsor pays before being notified by the PBGC). For involuntary corrections, when the PBGC notifies the plan sponsor first, the reduced penalty would be 2½ percent of the missed premiums per month up to a maximum of 50 percent. This penalty would be further reduced to ½ percent per month, up to a maximum of 25 percent (the same as voluntary correction), if the plan sponsor has “demonstrated a commitment to premium compliance.” A plan sponsor has demonstrated such a commitment if it has paid its premiums on time for the preceding 5 plan years (ignoring years for which the PBGC waived the penalty) and pays the currently late premiums, plus the reduced penalty, within 30 days of notification.
Comments on the proposed regulation are due June 27, 2016.
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