[Federal Register Volume 78, Number 141 (Tuesday, July 23, 2013)]
[Proposed Rules]
[Pages 44056-44069]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17561]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4000, 4006, 4007, and 4047

RIN 1212-AB26


Premium Rates; Payment of Premiums; Reducing Regulatory Burden

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: The Pension Benefit Corporation (PBGC) proposes to make its 
premium rules more effective and less burdensome. Based on its 
regulatory review under Executive Order 13563 (Improving Regulation and 
Regulatory Review), PBGC proposes to amend its regulations on Premium 
Rates and Payment of Premiums to simplify due dates, coordinate the due 
date for terminating plans with the termination process, make 
conforming and clarifying changes to the variable-rate premium rules, 
provide for relief from penalties, and make other changes. Large plans 
would no longer have to pay flat-rate premiums early; small plans would 
get more time to value benefits. These amendments would be effective 
starting 2014. PBGC also proposes to amend its regulations in 
accordance with the Moving Ahead for Progress in the 21st Century Act.

DATES: Comments must be submitted on or before September 23, 2013.

ADDRESSES: Comments, identified by Regulation Identifier Number (RIN) 
1212-AB26, may be submitted by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the Web site instructions for submitting comments.
     Email: reg.comments@pbgc.gov.
     Fax: 202-326-4112.
     Mail or Hand Delivery: Regulatory Affairs Group, Office of 
the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington, DC 20005-4026.
    All submissions must include the Regulation Identifier Number for 
this rulemaking (RIN 1212-AB26). Comments received, including personal 
information provided, will be posted to www.pbgc.gov. Copies of 
comments may also be obtained by writing to Disclosure Division, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington DC 20005-4026, or calling 202-326-4040 during 
normal business hours. (TTY and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Assistant General 
Counsel for Regulatory Affairs (klion.catherine@pbgc.gov), or Deborah 
C. Murphy, Senior Counsel (murphy.deborah@pbgc.gov), Office of the 
General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street 
NW., Washington DC 20005-4026; 202-326-4024. (TTY and TDD users may 
call the Federal relay service toll-free at 800-877-8339 and ask to be 
connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION: 

Executive Summary--Purpose of the Regulatory Action

    This rulemaking is needed to make PBGC's premium rules more 
effective and less burdensome. The proposed rule simplifies and 
streamlines due dates, coordinates the due date for terminating plans 
with the termination process, makes conforming changes to the variable-
rate premium rules, clarifies the computation of the premium funding 
target, reduces the maximum penalty for delinquent filers that self-
correct, and expands premium penalty relief.
    PBGC's legal authority for this action comes from section 
4002(b)(3) of the Employee Retirement Income Security Act of 1974 
(ERISA), which authorizes PBGC to issue regulations to carry out the 
purposes of title IV of ERISA, and section 4007 of ERISA, which gives 
PBGC authority to set premium due dates and to assess late payment 
penalties.

Executive Summary--Major Provisions of the Regulatory Action

Due Date Changes

    Premium due dates currently depend on plan size. Large plans pay 
the flat-rate premium early in the premium payment year and the 
variable-rate premium later in the year. Mid-size plans pay both the 
flat- and variable-rate premiums by that same later due date. Small 
plans pay the flat- and variable-rate premiums in the following year. 
PBGC proposes to simplify the due-date rules by providing that all 
annual premiums for plans of all sizes will be

[[Page 44057]]

due on the same day in the premium payment year--the historical 
variable-rate premium due date. The following table shows how 2014 due 
dates would change for calendar-year plans.

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                                                                      Current regulation             Proposal
                                                              --------------------------------------------------
                          Plan size                               Flat-rate      Variable-rate
                                                                   premium          premium       Entire premium
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Large........................................................        2/28/2014       10/15/2014       10/15/2014
Mid-size.....................................................       10/15/2014       10/15/2014       10/15/2014
Small........................................................        4/30/2015        4/30/2015       10/15/2014
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    For a plan terminating in a standard termination, the final premium 
may come due months after the plan closes its books and thus be 
forgotten. Correcting such defaults is inconvenient for both plans and 
PBGC. To forestall such problems, PBGC proposes to set the final 
premium due date no later than the last day the post-distribution 
certification can be submitted without penalty. Conforming changes to 
other due date rules are also proposed.

Variable-Rate Premium Changes

    Some small plans determine funding level too late in the year to be 
able to use current-year figures for the variable-rate premium by the 
new uniform due date. To address this problem, PBGC proposes that small 
plans generally use prior-year figures for the variable-rate premium.
    To facilitate the due date changes, no variable-rate premium would 
generally be owed for a plan's first year of coverage or for the year 
in which a plan completed a standard termination.
    In response to inquiries from pension practitioners, PBGC proposes 
to clarify the computation of the premium funding target for plans in 
``at-risk'' status for funding purposes.

Penalty Changes

    PBGC assesses late premium payment penalties at 1 percent per month 
for filers that self-correct and 5 percent per month for those that do 
not. The differential is to encourage and reward self-correction. But 
both penalty schedules have the same cap--100 percent of the 
underpayment--and once the cap is reached, the differential disappears. 
To preserve the self-correction incentive and reward for long-overdue 
premiums, PBGC proposes to reduce the 1-percent penalty cap from 100 
percent to 50 percent.
    PBGC also proposes to codify in its regulations the penalty relief 
policy for payments made not more than seven days late that it 
established in a Federal Register notice in September 2011 and to give 
itself more flexibility in exercising its authority to waive premium 
penalties.

Other Changes

    PBGC also proposes to amend its regulations to accord with the 
Moving Ahead for Progress in the 21st Century Act and to avoid 
retroactivity of PBGC's rule on plan liability for premiums in distress 
and involuntary terminations.

Background

    PBGC administers the pension plan termination insurance program 
under title IV of the Employee Retirement Income Security Act of 1974 
(ERISA). Under ERISA sections 4006 and 4007, plans covered by the 
program must pay premiums to PBGC. PBGC's premium regulations--on 
Premium Rates (29 CFR part 4006) and on Payment of Premiums (29 CFR 
part 4007)--implement ERISA sections 4006 and 4007.
    On January 18, 2011, the President issued Executive Order 13563, 
``Improving Regulation and Regulatory Review,'' to ensure that Federal 
regulations seek more affordable, less intrusive means to achieve 
policy goals, and that agencies give careful consideration to the 
benefits and costs of those regulations. In response to and in support 
of the Executive Order, PBGC on August 23, 2011, promulgated its Plan 
for Regulatory Review,\1\ noting several regulatory areas--including 
premiums--for immediate review. Small-plan premium due date issues, and 
penalties for premium filings made just past the deadline, were 
identified in the regulatory review plan as being among the promising 
candidates for action.
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    \1\ See http://www.pbgc.gov/documents/plan-for-regulatory-review.pdf.
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    On September 15, 2011,\2\ and February 9, 2012,\3\ PBGC published 
policy notices implementing some of the premium initiatives discussed 
in the regulatory review plan. In the September 15 notice, PBGC 
announced (among other things) that--based on its review and on 
comments from premium payers and pension professionals--it would waive 
premium late-payment penalties that are assessed solely because premium 
payments are late by not more than seven calendar days. The February 9 
notice created a limited-time penalty relief program for plans that had 
never paid required premiums.
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    \2\ See 76 FR 57082, http://www.pbgc.gov/Documents/2011-23692.pdf.
    \3\ See 77 FR 6675, http://www.pbgc.gov/Documents/2012-3054.pdf.
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    PBGC has continued its review of its premium regulations and has 
identified other ways to simplify and clarify the regulations, reduce 
burden, provide penalty relief, and generally make the regulations work 
better. This proposed rule would amend the premium regulations to 
implement those improvements (and to codify the seven-day policy 
announced in the September 15 notice). Public comment on this proposal 
will help PBGC determine whether its regulation review process is 
moving in the right direction. PBGC will continue to review its 
regulations with a view to developing more ideas for improvement.

Introduction

    The premium regulations were amended, for plan years beginning 
after 2007, to conform to changes in the statute made by the Pension 
Protection Act of 2006 (PPA 2006). The amendments changed how premiums 
are computed and paid.
    There are two kinds of annual premiums.\4\ The flat-rate premium is 
based on the number of plan participants, determined as of the 
participant count date. The participant count date is generally the 
last day of the plan year preceding the premium payment year; in some 
cases, however (such as for plans that are new or are involved in 
certain mergers or spinoffs), the participant count date is the first 
day of the premium payment year. The variable-rate premium (which 
applies only to single-employer plans) is based on a plan's unfunded 
vested benefits (UVBs)--the excess of its premium funding target over 
its assets. The premium funding target and asset values are determined 
as of the plan's UVB valuation date for the premium payment

[[Page 44058]]

year, which is the same as the valuation date used for funding purposes 
for that year. In general, the UVB valuation date is the beginning of 
the premium payment year, but some small plans (with fewer than 100 
participants) may have UVB valuation dates as late as the end of the 
year.
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    \4\ There is also a termination premium, which would be 
unaffected by this proposed rule.
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    Under ERISA section 4007, premiums accrue until plan assets are 
distributed in a standard termination or a failing plan is taken over 
by a trustee. A plan undergoing a standard termination is exempt from 
the variable-rate premium for any plan year after the year in which the 
plan's termination date falls.\5\ This proposed rule reflects the 
provision in Rev. Rul. 79-237 (1979-2 C.B. 190) that minimum funding 
standards apply only until the end of the plan year that includes the 
termination date.
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    \5\ See Exemption for Standard Terminations, below.
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    Section 4007 authorizes PBGC to set premium due dates and assess 
penalties for failure to pay premiums timely. Before 2008, all 
variable-rate premiums were due 9\1/2\ calendar months after the 
beginning of the premium payment year (October 15 for calendar-year 
plans). Most flat-rate premiums were also due on that date. However, 
flat-rate premiums for large plans (those with 500 or more 
participants) were due two calendar months after the beginning of the 
premium payment year (the end of February for calendar-year plans).\6\ 
Most large plans estimate this premium because they find it impractical 
to count participants that quickly after the participant count date.
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    \6\ This requirement was adopted in response to a recommendation 
in the 1984 report of the Grace Commission (the President's Private 
Sector Survey on Cost Control). See PBGC final rule at 50 FR 12533 
(Mar. 29, 1985).
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    The PPA 2006 amendments to the premium regulations changed the 
variable-rate premium due date for small plans (those with fewer than 
100 participants) to four months after the end of the premium payment 
year to accommodate their statutory option under PPA 2006 to value 
benefits as late as the end of the year. The participant count date, on 
which the flat-rate premium is based, remained the same for small plans 
as for other plans, so that small plans needed no extra time to 
determine the flat-rate premium. Nonetheless, for simplicity, small 
plans' flat-rate premium due date was made the same as the variable-
rate due date.
    Late payment penalties accrue at the rate of 1 percent or 5 percent 
per month of the unpaid amount, depending on whether the underpayment 
is ``self-corrected'' or not. Self-correction refers to payment of the 
delinquent amount before PBGC gives written notice of a possible 
delinquency. Penalties are capped by statute at 100 percent of the 
unpaid amount. Recognizing that most large plans pay an estimate of the 
flat-rate premium at the early due date and ``true up'' when they pay 
the variable-rate premium later in the year, the premium payment 
regulation provides an elaborate system of safe harbors from late-
payment penalties for estimated large-plan flat-rate premiums.

