44056 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

655.10(b), including, among other 

things, whether the OES mean is the 

appropriate basis for determining the 

prevailing wage; whether wages based 

on the Davis-Bacon Act (DBA), 40 

U.S.C. 276a et seq., 29 CFR part 1, or the 

McNamara-O’Hara Service Contract Act 

(SCA), 41 U.S.C. 351 et seq., should be 

used to determine the prevailing wage, 

and if so to what extent; and whether to 

permit the continued use of employersubmitted surveys and ways to 

strengthen their methodology, if 

permitted. The comment period closed 

on June 10, 2013, and the Departments 

are in the process of reviewing those 

comments and determining whether 

further revision to 20 CFR 655.10(b) is 

warranted in light of public comment. 

The confluence of the recurrent 

Congressional prohibition against 

implementation of the 2011 Wage Rule, 

which the Department anticipates will 

continue, and the Department’s current 

review and consideration of suggestions 

made in the comments associated with 

the IFR, which revised wage provisions 

of the H–2B regulations that were also 

the subject of the 2011 Wage Rule, 

require the indefinite delay of the 

effective date of the 2011 Wage Rule. 

Were the 2011 Wage Rule to become 

effective, it would supplant the 

revisions made to 20 CFR 655.10(b) in 

the IFR, which were necessary in light 

of the court’s order in CATA v. Solis. In 

that event, the Department would likely 

continue to be unable to implement the 

2011 Wage Rule, based on the 

continuation of the Congressional 

prohibition on its implementation. 

However, should Congress lift the 

prohibition against implementation of 

the 2011 Wage Rule, the Department 

would need time to assess the current 

regulatory framework, to consider any 

changed circumstances, novel concerns 

or new information received, and to 

minimize disruptions. 

Until such time as Congress no longer 

prohibits the Department from 

implementing the 2011 Wage Rule, the 

effective date of the 2011 Wage Rule 

should be delayed. In the event that 

Congress no longer prohibits 

implementation of the 2011 Wage Rule, 

the Department would publish a 

document in the Federal Register 

within 45 days apprising the public of 

the status of 20 CFR 655.10 and the 

effective date of the 2011 Wage Rule. 

The Department invites comment on the 

proposed indefinite delay of the 

effective date of the 2011 Wage Rule. 

Signed: at Washington, DC, this 18 of July, 

2013. 

Eric Seleznow, 

Acting Assistant Secretary for Employment 

and Training. 

[FR Doc. 2013–17676 Filed 7–18–13; 4:15 pm] 

BILLING CODE 4510–FP–P 

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. 

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 tollfree 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 selfcorrect, 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 flatrate 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 variablerate 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 


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1See http://www.pbgc.gov/documents/plan-forregulatory-review.pdf. 

2See 76 FR 57082, http://www.pbgc.gov/ 

Documents/2011-23692.pdf. 

3See 77 FR 6675, http://www.pbgc.gov/ 

Documents/2012-3054.pdf. 

4There is also a termination premium, which 

would be unaffected by this proposed rule. 

due on the same day in the premium 

payment year—the historical variablerate premium due date. The following 

table shows how 2014 due dates would 

change for calendar-year plans. 

Plan size 

Current regulation Proposal 

Flat-rate 

premium 

Variable-rate 

premium Entire premium 

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 

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 variablerate 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 selfcorrection 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. 

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. 

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 sevenday 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 


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44058 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

5See Exemption for Standard Terminations, 

below. 

6This 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). 

7See 63 FR 68684 (Dec. 14, 1998). 

8See discussion under the heading Flat-rate safe 

harbors, below. 

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. 

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. 

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 91⁄2 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. 

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 ‘‘selfcorrected’’ 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 flatrate premium at the early due date and 

‘‘true up’’ when they pay the variablerate 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—91⁄2 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. 

Eliminating large plans’ special flatrate 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. 

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 61⁄2

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 


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Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 44059 

9See Uniform Due Dates under Executive Orders 

12866 and 13563, below, for detailed discussion of 

costs and benefits. 

10See 29 CFR 4041.28(b). 

11See p. 3 of the Standard Termination Filing 

Instructions, http://www.pbgc.gov/documents/ 

500_instructions.pdf. 

