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<nobr>Jun 27, 2011</nobr>
ERIC Urges PBGC to Review Procedures Relating to Premium Filings and Imposition of Excessive Penalties
ERIC and other business trade associations in a June 24 letter to the PBGC requested that the agency review its procedures relating to premium filings and imposition of excessive penalties.
A copy of the letter can be accessed by clicking the link below:
http://www.eric.org/public/resources/GrpLtr_PBGC_0623CheckBoxIssue.pdf
The letter describes issues that various large companies are having with premium filings under Technical Update 10-2 and urges the PBGC implement a more reasonable standard regarding imposition of penalties.
The PBGC provided relief in Technical Update 10-2 to certain plans that intended to elect to use the alternative premium funding target to calculate the variable rate premium (VRP) that failed to check box 5 for the 2008 plan year or for certain 2009 plan years. The letter contends that, in a number of cases, the same confusion that led to a failure to check box 5 also led to other errors, and thus, the "one error" approach does not provide an equitable solution.
The letter urges the PBGC to provide the same relief, i.e., "deeming" the plan to have made a valid APFT election, to a broader class of plans, including where:
1) There is clear evidence (e.g., correspondence with the actuary, corporate records, etc.) that, on or before the premium filing deadline, the plan administrator intended to elect the APFT,
2) The plan administrator made a bona fide, good faith effort to comply with the PBGC's premium filing requirements, and
3) There is no evidence of any "gaming" of the system (e.g., making an election decision based on hindsight as to the direction of interest rates) in connection with the APFT election.
With respect to the penalty system, the group expresses concern about the standards being applied by the PBGC, contending that applying penalties whenever any mistake affects timely payment is not appropriate, and suggests that a revised approach to penalties is necessary.
The letter argues that it is very disturbing that the PBGC's current position is that any oversight affecting timely payment is a cause for penalties, and urges the PBGC to announce that inadvertent errors, such as clerical errors, that are made despite a clear intent to comply will not give rise to penalties.
The latest letter follows up on ERIC's May 2010 letter to the PBGC urging the agency to reconsider its position of not allowing plan sponsors to clarify what they believed was their intent to elect the alternative premium funding target in their PBGC comprehensive premium filings.
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For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
tgodbout@eric.org
www.eric.org
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