Due Date Proposals

Uniform Due Dates for Plans of All Sizes

    The historical variable-rate premium due date--9\1/2\ months after 
the beginning of the premium payment year--was established by PBGC in 
1998 \7\ to correspond with the extended due date for the annual report 
for the prior year that is filed on Form 5500. Coordination of the 
premium and Form 5500 due dates promotes consistency and simplicity and 
avoids confusion and administrative burden. PBGC now proposes to 
eliminate the current system of three premium due dates that depend on 
plan size and premium type and return to that historical due date for 
both flat- and variable-rate premiums of plans of all sizes. For 
calendar-year plans, the due date would be October 15.
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    \7\ See 63 FR 68684 (Dec. 14, 1998).
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    Eliminating large plans' special flat-rate premium due date would 
eliminate the need for the complex penalty safe harbor rules that now 
apply to underestimates of the flat-rate premium.\8\ And for many large 
plans, it would cut the number of filings by two, rather than just one. 
That is because underestimating the flat-rate premium gives rise not 
only to penalties (which can be waived) but also to interest (which 
cannot be waived). Thus, after paying an estimate of the flat-rate 
premium, and then paying the balance due, a large plan must make yet 
another payment, of the interest on the amount by which its initial 
estimated payment fell short of the correct amount. Eliminating the 
need for flat-rate premium estimates would eliminate interest payments 
on shortfalls in those estimates.
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    \8\ See discussion under the heading Flat-rate safe harbors, 
below.
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    For small plans, the unified due date proposal raises a timing 
issue. As noted above, the current small-plan due date comes after the 
premium payment year is over because some small plans value benefits at 
the end of the year and thus cannot calculate variable-rate premiums by 
a due date that falls within the year. (For example, a small calendar-
year plan that values benefits as of December 31 cannot determine the 
premium by the preceding October 15, the historical due date that this 
proposal would return to.) PBGC's proposed solution to this timing 
problem is for small plans to determine the variable-rate premium using 
data from the year before the premium payment year. This solution is 
discussed in more detail under the heading ``Look-Back'' Rule for Small 
Plans, below.
    The premium payment regulation provides an option for paying an 
estimate of the variable-rate premium at the due date and ``truing up'' 
within 6\1/2\ months without penalty. The availability of this option 
is currently restricted to mid-size and large plans. With the 
elimination of different due dates based on plan size, the option would 
be available to plans of any size. PBGC expects that very few small 
plans will take advantage of the option, since in virtually all cases, 
the variable-rate premium will be known by the uniform due date. PBGC 
requests comments on whether extending this option to small plans would 
on balance be beneficial or create undue opportunity for error and 
attendant inconvenience. For example, a filer that inadvertently 
designated a filing as estimated would be contacted by PBGC if a timely 
reconciliation filing was not made.
    The change to a uniform due date would mean that plan consultants 
could do all premium and Form 5500 filing chores at one time, once a 
year. PBGC would receive all premium filings for each plan year at one 
time, specific to that year, and would be able to process a plan's 
entire annual premium in a single operation. Going from three due dates 
to one would be simpler for all concerned--even for mid-size plans, 
whose due date would not change. Simpler rules mean shorter and simpler 
filing instructions--instructions that PBGC must update annually and 
that plan administrators of plans of all sizes must read, understand, 
and follow. Less complexity means less chance for mistakes and the time 
and expense of correcting them. Moving to one uniform due date would 
also simplify PBGC's premium processing systems and save PBGC money on 
future periodic changes to those systems (because it is less expensive 
to modify simpler systems).
    In short, PBGC believes that this change would produce a 
significant reduction in administrative burden for both plans and PBGC. 
It would also shift the earnings on premium payments between plans and 
PBGC for the time

[[Page 44059]]

between the old and new due dates, but overall, plans would gain.\9\
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    \9\ See Uniform Due Dates under Executive Orders 12866 and 
13563, below, for detailed discussion of costs and benefits.
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Terminating Plans' Due Date

    The foregoing discussion focuses on the normal due dates for annual 
premiums. There are also special due date rules for new and newly 
covered plans and for plans that change plan year. But there is no 
special due date provision for terminating plans--and yet such plans 
pose a special problem, because their final premium due date may come 
months after all benefits have been distributed and their books have 
been closed. Although the standard termination rules require that 
provision be made for PBGC premiums,\10\ PBGC's experience is that once 
the sometimes-difficult process of distributing benefits is over--and 
with the premium due date often months in the future--plan 
administrators may simply forget about premiums and consider their work 
done. Months later, when PBGC contacts them after they fail to file, it 
is typically an inconvenience, and sometimes an annoyance, to go back 
to (or reconstruct) the records to calculate and pay premiums--and 
interest and penalties, because the due date has been missed.
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    \10\ See 29 CFR 4041.28(b).
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    With a view to ensuring that final-year premiums are routinely paid 
for plans undergoing standard terminations, PBGC proposes to change the 
due date to bring it within the standard termination timeline.\11\ The 
final event in the standard termination timeline is the filing of the 
post-distribution certification under Sec.  4041.29 of PBGC's 
regulation on Plan Terminations (29 CFR part 4041). The plan 
administrator of a terminating plan must file the certification (on 
PBGC Form 501) within 30 days after the last benefit distribution date, 
but no late filing penalty is assessed if the filing is within 90 days 
after the distribution deadline under Sec.  4041.28(a) of the 
termination regulation. The proposed rule provides that the premium due 
date for a terminating plan's final year would be the earliest of (1) 
the normal premium due date, (2) the last date by which the post-
distribution certification can be filed without penalty, or (3) the 
date when the post-distribution certification is actually filed.
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    \11\ See p. 3 of the Standard Termination Filing Instructions, 
http://www.pbgc.gov/documents/500_instructions.pdf.
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    Because the final year premium filing would not be required any 
earlier than 90 days after distributions were complete, and the normal 
premium due date (under the unified due date proposal) would be nine-
and-a-half months after the plan year begins, only plans closing out in 
the first six-and-a-half months of the final year would face an 
accelerated premium deadline. For plans closing out in the last five-
and-a-half months of the final year, the normal premium due date would 
come before the last date by which the post-distribution certification 
could be filed without penalty.
    The 90 days (or more) between the completion of final distributions 
and the accelerated premium deadline would also give a plan at least 
that much time to determine the flat-rate premium (which is based on 
the participant count at the end of the prior year). For a terminating 
plan, counting participants should be relatively easy. Because it is in 
the process of providing benefits for (or for the survivors of) each 
participant, a terminating plan must necessarily have a roster of all 
participants. By simply subtracting from the roster the participants 
who received distributions before the participant count date, the plan 
can determine the participant count.
    Computing a variable-rate premium in three months might be more 
challenging, but under this proposal it would not be necessary. If the 
termination date for a standard termination is before the beginning of 
the final plan year, the existing regulation provides an exemption from 
the variable-rate premium for the final year. PBGC is proposing to 
expand this exemption to apply to a plan's final year, even if the 
termination date comes during that year.\12\ Thus, the final-year 
premium would be flat-rate only. This change would provide relief for 
the significant number of plans that close out in the same year in 
which their termination dates fall (as indicated by PBGC data on the 
number of plans that pay variable-rate premiums for the final year).
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    \12\ See Final-Year Variable-Rate Premium Exemption, below.
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    Advancing the premium due date for some terminating plans would 
shift earnings on the premiums from those plans to PBGC. But some of 
those plans should enjoy reduced administrative expenses (and possibly 
save on late charges) because the advanced deadline will prompt them to 
prepare premium filings while files are open for paying benefits. And 
some plans would avoid paying a final-year variable-rate premium under 
PBGC's proposed expansion of the exemption for plans doing standard 
terminations.\13\
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    \13\ See Final-Year Due Date under Executive Orders 12866 and 
13563, below, for detailed discussion of costs and benefits.
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    On balance, PBGC believes that there should be no net cost to plans 
and significant administrative benefits for PBGC. PBGC invites 
suggestions from the public about other approaches to the problem of 
terminating plans' final-year premiums that this change is aimed at.

