By Pension and Benefits Editorial Staff
The Pension Benefit Guaranty Corporation (PBGC) has provided new flexibility for variable-rate premium filers, a continuation of the Administration’s efforts to help support economic recovery and mitigate the effects of the coronavirus pandemic (COVID-19). The relief that the PBGC is providing will generally enable plan sponsors to take advantage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act extension of the due date for certain pension contributions and still ultimately pay the same variable-rate premium they would have owed had the plan received all prior year contributions by the regular contribution due date.
On March 27, 2020, President Trump signed into law the CARES Act, which provides that certain pension contributions that would otherwise be due during 2020 are due on January 1, 2021. However, the CARES Act did not provide any special rules related to PBGC premiums. The PBGC’s premium rates regulations require that to determine the value of a plan’s assets for calculating the variable-rate premium (VRP), “prior year contributions are included only to the extent received by the plan by the date the premium is filed.” The last date for a timely premium filing is October 15 for a calendar year plan.
Relief provided. For premium filings due on or after March 1, 2020, and before January 1, 2021, the date by which “prior year” contributions must be received by the plan to be included in plan assets will be extended to January 1, 2021. Thus, the discounted value of these contributions received by the plan after the premium is filed, but on or before January 1, 2021, will be included in the asset value used to determine the variable-rate premium. Because of this relief, plans will be able to amend the premium filing to revise the originally reported asset value once all prior year contributions have been made and receive the corresponding refund of variable-rate premiums.
The PBGC notes that the relief being provided has no effect on premium due dates (e.g., for calendar year plans, the 2020 premium is due October 15, 2020) and does not permit a premium filing to reflect a contribution that has not yet been made.
Filing instructions. Plan administrators that wish to take advantage of this relief must amend their premium filing by February 1, 2021 to revise the variable-rate premium data after eligible prior year contributions are received by the plan. These plan administrators must include an explanation in the space provided on why the premium amount reported in the amended premium filing is less than the amount reported in the original premium filing, enter “PBGC TU-20-2,” and report the dates and amounts of contributions included in the revised asset value that were not included in the asset value reported in the original filing.
Once the amended filing is received, processed, and reviewed, the excess of the original paid premium over the revised premium will be refunded or credited to the plan’s My PAA account, depending on the option chosen by the plan administrator.
“As COVID-19 continues to affect workers, families, and job creators across the country, PBGC continues to look for opportunities to provide the relief they need,” PBGC Director Gordon Hartogensis said. “This relief will support the Administration’s efforts to continue driving economic recovery and helping those in need.”
Note that guidance issued July 20, 2020, “COVID-19-Related Single-Employer Plan Sponsors and Administrators Questions and Answers,” (see Pension Plan Guide Newsletter No. 2208, August 4, 2020) is revised.
Source: PBGC News Release No. 20-04; Technical Update 20-2.
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