A new schedule change ending the twice-a-year premium requirement to large company-sponsored pension plans, orchestrated by the Pension Benefit Guaranty Corporation, is expected to be a boon for retirement plan sponsors.
Under the new rule, the PBGC says that large plans covering more than 500 people and multiemployer plans will now have to only calculate and pay premiums once a year. The guidelines, published in the Federal Register on Jan. 3, have served to limit to the two installment payments at different times of the year.
For plan sponsors and administrators, this new development should translate into immediate savings, explains Serena Simons, senior vice president and national practice leader with benefits and HR consulting firm Segal.
Sponsors and administrators of large single-employer plans should see savings in terms of staff time as a result of the elimination of the estimated flat-rate premium filing, as plan administrative staff will not have to spend time on that filing, she told Employee Benefit News. Also, to the extent that a plans estimated flat-rate premium payment was too low and resulted in owing the PBGC interest on unpaid premiums, the elimination of the estimated premium filing eliminates any expense related to remediating an underpayment.
She states that the final rule makes Oct. 15 the sole filing date for flat-rate premiums for large plans. It was noted that the PBGC has required large plans to pay estimated premiums by Feb. 28, while most did not have a final participant count documented at that time.
Because ERISA does not offer guidance on annual due dates, the PBGC has required the February deadline since the 1980s.
The change benefits the plans because they will have an additional 7.5 months of investment growth each year on the assets that would have been paid to the PBGC as estimated premiums, says Simons.
In 2014, PBGC says the single-employer pension plans will pay a flat rate of $49 per participant and rate premium of $14 per $1,000. For multiemployer plans, cost is around $12 per participant per year.
The Washington, D.C.-based PBGC, funded solely from plan sponsor insurance premiums, assets from defunct plans and investment earnings, says premium income increased from $2.7 billion to $3.2 billion in fiscal year 2013.
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