New Plan Due Date Modifications

    As noted above, the existing premium payment regulation includes a 
special due date provision for new and newly covered plans. PBGC 
proposes to make two technical modifications to this provision in 
support of the primary changes it is proposing in this rule.
    The first modification would be to restore--for newly covered 
plans--the alternative due date of 90 days after title IV coverage 
begins. This alternative was available before the PPA 2006 amendments 
to the premium regulations, but those amendments set newly covered 
plans' normal due date four months after the end of the premium payment 
year--and thus more than 90 days after the latest possible coverage 
date. This made the alternative due date superfluous, and it was 
removed. Now that PBGC is proposing to return the normal due date to 
2\1/2\ months before the end of the plan year, it will again be 
possible for a plan's coverage date to be too late in the premium 
payment year to make filing by the normal due date feasible. Hence the 
restoration of this alternative due date.
    The second modification would provide an alternative due date for a 
subset of plans that would be excluded from the normal rule--discussed 
briefly above and in detail below \14\--that small plans would base the 
variable-rate premium on prior-year data. This subset would consist of 
new small plans resulting from non-de minimis consolidations and 
spinoffs. These plans would have to pay a variable-rate premium based 
on current-year data.\15\ But being small, a plan in this subset might 
have a UVB valuation date too late in the premium payment year to 
enable the plan to meet the normal filing deadline. The alternative due 
date provided by this second modification to the new-plan due date 
provision would be 90 days after the UVB valuation date, to give any 
such plan time to calculate

[[Page 44060]]

the variable-rate premium.\16\ While the circumstances in which this 
due date extension would apply may arise infrequently, PBGC invites 
comment as to whether the extension would be adequate in situations 
where it did apply.
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    \14\ See ``Look-Back'' Rule for Small Plans, below.
    \15\ See First-Year Variable-Rate Premium Exemption, below.
    \16\ To give any plan with a deferred due date adequate time to 
reconcile an estimated variable-rate premium, the reconciliation 
date would key off the due date rather than the premium payment year 
commencement date. For a normal due date, the reconciliation date 
would remain the same.
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Variable-Rate Premium Proposals

``Look-Back'' Rule for Small Plans

    As noted in the discussion of the unified due date proposal above, 
some small plans value benefits too late in the premium payment year to 
be able to compute variable-rate premiums by the proposed new uniform 
due date, which is 2\1/2\ months before the end of the premium payment 
year. To solve this problem, PBGC proposes to have small plans 
determine UVBs, on which variable-rate premiums are based, by looking 
back to data for the prior year.\17\ Because a new plan does not have a 
prior year to look back to, PBGC proposes to provide an exemption from 
the variable-rate premium for new small plans. This new variable-rate 
premium exemption is discussed in more detail under First-Year 
Variable-Rate Premium Exemption below.
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    \17\ This proposal revives a concept that was in the premium 
regulations before PPA 2006: the alternative calculation method, 
which permitted plans to determine UVBs by ``rolling forward'' 
prior-year data using a set of complex formulae. No ``rolling 
forward'' or other modification of prior-year data are involved in 
the approach that PBGC now proposes.
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    The term ``UVB valuation year'' would be used in the text of the 
regulation to mean the year that the plan administrator looks to for 
the UVBs used to calculate the variable-rate premium for the premium 
payment year. As a general rule, the UVB valuation year would be the 
plan year preceding the premium payment year for small plans, and would 
be the premium payment year for other plans. (Using the term ``UVB 
valuation year'' avoids the need to have the regulation describe two 
versions of all the UVB determination rules--one version for small 
plans and a second version for the others.)
    This ``look-back'' rule would apply only to the variable-rate 
premium, not to the flat-rate premium. The participant count on which 
the flat-rate premium is based is determined not as of the UVB 
valuation date but as of the participant count date. This date is still 
the same as it was before PPA 2006, when small plans' premium due date 
was the historical date that this proposed rule would reinstate for 
them (October 15 for calendar-year plans). From the perspective of the 
flat-rate premium, the proposal returns small plans to their situation 
before PPA 2006, and no special accommodation is needed.

Plans Subject to Look-Back Rule

    In general, PBGC proposes to have the look-back rule apply to any 
plan with a participant count for the premium payment year of up to 
100, or a funding valuation date that is not at the beginning of the 
premium payment year. Thus the ``small plans'' to which the proposed 
look-back rule would apply would be a slightly different group, 
compared to the ``small plans'' whose premium due date is currently 
four months after the end of the plan year. The difference in approach 
reflects the difference in the implications of plan size under the 
current and proposed premium payment regulations. In the current 
regulation, all plans have the same UVB valuation year, and plan size 
determines due date; under the proposed rule, all plans would have the 
same due date, and plan size would generally determine UVB valuation 
year (i.e., whether the look-back rule applies).
    The current regulation bases plan size on the participant count for 
the year before the premium payment year, so that plans can determine 
well in advance whether they are large and thus required to pay the 
flat-rate premium early in the year. New plans (which have no prior 
year) are treated as small, which means that they pay their first-year 
premiums according to the small-plan payment schedule, regardless of 
size. Newly covered plans are grouped with new plans. If a new or newly 
covered plan in fact covers more than 100 participants, it enjoys the 
luxury of the delayed small-plan due date for its first year, but the 
most PBGC can be said to have ``lost'' is 6\1/2\ months' interest on 
the premium.
    Under the look-back proposal, in contrast, if a new plan covering 
more than 100 participants were treated as small, PBGC would lose not 
just interest but the whole variable-rate premium. For some new plans--
particularly those created by consolidation or spinoff--this could be a 
very substantial sum. To avoid this unintended consequence of the look-
back rule, which is meant for plans that are genuinely small, PBGC 
proposes to base the small-plan category on the participant count for 
the premium payment year rather than the preceding year. This change 
would be possible because eliminating the early flat-rate premium due 
date for large plans would eliminate the pressure to determine plan 
size early in the premium payment year. By the time a plan needed to 
know whether it was small (and thus subject to the look-back rule), it 
would have had plenty of time to determine its participant count.
    Changing from the prior year's to the current year's participant 
count would bring PBGC's definition of ``small plan'' into closer 
alignment with the statutory category of plans eligible to use non-
first-day-of-the-year valuation dates.\18\ The somewhat complex 
statutory definition counts participants in the prior year,\19\ and 
PBGC's participant count date for the current year is generally the 
last day of the prior year. To improve the correspondence with the 
statutory provision, PBGC proposes to change from its current small-
plan numerical size range (fewer than 100 participants) to the 
numerical size range in the statute (100 or fewer participants).
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    \18\ The currently defined small plan category corresponds only 
approximately with the category of plans permitted by statute to use 
non-first-day-of-the-plan-year valuation dates. See preamble to 
PBGC's final PPA 2006 premium rule, 73 FR 15065 at 15069 (Mar. 21, 
2008).
    \19\ ERISA section 303(g)(2)(B) provides that ``if, on each day 
during the preceding plan year, a plan had 100 or fewer 
participants, the plan may designate any day during the plan year as 
its valuation date for such plan year and succeeding plan years. For 
purposes of this subparagraph, all defined benefit plans which are 
single-employer plans and are maintained by the same employer (or 
any member of such employer's controlled group) shall be treated as 
1 plan, but only participants with respect to such employer or 
member shall be taken into account.'' ERISA section 303(g)(2)(C) 
provides additional rules dealing with predecessor employers and 
providing that a plan may qualify as ``small'' for its first year 
based on reasonable expectations about its participant count during 
that year.
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    PBGC wants every plan that in fact has a non-first-day-of-the-plan-
year valuation date to be included in the definition of ``small plan'' 
that the look-back rule applies to. But because of the complexity of 
the statutory category of plans eligible to use non-first-of-the-year 
valuation dates, PBGC is reluctant to match its ``small plan'' 
definition closely to every aspect of that statutory category. PBGC's 
proposed solution is to combine a simple ``small plan'' concept with a 
``catch-all'' clause. Accordingly, PBGC proposes to apply the look-back 
rule to any plan that has a participant count of 100 or fewer for the 
premium payment year or that in fact has a funding valuation date for 
the premium payment year that is not the first day of the year.\20\
---------------------------------------------------------------------------

    \20\ As discussed above, new plans resulting from non-de minimis 
consolidations and spinoffs would be excluded from the look-back 
provision.
---------------------------------------------------------------------------

    PBGC also considered having the look-back rule apply only to plans 
that

[[Page 44061]]

actually have non-first-day-of-the-plan-year valuation dates, or only 
to plans eligible to elect such dates under the statute. PBGC rejected 
the former course because it believes that all small plans will prefer 
the look-back rule and rejected the latter course because of the 
complexity of the statutory description of plans eligible to make the 
valuation date election. PBGC invites public comment on whether there 
is an alternative to the proposed approach that would be preferable.

Effects of Due Date and Look-Back Proposals

    PBGC's look-back proposal has the advantage that it would permit 
use of a much more convenient premium due date, and it avoids the use 
of complicated mathematical manipulations aimed at making the prior-
year figures more reflective of current conditions. For small plans, 
the combination of the new due date and the look-back rule would mean 
not only that the premium due date would align with the Form 5500 due 
date (as typically extended), but that the due dates that would align 
would correspond to the same valuation. The following table 
illustrates, for filings due October 15, 2014, how the alignment of 
valuations and due dates for small plans would differ from the 
alignment for other plans.

----------------------------------------------------------------------------------------------------------------
                                                          Premium payment     UVB valuation      5500 valuation
                                                                year               year               year
----------------------------------------------------------------------------------------------------------------
Small plans............................................               2014               2013               2013
Other Plans............................................               2014               2014               2013
----------------------------------------------------------------------------------------------------------------

    Thus, not only would small plans enjoy the convenience of a 
convergence between the premium and Form 5500 due dates, but the due 
dates that converged would be tied to the same valuation. This would 
accommodate the desire of many small plan sponsors to defer the plan 
valuation until after the beginning of the year following the valuation 
date, when profits and taxes can be computed.
    For small plans, this combined due-date and look-back proposal has 
basically the same result as if the current small-plan due date (four 
months after the end of the premium payment year) were extended for 
5\1/2\ months without a look-back. For example, consider the following 
table comparing PBGC's combined proposal with a 5\1/2\-month due date 
extension (without a look-back) for a calendar-year plan:

----------------------------------------------------------------------------------------------------------------
                                     Premium payment     UVB valuation
                                           year               year                       Due date
----------------------------------------------------------------------------------------------------------------
PBGC's proposal...................               2014               2013  October 15, 2014.
Due date extension without look-                 2013               2013  October 15, 2014.
 back.
----------------------------------------------------------------------------------------------------------------

    In both cases, the premium due October 15, 2014, is based on UVBs 
determined for 2013. The difference is that under PBGC's proposal, the 
premium is being paid for 2014, whereas if the due date has been 
extended 5\1/2\ months, the premium is being paid for 2013.
    PBGC in fact considered the alternative of extending the due date 
5\1/2\ months for small plans. But premium filings contain, in addition 
to premium data, other data that PBGC uses to help determine the 
magnitude of its exposure in the event of plan termination, to help 
track the creation of new plans and transfer of participants and plan 
assets and liabilities among plans, and to keep PBGC's insured-plan 
inventory up to date. It is important that these data be as current as 
possible. Furthermore, PBGC decided it was administratively simpler to 
have all premium filings for a year be due in that year--avoiding (for 
example) the need to determine whether a filing made October 15, 2014, 
was for 2014 or 2013.
    The comparison of the advanced and deferred due date approaches 
shows why it is not clear how to analyze the financial impact of PBGC's 
proposal. On the one hand, the change can be viewed as a simple 
acceleration of the premium due date, with small plans losing 6\1/2\ 
months' interest on their annual premium payments. On the other hand, 
it can be viewed as a deferral of the due date (with small plans 
gaining 5\1/2\ months' interest on their premiums each year) preceded 
by a one-time ``extra'' premium in the transition year.\21\ For 
purposes of the analyses in this preamble of the effects of the changes 
for small plans, PBGC views the due date as being accelerated rather 
than deferred.
---------------------------------------------------------------------------

