The Pension Benefit Guaranty Corporation (PBGC) is reducing penalties for late payment of premiums in an effort to reduce regulatory costs and make it easier for plan sponsors to maintain traditional pension plans.
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“We’re committed to reducing the regulatory burdens of sponsoring a pension plan,” said PBGC Director Tom Reeder, quoted in a press release. “This change is one of the ways we can help employers that are keeping their defined benefit pension plans and providing the security of lifetime income for workers and retirees.”
As premiums have risen, so have the penalties for late payment because they are calculated as a percentage of the premiums.
The final rule implementing the changes first proposed in April was published in the Federal Register on September 23, 2016. Under the final rule, penalty rates and caps are both cut in half. For sponsors with good payment histories that pay promptly following notification of late payment, PBGC will reduce the penalty an additional 80 percent.
The changes apply to both single-employer and multiemployer plans, and will apply to late premium payments for plan years beginning in 2016 or later.