12See Final-Year Variable-Rate Premium 

Exemption, below. 

13See Final-Year Due Date under Executive 

Orders 12866 and 13563, below, for detailed 

discussion of costs and benefits. 

14See ‘‘Look-Back’’ Rule for Small Plans, below. 

15See First-Year Variable-Rate Premium 

Exemption, below. 

between the old and new due dates, but 

overall, plans would gain.9

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 sometimesdifficult 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. 

With a view to ensuring that finalyear 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 § 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 

§ 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. 

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-ahalf months of the final year would face 

an accelerated premium deadline. For 

plans closing out in the last five-and-ahalf months of the final year, the normal 

premium due date would come before 

the last date by which the postdistribution 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). 

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

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 21⁄2

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 


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44060 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

16To give any plan with a deferred due date 

adequate time to reconcile an estimated variablerate 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. 

17This 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 prioryear data are involved in the approach that PBGC 

now proposes. 

18The currently defined small plan category 

corresponds only approximately with the category 

of plans permitted by statute to use non-first-dayof-the-plan-year valuation dates. See preamble to 

PBGC’s final PPA 2006 premium rule, 73 FR 15065 

at 15069 (Mar. 21, 2008). 

19ERISA 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. 

20As discussed above, new plans resulting from 

non-de minimis consolidations and spinoffs would 

be excluded from the look-back provision. 

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. 

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 21⁄2 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. 

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 lookback 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 firstyear premiums according to the smallplan 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 61⁄2 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 nonfirst-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). 

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 lookback 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

PBGC also considered having the 

look-back rule apply only to plans that 


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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. 

22See 76 FR 18134 (Apr. 1, 2011), http:// 

www.pbgc.gov/documents/2011–7805.pdf. 

actually have non-first-day-of-the-planyear 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 

year 

UVB valuation 

year 

5500 valuation 

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 duedate 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 51⁄2

months without a look-back. For 

example, consider the following table 

comparing PBGC’s combined proposal 

with a 51⁄2-month due date extension 

(without a look-back) for a calendar-year 

plan: 

Premium payment 

year 

UVB valuation 

year Due date 

PBGC’s proposal ........................................................................................ 2014 2013 October 15, 2014. 

Due date extension without look-back ....................................................... 2013 2013 October 15, 2014. 

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 51⁄2 months, the premium is 

being paid for 2013. 

PBGC in fact considered the 

alternative of extending the due date 51⁄2

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 61⁄2

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 51⁄2

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. 

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 lookback rule applies, small plans’ variablerate 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 


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44062 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

23Newly 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. 

24Between 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 variablerate premiums. 

25See Exemption for Standard Terminations, 

below. 

26See Final-Year Due Date under Executive 

Orders 12866 and 13563, below, for detailed 

discussion of costs and benefits. 

whether there are other approaches that 

might be more effective. 

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 variablerate premium with or without the lookback 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

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. 

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 finalyear due date rule for plans in standard 

terminations, to which this change is 

related.26

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 atrisk 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 atrisk 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 atrisk 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 (§ 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 participantcounting rules and does not impose on 


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Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 44063 

27PBGC 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. 

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 selfcorrect 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 selfcorrectors should be substantially less 

than that for those that do not selfcorrect.27

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, § 4007.8(d) refers 

to the policy guidelines in the appendix, 

and § 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 flatrate premium that is due early in the 

premium payment year, two months 

after the participant count date. 

If, as PBGC is proposing, the largeplan 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 flatrate 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 flatrate 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 


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44064 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

28As 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. 

29Technical 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. 

30The alternative calculation method is also 

described in the premium filing instructions for 

years to which it applies. 

also make the provision clearer and 

simpler.28

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 

(§ 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 § 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. 

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 

§ 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. 

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 


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Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 44065 

31The 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 

32PBGC assumes for this purpose that enrolled 

actuaries charge about $350 per hour. 

33PBGC 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. 

34The 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. 

35The 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. 

36For 2011, only about 7 percent of standard 

terminations involved plans with more than 100 

participants. 

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.) 

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

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. 

The most significant earnings shift 

would be that filers would gain 71⁄2

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. 

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 61⁄2-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. 

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 singleemployer 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@ 

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. 

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 


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44066 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

37See, 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. 

38See, 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. 

