Premium Compliance Evaluation Program (PBGC.gov)

The Pension Benefit Guaranty Corporation (PBGC) protects the retirement benefits of nearly 44 million workers and retirees without the use of funds from general tax revenues. PBGC finances its operations from insurance premiums paid by 30,460 insured pension plans, from investment income and from recoveries in bankruptcy. Premium revenue totaled $1.6 billion for 2007. All single-employer pension plans pay a basic flat-rate annual premium of $33 per participant. Underfunded single-employer plans pay an additional annual variable-rate charge of $9 per $1,000 of unfunded vested benefits. The annual premium for the smaller multiemployer program is $9 per participant. Each individual plan calculates and pays its own premium. Plans must use the PBGC Form 1 (and the related Schedule A) or PBGC Form 1-EZ to file their premium payments and to report the participant and (where required) plan funding information on which their premiums are based. All plans must submit their premium filings electronically using PBGC's secure Web-based application, "My PAA," which is available through PBGC's Web site at www.pbgc.gov.

The PBGC premium program relies on data reported by plan administrators. PBGC established its Premium Compliance Evaluation (PCE) program to help ensure that plans comply with PBGC premium regulations and pay the appropriate premium. PBGC also offers compliance assistance to foster greater awareness of PBGC premium rules and to help plan professionals who contact the Corporation with questions. By helping to ensure that all covered plans pay their required share of the insurance program costs, the PCE program protects the pension insurance program for the benefit of all premium payers. Plans that pay what they rightly owe should not have to subsidize those that do not.

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PBGC generally accepts information reported by plans without further verification. However, PBGC selects some plan filings for additional review either on a random basis or as the result of a screening process. The screening process helps to identify premium filings that may include errors in calculating the premium due or that may reflect data anomalies requiring further review. PBGC uses electronic data analysis and data matching tools as part of this screening process. Selection factors include large annual fluctuations in participant counts or in funding levels or discrepancies between information reported on the PBGC premium forms and the Form 5500 (Annual Return/Report of Employee Benefit Plan). For example, the plan may correctly identify itself on the Form 5500 as a "multiple employer plan" which is a type of single-employer plan but erroneously pay PBGC the premium for a multiemployer plan.

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The primary objectives of a premium compliance evaluation are to assess the accuracy of the number of participants reported by the plan and, for single-employer plans, of the determination of the variable-rate premium. Another objective is to determine whether those underfunded plans that are required to issue a Participant Notice about the plan's funding status have complied with the notice requirement. There are three types of reviews PBGC may conduct: letters of inquiry, limited reviews, and on-site evaluations. PBGC usually sends a letter of inquiry when a clarification is needed regarding an aspect of a premium filing. If more complicated issues are involved, PBGC will conduct a limited review. This level of review typically requires the submission of the plan document and certain records by the plan for more detailed analysis and discussion with plan representatives. PBGC may also conduct on-site examinations, which are broader in scope and include direct verification of evidence supporting the calculation of the premium paid.

Generally, evaluations are limited to a single plan year unless PBGC notes problems. Before making an initial determination that additional premiums are due, PBGC will discuss the draft findings with the plan administrator, provide an opportunity to comment in writing, and review any additional supporting documentation provided by the plan. PBGC may also conclude that the plan overstated the premium due. After considering the plan's response, PBGC will issue an initial determination and a report to the plan. The report will detail the basis for the determination and include the plan's response as an attachment.

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If a plan disagrees with the initial determination, the plan administrator may submit a request for reconsideration within 30 days. PBGC will provide specific instructions for filing a request when it issues its determination. A senior PBGC official will review the request and make PBGC's final determination.

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Some administrators of defined benefit pension plans have found a number of practices helpful in connection with their administrative responsibilities. Plan administrators may wish to consider one or more of the following to help ensure premium compliance and more easily document the premium reported:

Maintain detailed records supporting the number of participants reported (e.g., maintain required participant records, keep a list of specific participants for whom premiums were paid, update baseline participant count information regularly);
Maintain records regarding the plan's exemption from or calculation of the variable-rate premium (e.g., plan asset valuations, actuarial worksheets);
Perform periodic reviews of payroll and plan data to verify which employees are plan participants;
Compare the number of participants reported to PBGC with the number of participants included in the actuarial valuation and analyze differences;
Document reasons for significant changes to participant counts or vested benefit liabilities; and
Review comparable information reported on PBGC premium forms and the Form 5500 to identify obvious errors.

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PBGC provides an incentive for plans to self-report errors or omissions relating to the amount of premium paid to PBGC. If a plan corrects an underpayment by the date PBGC issues a written notice of either a Premium Compliance Evaluation or an actual or potential premium delinquency, then the plan is eligible for a reduced monthly penalty rate of only 1 percent of the outstanding unpaid premium. Otherwise, the applicable monthly penalty rate is 5 percent. The total penalty paid cannot exceed the amount of the unpaid premium, and a penalty charge may be waived for reasonable cause. However, all unpaid premium amounts are also subject to a late payment interest charge.

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If you have questions about the PBGC Premium Compliance Evaluation program, please e-mailpce@pbgc.gov.
If you have general questions about PBGC premiums, please e-mail premiums@pbgc.gov or call PBGC toll-free at (800) 736-2444. For TTY/TDD users, call the Federal Relay Service toll-free at (800) 877-8339 and ask to be connected to (800) 736-2444.

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