    \21\ In the transition year (using a calendar-year plan as an 
example), PBGC's proposal would result in two premium payments: one 
at the end of April for the prior year, and one in mid-October for 
the current year. (In the transition year for the existing due date 
system, small plans made no premium payments.) Under a simple due 
date extension, there would not be two due dates within the same 
year.
---------------------------------------------------------------------------

    Under the look-back proposal, small plans would pay variable-rate 
premiums based on year-old data. Plans might view this either 
positively or negatively, depending on whether UVBs were trending up or 
down; using year-old data to compute variable-rate premiums shifts by 
one year the effect of changes in those data, which are typically 
modest but may at times be dramatic. And for the first year to which 
the look-back rule applies, small plans' variable-rate premiums would 
be based on the same UVBs as for the year before, which each small plan 
might consider either beneficial or detrimental depending on its 
circumstances. PBGC invites comment on whether this approach is a 
matter of concern and suggestions for mitigating any such concern.
    In response to a request for suggestions from the public in 
connection with its review of its regulations,\22\ PBGC received a 
letter from an organization representing retirement plan professionals 
(involved primarily with small plans) requesting that the small-plan 
due date be changed, suggesting that it would be efficient to 
coordinate with the Form 5500 due date, and reiterating previous 
requests that small plans be given more time to complete valuations. 
Judging from this and other comments and questions to PBGC from pension 
practitioners, PBGC anticipates that the small-plan community will 
welcome this proposal. PBGC invites comments from small plans and their 
sponsors and consultants on the proposed change and

[[Page 44062]]

whether there are other approaches that might be more effective.
---------------------------------------------------------------------------

    \22\ See 76 FR 18134 (Apr. 1, 2011), http://www.pbgc.gov/documents/2011-7805.pdf.
---------------------------------------------------------------------------

First-Year Variable-Rate Premium Exemption

    The look-back rule faces the difficulty, noted above, that a new 
plan does not have a prior year to look back to. The typical new plan 
has no vested benefits, and so would owe no variable-rate premium with 
or without the look-back rule. But some new plans do have UVBs--for 
example, newly created plans that grant past-service credits. This 
circumstance creates a dilemma: it may be impossible for a small plan 
to base its first year's premium on its first year's UVBs (because its 
valuation date may be too late in the year), but neither can it look 
back to prior-year UVBs (because it has no prior year). To resolve this 
problem, PBGC proposes to provide an exemption from the variable-rate 
premium for small plans that are new or newly covered.\23\ PBGC 
considers it reasonable to forgo variable-rate premiums from a few new 
small plans in the interest of greatly simplifying its premium due date 
structure.\24\
---------------------------------------------------------------------------

    \23\ Newly covered plans are often not subject to the funding 
rules, on which the premium rules are based, for the year that would 
be their look-back year. It is possible for a newly covered plan to 
have been in existence as a covered plan for a portion of the 
preceding year. Such a plan would have a look-back year and would 
not need an exemption from the variable-rate premium. In the 
interest of simplicity, PBGC's proposed first-year variable-rate 
premium exemption would ignore this rare possible situation.
    \24\ Between 2008 and 2011, about 65 new small plans per year 
paid total average variable-rate premiums of a little over $82,000--
less than 2 percent of total average annual new-plan variable-rate 
premiums.
---------------------------------------------------------------------------

    However, PBGC considers plans created by consolidation or spinoff 
to be new plans. To avoid creating an incentive to sponsors of 
underfunded small plans to turn them (in effect) into new plans by 
spinoff or consolidation, simply to avoid paying variable-rate 
premiums, PBGC proposes to exclude from this variable-rate premium 
exemption any new small plan that results from a non-de minimis 
consolidation or spinoff. These consolidated or spunoff plans would not 
be subject to the look-back rule, but would instead base their 
variable-rate premiums on current-year data, with an alternative due 
date available (as discussed above) to provide time to calculate the 
premium where the UVB valuation date was late in the premium payment 
year.

Final-Year Variable-Rate Premium Exemption

    Although the existing regulation exempts a plan in a standard 
termination from the variable-rate premium for any plan year beginning 
after the plan's termination date,\25\ it is possible to carry out a 
standard termination so that the termination date and final 
distribution come within the same plan year. In that case, the plan is 
subject to the variable-rate premium--based on underfunding of vested 
benefits--for the very year in which it demonstrates, by closing out, 
that its assets are sufficient to satisfy not merely all vested 
benefits but all non-vested benefits as well.
---------------------------------------------------------------------------

    \25\ See Exemption for Standard Terminations, below.
---------------------------------------------------------------------------

    As mentioned above, PBGC proposes to expand the existing 
regulation's exemption from the variable-rate premium to include the 
year in which a plan closes out, regardless of when the termination 
date is. Like the existing exemption, the new exemption would be 
conditioned on completion of a standard termination. If the exemption 
were claimed in a premium filing made before (but in anticipation of) 
close-out, and close-out did not in fact occur by the end of the plan 
year, the exemption would be lost, and the variable-rate premium would 
be owed for that year (with late charges).
    As noted above, variable-rate premium amounts not owed because of 
this change in the variable-rate premium exemption would significantly 
offset costs attributable to the revised final-year due date rule for 
plans in standard terminations, to which this change is related.\26\
---------------------------------------------------------------------------

    \26\ See Final-Year Due Date under Executive Orders 12866 and 
13563, below, for detailed discussion of costs and benefits.
---------------------------------------------------------------------------

Premium Funding Target for Plans in At-Risk Status for Funding Purposes

    ERISA section 4006(a)(3)(E) makes the funding target in ERISA 
section 303(d) (with modifications) the basis for the premium funding 
target. The definition of ``funding target'' in section 303(d) in turn 
incorporates the provisions of ERISA section 303(i)(1), dealing with 
``at-risk'' plans. (A plan is in ``at-risk'' status if it fails certain 
funding-status tests.) ERISA section 303(i)(5) provides for 
transitioning between normal and at-risk funding targets and thus 
ameliorates the effects of section 303(i)(1). Although neither section 
303(d) nor section 303(i)(1) refers explicitly to section 303(i)(5), 
PBGC believes that section 303(i)(5) clearly applies to the 
determination of the premium funding target. PBGC proposes to add a 
provision to the premium rates regulation clarifying this point.
    ERISA section 303(i)(1)(A)(i) requires the use of special actuarial 
assumptions in calculating an at-risk plan's funding target, and 
section 303(i)(1)(A)(ii) requires that a ``loading factor'' be included 
in the funding target of an at-risk plan that has been at-risk for two 
of the past four plan years. The loading factor, described in section 
303(i)(1)(C), is the sum of (i) an additional amount equal to $700 
times the number of plan participants and (ii) an additional amount 
equal to 4 percent of the funding target determined as if the plan were 
not in at-risk status.
    In response to inquiries from pension practitioners, PBGC proposes 
to amend the premium rates regulation to clarify the application of the 
loading factor to the calculation of the premium funding target for 
plans in at-risk status.
    The statutory variable-rate premium provision refers explicitly to 
the defined term ``funding target,'' which for at-risk plans clearly 
includes the section 303(i)(1) modifications. PBGC thus considers it 
clear that all of the at-risk modifications must be reflected in the 
premium funding target. And considering that the funding target and the 
premium funding target are so closely analogous, it seems natural that 
for premium purposes, the 4 percent increment referred to in section 
303(i)(1)(C)(ii) should be taken to mean 4 percent of the premium 
funding target determined as if the plan were not in at-risk status.
    But for premium purposes, the term ``participant'' in the loading 
factor provision is ambiguous. Because the premium funding target 
reflects only vested benefits, while the funding target reflects all 
accrued benefits, there is a suggestion that the term ``participant'' 
should in the premium context be understood to refer to vested 
participants. But many participants are partially vested (as in plans 
with graded vesting) or are vested in one benefit but not another (for 
example, vested in a lump-sum death benefit but not in a retirement 
annuity) and thus are not clearly either vested or non-vested. 
Furthermore (putting vesting aside), the premium regulations (Sec.  
4006.6 of the premium rates regulation) and the Internal Revenue 
Service's regulation on special rules for plans in at-risk status (26 
CFR 1.430(i)-1(c)(2)(ii)(A)) count participants differently.
    PBGC proposes to resolve the statutory ambiguity by providing that 
the participant count to use in calculating the loading factor to be 
reflected in the premium funding target is the same participant count 
used to compute the load for funding purposes. This solution has the 
advantage that it avoids introducing new participant-counting rules and 
does not impose on

[[Page 44063]]

filers the burden of determining two different participant counts for 
two similar purposes. PBGC solicits suggestions from the public for 
alternative approaches to calculating the participant-based portion of 
the loading factor.

Penalties

Lowering the Self-Correction Penalty Cap

    The difference between the normal penalty rate of 5 percent per 
month and the self-correction rate of 1 percent per month provides an 
incentive to self-correct and reflects PBGC's judgment that those that 
come forward voluntarily to correct underpayments deserve more lenient 
treatment than those that PBGC ferrets out through its premium 
enforcement programs. But because the penalty is capped at 100 percent 
of the underpayment regardless of the rate it accrues at, a plan that 
self-corrects after 100 months pays the same penalty as if it had been 
tracked down by PBGC. PBGC occasionally encounters situations in 
which--typically when there is a change in plan sponsor or plan 
actuary--a plan with a long history of underpaying or not paying 
premiums ``comes in from the cold.'' PBGC believes that in fairness to 
such filers (and to persuade others to emulate them), the maximum 
penalty for self-correctors should be substantially less than that for 
those that do not self-correct.\27\
---------------------------------------------------------------------------

    \27\ PBGC took a step in this direction with its policy notice 
of February 9, 2012 (see discussion under Background above). 
However, the waiver of all penalties announced in that notice 
applied only for a limited time and only to plans that had never 
paid premiums.
---------------------------------------------------------------------------

    To preserve the self-correction penalty differential for long-
overdue premiums, PBGC proposes to cap the self-correction penalty at 
50 percent of the unpaid amount. While this will reduce PBGC's penalty 
income in these cases, acceptance of the reduction is consistent with 
the view of penalties as a means to encourage compliance, rather than 
as a source of revenue. PBGC invites public comment on other ways to 
encourage, and appropriately recognize, self-correction of long-ago 
failures to pay premiums.

