Background:

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 29,400 insured pension plans, from investment income and from recoveries in bankruptcy. Premium revenue totaled $1.5 billion for 2008. For plan years beginning in 2008, all single-employer pension plans pay a basic flat-rate premium of $33 per participant per year. Underfunded pension plans pay an additional variable-rate charge of $9 per $1,000 of unfunded vested benefits. The premium for the smaller multiemployer program is $9 per participant per year. The comparable rates for 2009 will be $34 per participant for single-employer plans and $9 per participant for the multiemployer program. Each individual plan calculates and pays its own premium based on the reported participant count and (where required) plan funding information. 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.

Selecting Plans for Evaluation:

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 filings 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.

Objectives and Types of Reviews:

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.

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.

Requests for Reconsideration:

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.

Practices to Consider:

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 liabilities and the calculation of the variable-rate premium (e.g., plan asset valuation, actuarial valuation report and supporting 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 filings and the Form 5500 to identify obvious errors.

Incentive for Self-Correcting Underpaid Premiums:

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 before 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.  All unpaid premium amounts are also subject to a late payment interest charge.

Contact Us for Compliance Assistance:

If you have questions about the PBGC Premium Compliance Evaluation program, please e-mail pce@pbgc.gov. If you have general questions about PBGC premiums, please e-mail premiums@pbgc.gov or call PBGC toll-free at 1-800-736-2444 (and select the “premium” option). TTY/TDD users may call the Federal relay service toll free at 1-800-877-8339 and ask to be connected. Further information, including answers to frequently asked questions regarding premiums, is available at www.pbgc.gov.