PBGC pushes back flat rate premium due date
By Dan Berman
The Pension Benefits Guaranty Corp. published a final rule on Friday pushing back the due date for flat rate premiums paid by large corporate retirement plans.
The payments are due Oct. 15, the same deadline for paying variable rate premiums. The original deadline was Feb. 28. The PBGC, which is the insurer for corporate pension plans, said the change was made as part of its effort to simplify rules and make them less burdensome.
In the past, the date premiums were due depended on the size of the plan. Now, all plans will be governed by the same deadline.
Corporations pay two types of premiums to the PBGC. The flat rate is based on the number of plan participants. For this year, the rate is $49 per participant. The variable rate is dependent on the amount of unfunded liabilities carried by a pension fund. That premium is $14 for every $1,000 of underfunding.
The budget passed by Congress last month included increases in the premiums. Some analysts said the hikes could increase the costs of administering a plan by as much as 3 percent per year.
The premium hikes were instituted to ease the agency’s deficit, which in November was reported to be $36 billion. The PBGC insures pension plans with nearly 44 million current and future beneficiaries. It pays benefits to 1.5 million people in plans that have failed.
The agency has about $85 billion in assets from the pension plans it has taken over, premiums and investment income to cover its annual operating losses. But it estimates its potential exposure to future pension losses from financially weak companies at about $292 billion.
Each month, the PGBC sets the interest rate that pension funds must use to calculate lump sum payments when employer sponsored plans are terminated. The rate for January was set at 1.75 percent, the same as the previous two months.
Originally published on BenefitsPro.com