Expansion of Penalty Waiver Authority

    The premium payment regulation and its appendix include many 
specific penalty waiver provisions that provide guidance to the public 
about the circumstances in which PBGC considers waivers appropriate--
circumstances such as reasonable cause and mistake of law. To deal with 
unanticipated situations that nevertheless seem to warrant penalty 
relief, Sec.  4007.8(d) refers to the policy guidelines in the 
appendix, and Sec.  21(b)(5) of the appendix says that PBGC may waive 
all or part of a premium penalty if it determines that it is 
appropriate to do so, and that PBGC intends to exercise this waiver 
authority only in narrow circumstances.
    In reviewing the circumstances where it has exercised its waiver 
authority, PBGC has concluded that the term ``narrow'' may not capture 
well the scope of that exercise and may thus be misleading. To avoid an 
implication that PBGC considers its waiver authority more narrowly 
circumscribed than in fact it does, PBGC proposes to remove the 
sentence about narrow circumstances from the appendix.

Codification of Seven-Day Penalty Waiver Rule

    On September 15, 2011 (at 76 FR 57082), PBGC published a policy 
notice announcing (among other things) that for plan years beginning 
after 2010, it would waive premium payment penalties assessed solely 
because premium payments were late by not more than seven calendar 
days.
    In applying this policy, PBGC assumes that each premium payment is 
made seven calendar days before it is actually made. All other rules 
are then applied as usual. If the result of this procedure is that no 
penalty would arise, then any penalty assessed on the basis of the 
actual payment dates is waived.
    PBGC proposes to codify this policy in the premium payment 
regulation.

Removal of Unneeded Flat-Rate Safe Harbors

    As discussed above, the premium payment regulation includes several 
somewhat complex ``safe harbor'' provisions to relieve penalties for 
large plans' late payment of the correct flat-rate premium that is due 
early in the premium payment year, two months after the participant 
count date.
    If, as PBGC is proposing, the large-plan flat-rate due date is 
moved back to later in the premium payment year, when other premiums 
are due, the penalty safe harbors for under-estimates of large plans' 
flat-rate premiums will no longer be necessary. Accordingly, PBGC is 
proposing to eliminate the flat-rate safe harbor provisions from the 
premium payment regulation.

Other Changes

Variable-Rate Premium Cap

    Before amendment to conform to statutory changes made by PPA 2006, 
PBGC's premium regulations used the same date for counting participants 
for purposes of the flat-rate premium and for determining UVBs for 
purposes of the variable-rate premium. This date was (generally) ``the 
last day of the plan year preceding the premium payment year.''
    When PBGC amended the premium regulations to conform to PPA 2006, 
the amendments provided that in general, UVBs were to be determined as 
of a different date from the date used to count participants. Thus 
references in the regulations to ``the last day of the plan year 
preceding the premium payment year'' in some cases were changed to 
refer to ``the participant count date'' and in other cases were changed 
to refer to ``the UVB valuation date.''
    The regulatory provision dealing with the variable-rate premium cap 
for plans of small employers includes two references to ``the last day 
of the plan year preceding the premium payment year'' that should have 
been amended to refer to ``the participant count date'' but were 
overlooked. This proposed rule would correct the variable-rate premium 
cap provision to remedy this oversight.

Exemption for Standard Terminations

    When PBGC added to the premium regulations the exemption from the 
variable-rate premium for plans terminating in standard terminations, 
it stated that the exemption would apply to ``a standard termination 
with a proposed termination date during a plan year preceding the 
premium payment year.'' (See preamble to final rule, 54 FR 28950 (July 
10, 1989).) In the text of the regulation, this requirement was 
expressed by requiring that the proposed termination date be on or 
before ``the last day of the plan year preceding the premium payment 
year''--the same words used to identify the date as of which 
participants were to be counted for purposes of the flat-rate premium 
and the date as of which UVBs were to be determined for purposes of the 
variable-rate premium.
    When PBGC amended the premium regulations to conform to statutory 
changes made by PPA 2006, as described above, the phrase ``the last day 
of the plan year preceding the premium payment year'' in the standard 
termination exemption from the variable-rate premium should have been 
left unchanged. Instead, it was inadvertently amended to read ``the UVB 
valuation date.'' This proposed rule would correct the exemption to 
require that the proposed termination date be ``before the beginning of 
the premium payment year,'' which will

[[Page 44064]]

also make the provision clearer and simpler.\28\
---------------------------------------------------------------------------

    \28\ As discussed above, PBGC proposes to broaden the scope of 
this exemption to include the year in which a standard termination 
is completed, regardless of the timing of the termination date.
---------------------------------------------------------------------------

Liability for Premiums in Distress and Involuntary Terminations

    The premium payment regulation provides that a single-employer plan 
does not have an obligation to pay premiums if the plan is the subject 
of distress or involuntary termination proceedings, with a view to 
conserving plan assets in such situations. The premium payment 
obligation then falls solely on the plan sponsor's controlled group. 
The current regulation (Sec.  4007.12(b)) focuses on the plan year for 
which a premium is due; the plan's obligation is tolled with respect to 
premiums for the year in which the termination is initiated and future 
years.
    PBGC has encountered cases in which plan administrators have used 
plan assets to pay premiums for which the plans had no obligation 
because termination proceedings began later in the plan year, after 
payment was made. To address this problem, PBGC proposes to revise 
Sec.  4007.12(b) so that a plan's obligation to pay premiums ceases 
when termination proceedings begin--an event of which the plan 
administrator will have notice--at which time the premium payment 
obligation falls solely on the plan sponsor's controlled group.
    This change would not affect the amount of premiums due. It would 
reduce administrative burden by making it easier for a plan 
administrator to determine whether the plan has an obligation to make a 
premium payment.
    Definition of newly covered plan--
    The current definition of newly covered plan excludes new plans. In 
rare cases, a new plan might not initially be covered by title IV of 
ERISA and might then become covered later in its first year of 
existence. PBGC proposes to revise the definition to remove the 
exclusion of new plans so that in the case described, the plan would be 
a newly covered plan (as well as a new plan) and thus entitled to 
prorate its premium based on its coverage date (as newly covered plans 
are permitted to do) rather than its effective date (as new plans are 
permitted to do).

Changes Related to MAP-21

    On July 6, 2012, the President signed into law the Moving Ahead for 
Progress in the 21st Century Act (MAP-21) (Pub. L. 112-141). MAP-21 
included provisions about PBGC premiums that, without the need for 
implementing action by PBGC, have already become effective.\29\ PBGC 
proposes to amend the premium rates regulation in accordance with MAP-
21.
---------------------------------------------------------------------------

    \29\ Technical Update 12-1, http://www.pbgc.gov/res/other-guidance/tu/tu12-1.html provides guidance on the effect of MAP-21 on 
PBGC premiums.
---------------------------------------------------------------------------

    Under sections 40221 and 40222 of MAP-21, effective for plan years 
beginning after 2012, each flat or variable premium rate has a 
different annual inflation adjustment formula, and the variable-rate 
premium is limited by a cap with its own annual inflation adjustment. 
Because of the multiplicity and complexity of the inflation adjustment 
formulas, PBGC has concluded that it would not be useful to repeat the 
statutory premium rate rules in the premium rates regulation. PBGC 
proposes instead to replace existing premium rate provisions with 
statutory references and simply announce each year the new rates 
generated by the statutory rate formulas.
    Effective for plan years beginning after 2011, section 40211 of 
MAP-21 establishes a ``segment rate stabilization'' corridor for 
certain interest assumptions used for funding purposes but provides (in 
section 40211(b)(3)(C)) for disregarding rate stabilization in 
determining PBGC variable-rate premiums. PBGC proposes to revise the 
description of the alternative premium funding target to make clear 
that it is determined using discount rates unconstrained by the segment 
rate stabilization rules of MAP 21.

Editorial Changes

    PBGC proposes to revise the language that describes the 
``reconciliation'' date--associated with the penalty waiver for 
underestimation of the variable-rate premium--to clarify that the 
waiver does not require a particular state of mind (of the plan 
administrator, sponsor, actuary, or other person) regarding the 
correctness or ``finality'' of the estimate. This clarification is not 
substantive but merely reflects the fact that (as noted in the preamble 
to the existing regulation) the waiver is provided ``in recognition of 
the possibility that circumstances might make a final UVB determination 
by the due date difficult or impossible'' (73 FR 15069 (emphasis 
supplied)).
    The proposed rule would also make some other non-substantive 
editorial changes, including provision of an additional example, 
deletion of anachronistic text, and addition of a definitional cross-
reference.

Conforming Changes to Other Regulations

    PBGC's regulation on Restoration of Terminating and Terminated 
Plans (29 CFR part 4047) has a cross-reference to Sec.  4006.4(c) of 
the premium rates regulation, which used to describe the alternative 
calculation method for determining the variable-rate premium \30\ but 
no longer does so. To avoid confusion, PBGC is removing the obsolete 
cross-reference.
---------------------------------------------------------------------------

    \30\ The alternative calculation method is also described in the 
premium filing instructions for years to which it applies.
---------------------------------------------------------------------------

    The proposed rule would delete from PBGC's regulation on Filing, 
Issuance, Computation of Time, and Record Retention (29 CFR part 4000) 
a provision that parallels anachronistic text that is being deleted 
from the premium rates regulation.

Applicability

    Except as explained below, PBGC proposes to make the amendments in 
this proposed rule applicable for 2014 and later plan years.
    PBGC proposes to make the change to the liability for premiums in 
distress and involuntary terminations applicable to terminations with 
respect to which the plan administrator issues the first notice of 
intent to terminate or the PBGC issues a notice of determination on or 
after the effective date of the final rule.
    MAP-21 became effective on July 6, 2012. The MAP-21 changes to 
premium rates are applicable for 2013 and later plan years. The 
clarification to the definition of the alternative premium funding 
target after MAP-21 is applicable for 2012 and later plan years.

