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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The PBGC has announced that it will provide relief for certain single-employer defined benefit plan premium filers that used the alternative premium funding target to determine their variable-rate premiums, but did not check box 5 on their comprehensive premium filings.
Pursuant to a change made by the Pension Protection Act of 2006 (P.L. 109-280), the alternative premium funding target (alternative method) allows plans to calculate their variable-rate premium using a method that is simpler and less burdensome that the statutorily prescribed (standard) method. If a plan chooses the alternative method, it must do so for at least five years.
Senate letter to PBGC
The leadership of the Senate Committees on Health, Education, Labor and Pensions (HELP) and on Finance sent a letter to the PBGC on May 20, 2010 expressing concern over a decision by the PBGC regarding the 2009 premium filings. Specifically, many plans that thought they had elected to use the alternative method were told by the PBGC that they were not entitled to use the method because they neglected to check box 5 on their premium filings indicating their election of the method. Although box 5 was not checked, these plans did indicate their election by checking the alternative method box in line 7 and timely paying their premiums as calculated under the alternative method. The Senate leadership noted that the online premium filing form failed to prompt these plans to check both boxes. In some cases, the use of the alternative method would have resulted in lower premiums. The leadership observed that these plans faced millions of dollars in additional premiums, plus interest and penalties, and asked the PBGC to reconsider its decision.
PBGC response
In a June 7, 2010 letter to the leadership of the Senate HELP and Finance Committees, the PBGC decided to offer relief to these plans. The PBGC noted that most plans followed the instructions and checked box 5 to indicate their election. However, approximately 5% of the plans used the alternative method of calculation, but did not check box 5. The PBGC explained that because these practitioners were using the new election procedures for the first time, it has decided to offer relief.
The PBGC said that it will issue a technical update shortly that provides the scope of the relief and the process for obtaining it for any plan that intended to make the election but did not check box 5. The relief will be provided if (1) the plan filed on time; (2) the plan used the alternative method to determine the variable-rate premium; and (3) the "Alternative" box was checked in line 7d(1). To take advantage of this relief, the plan administrator will be required to notify the PBGC in writing by a specified date to say that the plan intended to make the election. No other documentary evidence will be required, according to the PBGC. The plan will be deemed to have made a valid election, locking in the alternative method for five years. In addition, the PBGC explained that similarly situated plans that have already amended their filings to use the standard method to calculate their variable-rate premiums will be eligible for the relief.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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