39See, e.g., DOL’s final rule on Prohibited 

Transaction Exemption Procedures, 76 FR 66,637, 

66,644 (Oct. 27, 2011). 

40See PBGC 2010 pension insurance data table S– 

31, http://www.pbgc.gov/Documents/pensioninsurance-data-tables-2010.pdf. 

41This 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. 

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

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

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. 


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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 

■ 1. The authority citation for part 4000 

continues to read as follows: 

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

§ 4000.3 [Amended] 

■ 2. In § 4000.3(b): 

■ a. Paragraph (b)(1)(i) is removed. 

■ 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 

■ 3. The authority citation for part 4006 

continues to read as follows: 

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

1307. 

■ 4. In § 4006.2: 

■ a. The introductory text is amended 

by removing the words ‘‘and singleemployer plan’’ and adding in their 

place the words ‘‘single-employer plan, 

and termination date’’. 

■ 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’’. 

■ c. The definition of participant count 

date is amended by removing the words 

‘‘for a plan year’’. 

■ 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’’. 

■ 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: 

§ 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. 

■ 5. In § 4006.3: 

■ a. Paragraphs (c) and (d) are removed. 

■ b. A sentence is added to the end of 

the introductory text, and paragraphs (a) 

and (b) are revised, to read as follows: 

§ 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 § 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 variablerate 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 × 

20 2 = $5 × 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. 

■ 6. In § 4006.4: 

■ 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’’. 

■ 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’’. 

■ 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’’. 

■ d. New paragraph (b)(3) is added to 

read as follows: 

§ 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 


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44068 Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 

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. 

* * * * * 

■ 7. In § 4006.5: 

■ 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’’. 

■ 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’’. 

■ 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’’. 

■ d. Paragraph (e)(2)(ii) is amended by 

removing the words ‘‘plan year’’ and 

adding in their place the words 

‘‘premium payment year’’. 

■ 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). 

■ f. Paragraph (a)(4) is added, and 

paragraphs (c), (d), (e)(1), and (g) are 

revised, to read as follows: 

§ 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 

§ 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 

§ 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. 

§ 4006.7 [Amended] 

■ 8. In § 4006.7, paragraph (b) is 

amended by removing the words ‘‘under 

section 4048 of ERISA’’. 

PART 4007—PAYMENT OF PREMIUMS 

■ 9. The authority citation for part 4007 

continues to read as follows: 

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

1306, 1307. 

§ 4007.2 [Amended] 

■ 10. In § 4007.2: 

■ a. Paragraph (a) is amended by 

removing the words ‘‘and singleemployer plan’’ and adding in their 

place the words ‘‘single-employer plan, 

and termination date’’. 

■ 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’’. 

■ 11. In § 4007.3: 

■ 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’’). 

■ b. Paragraph (a) is revised to read as 

follows: 

§ 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 § 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 


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Federal Register / Vol. 78, No. 141 / Tuesday, July 23, 2013 / Proposed Rules 44069 

specified in this part in the manner and 

format prescribed in the instructions. 

* * * * * 

■ 12. In § 4007.8: 

■ 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’’). 

■ b. Paragraphs (f), (g), (h), and (i) are 

removed, and paragraph (j) is 

redesignated as paragraph (g). 

■ 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: 

§ 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 

§ 4007.11(a)(1),— 

* * * * * 

■ 13. Section 4007.11 is revised to read 

as follows: 

§ 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 § 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 postdistribution certification may be filed 

without penalty under § 4041.29 of this 

chapter, or 

(3) The date when the postdistribution certification is filed. 

(e) Continuing obligation to file. The 

obligation to make flat-rate and variablerate 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. 

■ 14. Section 4007.12 is amended by 

revising paragraph (b) to read as follows: 

§ 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 singleemployer plan shall be an obligation 

solely of the contributing sponsor and 

the members of its controlled group, if 

any. 

§ 4007.13 [Amended] 

■ 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] 

■ 16. In the Appendix to part 4007: 

■ 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’’. 

■ 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 

■ 17. The authority citation for part 

4047 continues to read as follows: 

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

§ 4047.4 [Amended] 

■ 18. In § 4047.4, paragraph (c) is 

amended by removing the words ‘‘in 

§ 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 


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