Executive Orders 12866 and 13563

    PBGC has determined, in consultation with the Office of Management 
and Budget, that this rulemaking is a ``significant regulatory action'' 
under Executive Order 12866. The Office of Management and Budget has 
therefore reviewed this notice under Executive Order 12866.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This

[[Page 44065]]

proposed rule is associated with retrospective review and analysis in 
PBGC's Plan for Regulatory Review issued in accordance with Executive 
Order 13563.

Regulatory Impact Analysis

    Executive Orders 12866 and 13563 require that a comprehensive 
regulatory impact analysis be performed for any economically 
significant regulatory action, which, under Section 3(f)(1) of 
Executive Order 12866, is one that ``is likely to result in a rule that 
may . . . [h]ave an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities.''
    PBGC premium payments are included as receipts in the Federal 
budget, and the large-plan flat-rate premium deferral will cause a one-
time shift of about $1 billion (attributable primarily to calendar year 
plans) from one fiscal year to the next. Although no premium revenue 
will be lost, there will be the appearance of a one-time loss for the 
year when the due dates change, and PBGC has therefore determined that 
this proposed rule is economically significant under the criteria in 
Executive Order 12866. In accordance with OMB Circular A-4, PBGC has 
examined the economic and policy implications of this proposed rule and 
has concluded that the action's benefits justify its costs. That 
conclusion is based on the following analysis of the impact of the 
proposed due date changes.\31\ (The other proposed changes are not 
economically significant.)
---------------------------------------------------------------------------

    \31\ The analysis is based on the following premium data for the 
2010 plan year:
    Multi:
    Small:
     Number of plans 29
     Flat-rate premium 15,865
    Mid-size:
     Number of plans 280
     Flat-rate premium 751,292
    Large:
     Number of plans 1,134
     Flat-rate premium 91,950,881
    Single:
    Small:
     Number of plans 16,027
     Flat-rate premium 11,157,676
     Variable-rate premium 14,384,475
    Mid-size:
     Number of plans 4,459
     Flat-rate premium 37,039,342
     Variable-rate premium 48,133,809
    Large:
     Number of plans 4,577
     Flat-rate premium 1,098,754,335
     Variable-rate premium 1,074,057,949
---------------------------------------------------------------------------

Uniform Due Dates

    PBGC estimates that the reduction in administrative burden 
attributable to adoption of its unified due date proposal translates 
into average annual savings of 3 hours for each large plan and 1 hour 
and 10 minutes for each small plan. (PBGC arrived at these estimates on 
the basis of inquiries made to pension practitioners.) The dollar 
equivalent of this saving is about $1,050 for a large plan and about 
$400 for a small plan.\32\
---------------------------------------------------------------------------

    \32\ PBGC assumes for this purpose that enrolled actuaries 
charge about $350 per hour.
---------------------------------------------------------------------------

    The uniform due date proposal would also shift the earnings on 
premium payments between plans and PBGC for the time between the old 
and new due dates. Because earning rates differ between PBGC and 
plans,\33\ the losses and gains would not balance out exactly. But the 
amounts would be relatively small, and overall, plans would gain.
---------------------------------------------------------------------------

    \33\ PBGC estimates its rate of return, from investment in U.S. 
Government securities, at about 2 percent. PBGC estimates plans' 
rate of return at 6 percent.
---------------------------------------------------------------------------

    The most significant earnings shift would be that filers would gain 
7\1/2\ months' interest on large plans' flat-rate premiums. Based on 
2010 data, PBGC estimates that the average gain per large plan might be 
nearly $8,000 per year. (PBGC's loss would be about one-third as much.) 
\34\ To put this figure in perspective, large plans account for almost 
all of PBGC's flat-rate premium income--about $1.19 billion (out of a 
total of about $1.24 billion) for 2010.
---------------------------------------------------------------------------

    \34\ The following table shows potential changes in interest 
earnings calculated with four rates: two percent (our best estimate 
for PBGC's rate of return), six percent (our best estimate for 
plans' rate of return), and three and seven percent (the discount 
rates recommended by OMB Circular A-4).
    Possible (2010 data) approximate average gain or loss per large 
plan at--
    2 percent $2,600.
    3 percent $4,000.
    6 percent $8,000.
    7 percent $9,000.
---------------------------------------------------------------------------

    The earnings shift for small plans would be virtually negligible. 
The analysis is not as straightforward because of the concomitant shift 
from current-year to prior-year data. See the discussion under the 
heading Combined Effects of Due Date and Look-Back Proposals, above. 
But based again on 2010 data, and assuming a 6\1/2\-month advance in 
the small-plan due date and a plan earnings rate of 6 percent, small 
plans in the aggregate would lose about $830,000 a year--on average, 
about $50 per plan. (PBGC's gain would be about one-third the amount 
lost by plans.) \35\ A plan's lost interest earnings would be 
proportional to its premium; the premium may vary widely among plans, 
and thus the loss may do the same.
---------------------------------------------------------------------------

    \35\ The following table shows potential changes in interest 
earnings calculated with four rates: two percent (our best estimate 
for PBGC's rate of return), six percent (our best estimate for 
plans' rate of return), and three and seven percent (the discount 
rates recommended by OMB Circular A-4).
    Possible (2010 data) approximate average gain or loss per small 
plan at--
    2 percent $17.
    3 percent $25.
    6 percent $50.
    7 percent $60.
---------------------------------------------------------------------------

    Accordingly, PBGC foresees an average net benefit (in dollar terms) 
from its uniform due date proposal of about $9,050 for each large plan 
and about $350 for each small plan.

Final-Year Due Date

    Advancing the premium due date for some terminating plans would 
also shift earnings on the premiums from plans to PBGC. Since plans 
that do standard terminations are almost all small, the amounts 
involved are also small. For the 2010 plan year, the average small 
single-employer plan paid a flat-rate premium of less than $700. On 
average (over the period 2001-2010), fewer than 1,350 plans terminate 
each year. About 730 plans would have their final-year due dates 
advanced by an average of 3[frac14] months; for the rest (about 620), 
the due date would not be advanced. Thus on average, the proposal would 
require payment of the premium about 53 days early. At a rate of 6 
percent, 53 days' interest on an average flat-rate premium of $700 is 
about $6. For larger plans, the average figure using the same 
methodology would be almost $1,100. But so few larger plans do standard 
terminations \36\ that the average earnings loss for plans of all sizes 
would be only about $80 per plan, with a total estimated loss of 
$110,000.
---------------------------------------------------------------------------

    \36\ For 2011, only about 7 percent of standard terminations 
involved plans with more than 100 participants.
---------------------------------------------------------------------------

    On the other hand, there should be some savings to plans arising 
from payment of the final-year premium while plan books and records are 
still open and in use for paying benefits--as opposed to later, when 
they would have to be found and reopened. If one-tenth of final-year 
filers (135 plans) each saved one hour of actuarial time at an average 
of $350 per hour, the total savings would be over $47,000 (or, if 
averaged over all plans, about $35 per plan).
    Further, PBGC data for the 2011 plan year show an aggregate of 
about $75,000 in variable-rate premiums paid by plans that completed 
standard terminations during the year. This represents an estimate of 
the savings to plans under

[[Page 44066]]

the proposed expansion of the standard termination variable-rate 
premium exemption. The savings would of course be realized only by the 
small minority of terminating plans that would owe variable-rate 
premium in their final year in the absence of this proposal. Averaged 
over all plans closing out in a year, however, the savings would be 
about $55 per plan.

Regulatory Flexibility Act

    The Regulatory Flexibility Act imposes certain requirements with 
respect to rules that are subject to the notice and comment 
requirements of section 553(b) of the Administrative Procedure Act and 
that are likely to have a significant economic impact on a substantial 
number of small entities. Unless an agency determines that a proposed 
rule is not likely to have a significant economic impact on a 
substantial number of small entities, section 603 of the Regulatory 
Flexibility Act requires that the agency present an initial regulatory 
flexibility analysis at the time of the publication of the proposed 
rule describing the impact of the rule on small entities and seeking 
public comment on the impact. Small entities include small businesses, 
organizations and governmental jurisdictions.

Small Entities

    For purposes of the Regulatory Flexibility Act requirements with 
respect to this proposed rule, PBGC considers a small entity to be a 
plan with fewer than 100 participants. This is substantially the same 
criterion used to determine what plans would be subject to the look-
back rule under the proposal, and is consistent with certain 
requirements in title I of ERISA \37\ and the Internal Revenue 
Code,\38\ as well as the definition of a small entity that the 
Department of Labor (DOL) has used for purposes of the Regulatory 
Flexibility Act.\39\ Using this proposed definition, about 64 percent 
(16,700 of 26,100) of plans covered by title IV of ERISA in 2010 were 
small plans.\40\
---------------------------------------------------------------------------

    \37\ See, e.g., ERISA section 104(a)(2), which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \38\ See, e.g., Code section 430(g)(2)(B), which permits plans 
with 100 or fewer participants to use valuation dates other than the 
first day of the plan year.
    \39\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66,637, 66,644 (Oct. 27, 2011).
    \40\ See PBGC 2010 pension insurance data table S-31, http://www.pbgc.gov/Documents/pension-insurance-data-tables-2010.pdf.
---------------------------------------------------------------------------

    Further, while some large employers may have small plans, in 
general most small plans are maintained by small employers. Thus, PBGC 
believes that assessing the impact of the proposal on small plans is an 
appropriate substitute for evaluating the effect on small entities. The 
definition of small entity considered appropriate for this purpose 
differs, however, from a definition of small business based on size 
standards promulgated by the Small Business Administration (13 CFR 
121.201) pursuant to the Small Business Act. PBGC therefore requests 
comments on the appropriateness of the size standard used in evaluating 
the impact of the proposed rule on small entities.

Certification

    On the basis of its proposed definition of small entity, PBGC 
certifies under section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.) that the amendments in this proposed rule will not 
have a significant economic impact on a substantial number of small 
entities. Accordingly, as provided in section 605 of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604 do not 
apply. This certification is based on PBGC's estimate (discussed above) 
that the proposed change to uniform due dates would create an average 
annual net economic benefit for each small plan of about $350. This is 
not a significant impact. PBGC invites public comment on this 
assessment.

