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CCH® PENSION AND BENEFITS — 12/21/06

PBGC agenda proposes cap on variable rate premium, in some cases

The PBGC has issued its semiannual regulatory agenda, which proposes a cap to the variable rate premium, in some cases. The regulatory agenda lists regulations that are currently under development or review, or which will be under development or review within the next twelve months. The regulations on premium rates and payment of premiums would also be revised to implement provisions of the Deficit Reduction Act of 2005 (P.L. 109-171) and the Pension Protection Act of 2006 (P.L. 109-280) that are effective in 2006 or 2007. In addition to the limited cap on the variable-rate premium, the rule change would affect the flat premium rate and create a new "termination premium" that would be payable in connection with certain distress and involuntary plan terminations.

Other proposed rule changes

In its latest issuance, the PBGC has indicated that it proposes to amend current regulations to: (1) strengthen multiemployer plan reporting requirements; (2) improve its valuation assumptions and methods by amending its benefit valuation and asset allocation regulations; (3) improve its benefit payment rules for PBGC-trusteed plans; (4) reflect changes under the PPA to the calculation of the variable rate premium and its rule on Annual Financial Accounting Information Reporting; and (4) add two new reportable events. One of the reportable events is a decline in the credit rating of a controlled group member below investment grade, and the other is the filing of Form 8-K with the SEC.

Final rule stage

Two items appear in the final rule stage. The PBGC is replacing policy statements about penalties with an updated and expanded set of information penalty policies codified in its regulations. In addition, the PBGC is amending its regulation on Missing Participants to conform the mortality assumptions to the updated mortality assumptions under its regulation on Allocation of Assets in Single Employer Plans.

Completed actions

Finally, actions listed as completed in the regulatory agenda are (1) the assessment of and relief from premium penalties; (2) the electronic filing requirement; and (3) the rule for computing liability under ERISA §4063(b) when there is a substantial cessation of operations by an employer described in ERISA §4062(e).

For more information on this and related topics, consult the CCH Pension Plan Guide.

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