Paperwork Reduction Act

    PBGC is submitting the information requirements under this proposed 
rule to the Office of Management and Budget for review and approval 
under the Paperwork Reduction Act. The collection of information under 
the premium payment regulation is currently approved under OMB control 
number 1212-0009 (expires December 31, 2013). Copies of PBGC's request 
may be obtained free of charge by contacting the Disclosure Division of 
the Office of the General Counsel of PBGC, 1200 K Street NW., 
Washington, DC 20005, 202-326-4040. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.
    PBGC is proposing only small changes in the data filers are 
required to submit. A plan's filing would be required to state whether 
the plan was a new small plan created by non-de minimis consolidation 
or spinoff (to which special rules apply) and to indicate if an 
exemption from the variable-rate premium was claimed under one of the 
proposed new exemption rules. Other changes would be to the filing 
instructions, clarifying how to calculate premiums and setting forth 
the new due date rules.
    PBGC needs the information in a premium filing to identify the plan 
for which the premium is paid to PBGC, to verify the amount of the 
premium, to help PBGC determine the magnitude of its exposure in the 
event of plan termination, to help PBGC track the creation of new plans 
and the transfer of plan assets and liabilities among plans, and to 
keep PBGC's inventory of insured plans up to date. PBGC receives 
premium filings from about 25,700 respondents each year and estimates 
that under this proposal, the total annual burden of the collection of 
information will be about 8,000 hours and $53,255,000.\41\
---------------------------------------------------------------------------

    \41\ This burden estimate reflects both a decrease in burden 
attributable to changes in the premium due dates under this proposed 
rule and an increase in burden attributable to a re-estimate of the 
existing premium filing burden. The increase in burden due to re-
estimation is about 31,300 hours, and the decrease due to the 
proposed due date changes is about 35,000 hours (about 17,000 hours 
for large plans and about 18,000 hours for small plans), a net 
decrease of about 3,700 hours from the currently approved burden 
(about 163,600). PBGC assumes that about 95 percent of the work is 
contracted out at $350 per hour, so the 35,000-hour decrease 
attributable to the proposed rule is equivalent to about 1,750 hours 
of in-house labor and about $11,600,000 of contractor costs.
---------------------------------------------------------------------------

    Comments on the paperwork provisions under this proposed rule 
should be sent to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for Pension 
Benefit Guaranty Corporation, via electronic mail at OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974. Although comments may 
be submitted through September 23, 2013, the Office of Management and 
Budget requests that comments be received on or before August 22, 2013 
to ensure their consideration. Comments may address (among other 
things)--
     Whether the proposed collection of information is needed 
for the proper performance of PBGC's functions and will have practical 
utility;
     The accuracy of PBGC's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
     Enhancement of the quality, utility, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.

[[Page 44067]]

List of Subjects

29 CFR Part 4000

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

29 CFR Part 4006

    Employee benefit plans, Pension insurance.

29 CFR Part 4007

    Employee benefit plans, Penalties, Pension insurance, Reporting and 
recordkeeping requirements.

29 CFR Part 4047

    Employee benefit plans, Pension insurance.

    In consideration of the foregoing, PBGC proposes to amend 29 CFR 
parts 4000, 4006, 4007, and 4047 as follows:

PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD 
RETENTION

0
1. The authority citation for part 4000 continues to read as follows:

    Authority: 29 U.S.C. 1082(f), 1302(b)(3).


Sec.  4000.3  [Amended]

0
2. In Sec.  4000.3(b):
0
a. Paragraph (b)(1)(i) is removed.
0
b. Paragraphs (b)(1)(ii), (b)(1)(iii), and (b)(1)(iv) are redesignated 
as paragraphs (b)(1)(i), (b)(1)(ii), and (b)(1)(iii) respectively.

PART 4006--PREMIUM RATES

0
3. The authority citation for part 4006 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.

0
4. In Sec.  4006.2:
0
a. The introductory text is amended by removing the words ``and single-
employer plan'' and adding in their place the words ``single-employer 
plan, and termination date''.
0
b. The definition of participant count is amended by removing the words 
``for a plan year'' and by removing the words ``for the plan year''.
0
c. The definition of participant count date is amended by removing the 
words ``for a plan year''.
0
d. The definition of UVB valuation date is amended by removing the 
words ``for a plan year''; and by removing the words ``plan year 
determined'' and adding in their place the words ``UVB valuation year, 
determined''.
0
e. The definition of newly-covered plan is revised, and new definitions 
of Continuation plan, Small plan, and UVB valuation year are added, in 
alphabetical order, to read as follows:


Sec.  4006.2  Definitions.

* * * * *
    Continuation plan means a new plan resulting from a consolidation 
or spinoff that is not de minimis pursuant to the regulations under 
section 414(l) of the Code.
* * * * *
    Newly covered plan means a plan that becomes covered by title IV of 
ERISA during the premium payment year and that existed as an uncovered 
plan immediately before the first date in the premium payment year on 
which it was a covered plan.
* * * * *
    Small plan means a plan--
    (1) Whose participant count is not more than 100, or
    (2) Whose funding valuation date for the premium payment year, 
determined in accordance with ERISA section 303(g)(2), is not the first 
day of the premium payment year.
* * * * *
    UVB valuation year of a plan means--
    (1) The plan year preceding the premium payment year, if the plan 
is a small plan other than a continuation plan, or
    (2) The premium payment year, in any other case.
0
5. In Sec.  4006.3:
0
a. Paragraphs (c) and (d) are removed.
0
b. A sentence is added to the end of the introductory text, and 
paragraphs (a) and (b) are revised, to read as follows:


Sec.  4006.3  Premium rate.

    * * * Premium rates (and the MAP-21 cap rate referred to in 
paragraph (b)(2) of this section) are subject to change each year under 
inflation indexing provisions in section 4006 of ERISA.
    (a) Flat-rate premium. The flat-rate premium for a plan is equal to 
the applicable flat premium rate multiplied by the plan's participant 
count. The applicable flat premium rate is the amount prescribed for 
the calendar year in which the premium payment year begins by--
    (1) ERISA section 4006(a)(3)(A)(i) and (F) for a single-employer 
plan, or
    (2) ERISA section 4006(a)(3)(A)(v) and (I) for a multiemployer 
plan.
    (b) Variable-rate premium.
    (1) In general. Subject to the cap provisions in paragraphs (b)(2) 
and (b)(3) of this section, the variable-rate premium for a single-
employer plan is equal to a specified dollar amount for each $1,000 (or 
fraction thereof) of the plan's unfunded vested benefits as determined 
under Sec.  4006.4 for the UVB valuation year. The specified dollar 
amount is the applicable variable premium rate prescribed by ERISA 
section 4006(a)(8) for the calendar year in which the premium payment 
year begins.
    (2) MAP-21 cap. The variable-rate premium for a plan is not more 
than the applicable MAP-21 cap rate multiplied by the plan's 
participant count. The applicable MAP-21 cap rate is the amount 
prescribed by ERISA section 4006(a)(3)(E)(i)(II) and (J) for the 
calendar year in which the premium payment year begins.
    (3) Small-employer cap.
    (i) In general. If a plan is described in paragraph (b)(3)(ii) of 
this section for the premium payment year, the variable-rate premium is 
not more than $5 multiplied by the square of the participant count. For 
example, if the participant count is 20, the variable-rate premium is 
not more than $2,000 ($5 x 20 \2\ = $5 x 400 = $2,000).
    (ii) Plans eligible for cap. A plan is described in paragraph 
(b)(3)(ii) of this section for the premium payment year if the 
aggregate number of employees of all employers in the plan's controlled 
group on the first day of the premium payment year is 25 or fewer.
    (iii) Meaning of ``employee.'' For purposes of paragraph (b)(3)(ii) 
of this section, the aggregate number of employees is determined in the 
same manner as under section 410(b)(1) of the Code, taking into account 
the provisions of section 414(m) and (n) of the Code, but without 
regard to section 410(b)(3), (4), and (5) of the Code.
0
6. In Sec.  4006.4:
0
a. Paragraph (a) is amended by removing the words ``for the premium 
payment year'' where they appear five times in the paragraph and adding 
in their place the first four times (but not the fifth time) the words 
``for the UVB valuation year''.
0
b. Paragraph (b)(2) introductory text is amended by removing the words 
``premium payment year'' and adding in their place the words ``UVB 
valuation year''.
0
c. Paragraph (b)(2)(ii) is amended by removing the words ``premium 
payment year'' where they appear twice in the paragraph and adding in 
their place (in both places) the words ``UVB valuation year''.
0
d. New paragraph (b)(3) is added to read as follows:


Sec.  4006.4  Determination of unfunded vested benefits.

* * * * *
    (b) Premium funding target.
* * * * *
    (3) ``At-risk'' plans; transition rules; loading factor. The 
transition rules in ERISA section 303(i)(5) apply to the

[[Page 44068]]

determination of the premium funding target of a plan in at-risk status 
for funding purposes. If a plan in at-risk status is also described in 
ERISA section 303(i)(1)(A)(ii) for the UVB valuation year, its premium 
funding target reflects a loading factor pursuant to ERISA section 
303(i)(1)(C) equal to the sum of--
    (i) Per-participant portion of loading factor. The amount 
determined for funding purposes under ERISA section 303(i)(1)(C)(i) for 
the UVB valuation year, and
    (ii) Four percent portion of loading factor. Four percent of the 
premium funding target determined as if the plan were not in at-risk 
status.
* * * * *
0
7. In Sec.  4006.5:
0
a. Paragraph (a) introductory text is amended by removing the reference 
``paragraphs (a)(1)-(a)(3) of this section'' and adding in its place 
the reference ``paragraphs (a)(1)-(a)(4) of this section''.
0
b. Paragraph (a)(3) introductory text is amended by removing the words 
``described in this paragraph if'' and adding in their place the words 
``described in this paragraph if it makes a final distribution of 
assets in a standard termination during the premium payment year or 
if''.
0
c. Paragraph (a)(3)(ii) is amended by removing the words ``on or before 
the UVB valuation date'' and adding in their place the words ``before 
the beginning of the premium payment year''.
0
d. Paragraph (e)(2)(ii) is amended by removing the words ``plan year'' 
and adding in their place the words ``premium payment year''.
0
e. Paragraph (f)(1) is amended by removing the words ``newly-covered'' 
(with a hyphen) and adding in their place the words ``newly covered'' 
(without a hyphen).
0
f. Paragraph (a)(4) is added, and paragraphs (c), (d), (e)(1), and (g) 
are revised, to read as follows:


Sec.  4006.5  Exemptions and special rules.

* * * * *
    (a) Variable-rate premium exemptions. * * *
* * * * *
    (4) Certain small new and newly covered plans. A plan is described 
in this paragraph if--
    (i) It is a small plan other than a continuation plan, and
    (ii) It is a new plan or a newly covered plan.
* * * * *
    (c) Participant count date; in general. Except as provided in 
paragraphs (d) and (e) of this section, the participant count date of a 
plan is the last day of the plan year preceding the premium payment 
year.
    (d) Participant count date; new and newly covered plans. The 
participant count date of a new plan or a newly covered plan is the 
first day of the premium payment year. For this purpose, a new plan's 
premium payment year begins on the plan's effective date.
    (e) Participant count date; certain mergers and spinoffs.
    (1) The participant count date of a plan described in paragraph 
(e)(2) of this section is the first day of the premium payment year.
* * * * *
    (g) Alternative premium funding target. A plan's alternative 
premium funding target is determined in the same way as its standard 
premium funding target except that the discount rates described in 
ERISA section 4006(a)(3)(E)(iv) are not used. Instead, the alternative 
premium funding target is determined using the discount rates that 
would have been used to determine the funding target for the plan under 
ERISA section 303 for the purpose of determining the plan's minimum 
contribution under ERISA section 303 for the UVB valuation year if the 
segment rate stabilization provisions of ERISA section 303(h)(2)(iv) 
were disregarded. A plan may elect to compute unfunded vested benefits 
using the alternative premium funding target instead of the standard 
premium funding target described in Sec.  4006.4(b)(2), and may revoke 
such an election, in accordance with the provisions of this paragraph 
(g). A plan must compute its unfunded vested benefits using the 
alternative premium funding target instead of the standard premium 
funding target described in Sec.  4006.4(b)(2) if an election under 
this paragraph (g) to use the alternative premium funding target is in 
effect for the premium payment year.
    (1) An election under this paragraph (g) to use the alternative 
premium funding target for a plan must specify the premium payment year 
to which it first applies and must be filed by the plan's variable-rate 
premium due date for that premium payment year. The premium payment 
year to which the election first applies must begin at least five years 
after the beginning of the premium payment year to which a revocation 
of a prior election first applied. The election will be effective--
    (i) For the premium payment year for which made and for all plan 
years that begin less than five years thereafter, and
    (ii) For all succeeding plan years until the premium payment year 
to which a revocation of the election first applies.
    (2) A revocation of an election under this paragraph (g) to use the 
alternative premium funding target for a plan must specify the premium 
payment year to which it first applies and must be filed by the plan's 
variable-rate premium due date for that premium payment year. The 
premium payment year to which the revocation first applies must begin 
at least five years after the beginning of the premium payment year to 
which the election first applied.


Sec.  4006.7  [Amended]

0
8. In Sec.  4006.7, paragraph (b) is amended by removing the words 
``under section 4048 of ERISA''.

PART 4007--PAYMENT OF PREMIUMS

0
9. The authority citation for part 4007 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1303(A), 1306, 1307.


Sec.  4007.2  [Amended]

0
10. In Sec.  4007.2:
0
a. Paragraph (a) is amended by removing the words ``and single-employer 
plan'' and adding in their place the words ``single-employer plan, and 
termination date''.
0
b. Paragraph (b) is amended by removing the words ``new plan'' and 
adding in their place the words ``continuation plan, new plan''; and by 
removing the words ``and short plan year'' and adding in their place 
the words ``short plan year, small plan, and UVB valuation date''.
0
11. In Sec.  4007.3:
0
a. Paragraph (b) is amended by removing the words ``the PBGC'' and 
adding in their place the word ``PBGC''; and by removing the second 
sentence (which begins ``The requirement . . .'' and ends ``. . . after 
2006'').
0
b. Paragraph (a) is revised to read as follows:


Sec.  4007.3  Filing requirement; method of filing.

    (a) In general. The estimation, determination, declaration, and 
payment of premiums must be made in accordance with the premium 
instructions on PBGC's Web site (www.pbgc.gov). Subject to the 
provisions of Sec.  4007.13, the plan administrator of each covered 
plan is responsible for filing prescribed premium information and 
payments. Each required premium payment and related information, 
certified as provided in the premium instructions, must be filed by the 
applicable due date

[[Page 44069]]

specified in this part in the manner and format prescribed in the 
instructions.
* * * * *
0
12. In Sec.  4007.8:
0
a. Paragraph (a) introductory text is amended by removing the words 
``the PBGC'' and adding in their place the word ``PBGC''; and by 
removing the second sentence (which begins ``The charge . . .'' and 
ends ``. . . unpaid premium'').
0
b. Paragraphs (f), (g), (h), and (i) are removed, and paragraph (j) is 
redesignated as paragraph (g).
0
c. Paragraphs (a)(1) and (a)(2) and the introductory text of 
redesignated paragraph (g) are revised, and new paragraph (f) is added, 
to read as follows:


Sec.  4007.8  Late payment penalty charges.

    (a) Penalty charge. * * *
    (1) For any amount of unpaid premium that is paid on or before the 
date PBGC issues a written notice to any person liable for the premium 
that there is or may be a premium delinquency (for example, a premium 
bill, a letter initiating a premium compliance review, a notice of 
filing error in premium determination, or a letter questioning a 
failure to make a premium filing), 1 percent per month, to a maximum 
penalty charge of 50 percent of the unpaid premium; or
    (2) For any amount of unpaid premium that is paid after that date, 
5 percent per month, to a maximum penalty charge of 100 percent of the 
unpaid premium.
* * * * *
    (f) Filings not more than 7 days late. PBGC will waive premium 
payment penalties that arise solely because premium payments are late 
by not more than seven calendar days, as described in this paragraph 
(f). In applying this waiver, PBGC will assume that each premium 
payment with respect to a plan year was made seven calendar days before 
it was actually made. All other rules will then be applied as usual. If 
the result of this procedure is that no penalty would arise for that 
plan year, then any penalty that would apply on the basis of the actual 
payment date(s) will be waived.
    (g) Variable-rate premium penalty relief. PBGC will waive the 
penalty on any underpayment of the variable-rate premium for the period 
that ends on the earlier of the date the reconciliation filing is due 
or the date the reconciliation filing is made if, by the date the 
variable-rate premium for the premium payment year is due under Sec.  
4007.11(a)(1),--
* * * * *
0
13. Section 4007.11 is revised to read as follows:


Sec.  4007.11  Due dates.

    (a) In general. In general:
    (1) The flat-rate and variable-rate premium filing due date is the 
fifteenth day of the tenth full calendar month that begins on or after 
the first day of the premium payment year.
    (2) If the variable-rate premium paid by the premium filing due 
date is estimated as described in Sec.  4007.8(g), a reconciliation 
filing and any required variable-rate premium payment must be made by 
the end of the sixth calendar month that begins on or after the premium 
filing due date.
    (b) Plans that change plan years. For a plan that changes its plan 
year, the flat-rate and variable-rate premium filing due date for the 
short plan year is as specified in paragraph (a) of this section. For 
the plan year that follows a short plan year, the due date is the later 
of --
    (1) The due date specified in paragraph (a) of this section, or
    (2) 30 days after the date on which the amendment changing the plan 
year was adopted.
    (c) New and newly covered plans. For a new plan or newly covered 
plan, the flat-rate and variable-rate premium filing due date for the 
first plan year of coverage is the latest of--
    (1) The due date specified in paragraph (a) of this section, or
    (2) 90 days after the date of the plan's adoption, or
    (3) 90 days after the date on which the plan became covered by 
title IV of ERISA, or
    (4) In the case of a small plan that is a continuation plan, 90 
days after the plan's UVB valuation date.
    (d) Terminating plans. For a plan that terminates in a standard 
termination, the flat-rate and variable-rate premium filing due date 
for the plan year in which all plan assets are distributed pursuant to 
the plan's termination is the earliest of --
    (1) The due date specified in paragraph (a) of this section, or
    (2) The latest date by which the post-distribution certification 
may be filed without penalty under Sec.  4041.29 of this chapter, or
    (3) The date when the post-distribution certification is filed.
    (e) Continuing obligation to file. The obligation to make flat-rate 
and variable-rate premium filings and payments under this part 
continues through the plan year in which all plan assets are 
distributed pursuant to a plan's termination or in which a trustee is 
appointed under section 4042 of ERISA, whichever occurs earlier.
0
14. Section 4007.12 is amended by revising paragraph (b) to read as 
follows:


Sec.  4007.12  Liability for single-employer premiums.

* * * * *
    (b) After a plan administrator issues (pursuant to section 
4041(a)(2) of ERISA) the first notice of intent to terminate in a 
distress termination under section 4041(c) of ERISA or the PBGC issues 
a notice of determination under section 4042(a) of ERISA, the 
obligation to pay the premiums (and any interest or penalties thereon) 
imposed by ERISA and this part for a single-employer plan shall be an 
obligation solely of the contributing sponsor and the members of its 
controlled group, if any.


Sec.  4007.13  [Amended]

0
15. Section 4007.13 is amended by removing the words ``under section 
4048 of ERISA'' where they appear once in paragraph (a)(1) introductory 
text, once in paragraph (a)(2) introductory text, once in paragraph 
(d)(1), once in paragraph (e)(3) introductory text, once in paragraph 
(e)(4) introductory text, once in paragraph (e)(4)(i), and once in 
paragraph (f) introductory text.

Appendix to Part 4007 [Amended]

0
16. In the Appendix to part 4007:
0
a. Section 21(b)(1) is amended by removing the words ``for waivers if 
certain `safe harbor' tests are met, and''; and by removing the words 
``30 days after the date of the bill'' and adding in their place the 
words ``30 days after the date of the bill, and for waivers in certain 
cases where you pay not more than a week late or where you estimate the 
variable-rate premium and then timely correct any underpayment''.
0
b. Section 21(b)(5) is amended by removing the second sentence (which 
begins ``We intend . . .'' and ends ``. . . narrow circumstances'').

PART 4047--RESTORATION OF TERMINATING AND TERMINATED PLANS

0
17. The authority citation for part 4047 continues to read as follows:

    Authority:  29 U.S.C. 1302(b)(3), 1347.


Sec.  4047.4  [Amended]

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18. In Sec.  4047.4, paragraph (c) is amended by removing the words 
``in Sec.  4006.4(c) of this chapter''.

    Issued in Washington, DC, this 16th day of July 2013.
Joshua Gotbaum,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2013-17561 Filed 7-22-13; 8:45 am]
BILLING CODE 7709-02-P