Premium due dates currently depend on plan size, with large, mid-size and small plans all paying flat- and variable-rate premiums according to different schedules. PBGC proposes to eliminate the current system of three premium due dates that depend on plan size and premium type and return to the historical due date for both flat- and variable-rate premiums of plans of all sizes. (Under the current regulation, for example, a large calender-year plan would have a 2/24/14 due date for the flat-rate premium and a 10/15/14 due date for the variable-rate premium.)

For calendar-year plans of all sizes, the due date would be October 15. Unifying premium filing due dates for all plans would simplify the filing process by:

For small plans, the proposed uniform due date causes a timing issue under current rules because they value plan benefits at the end of the year. To solve this problem, the PBGC is also proposing a look-back rule for small plan valuation purposes (see Look-back Rule for Small Plans).

Under current rules, for a plan terminating in a standard termination, the final premium may be due months after the plan is terminated. The proposed rule creates a new premium due date for terminating plans that coordinates with the final step in a standard termination, a plan's filing of the post-distribution certification under PGBC Regulation 4041.29. Accordingly, the special premium due date for a terminating plan's final year would be the earliest of:

As a practical matter, this accelerates the premium deadline for terminating plans that close out within the first six and one-half months of the final year. However, the PBGC is also proposing to exempt plans from variable-rate premiums for the final year (even if the termination date comes within that year), which reduces the burden of computing a variable-rate premium under this accelerated deadline (see First-year and Final-year Variable-rate Premium Exemptions).

The current 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 that include:

Currently, 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 two and one-half months before the end of the premium payment year (see Uniform Due Dates for Plans of All Sizes).

The PBGC proposal instead requires small plans to determine unfunded vested benefits (UVBs), on which variable-rate premiums are based, by looking back to data for the prior year. (It would not involve any "rolling forward" or other modification of prior year data as was the case under regulations that were in place pre-PPA.) This "look-back" rule would apply only to the variable-rate premium, not to the flat-rate premium.

This PBGC proposal would define small plan to include a plan with either:

Basing this definition on a plan's participant count in the premium payment year (rather than the year prior to the premium payment year) will exclude many new or newly covered plans (which have no prior year) from taking advantage of the delayed small plan due date for their first year that is permitted under current rules.

For small plans, the combination of the new due date and the look-back rule would mean both that:

This would permit small plan sponsors to defer to plan valuation until after the beginning of the year following the valuation date, when profits and taxes can be computed.

Because a new plan does not have a prior year to look back to, the PBGC proposal provides an exemption from the variable-rate premium for small plans that are new or newly covered.

The PBGC considers plans created by consolidation or spin-off to be new plans. To avoid creating incentives to spin-off underfunded small plans to avoid paying variable-rate premiums, the PBGC proposal excludes non-de minimis consolidated or spun-off plans from this exemption and instead bases their variable-rate premiums on current year data, with an alternative due date available (see New Plan Due Date Modifications).

The PBGC proposal also expands the current 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. This is conditioned only on the completion of a standard termination.

ERISA Section 303(i)(1)(A)(i) requires the use of special actuarial assumptions in calculating an at-risk plan's funding target, including that a "loading factor" (described in ERISA Section 303(i)(1)(C)) be included in the funding target of an at-risk plan which has been considered at-risk for two of the past four years. There is some ambiguity under the current premium rates regulation regarding the term "participant" in the loading factor calculation for at-risk plans, including:

The PBGC proposes to resolve this 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. However, it solicits suggestions from the public for alternative approaches to take in calculating the participant-based portion of the loading factor.

For more information on PPA funding rules for at-risk plans, see Practice Note, Qualified Retirement Plans in Mergers & Acquisitions: PPA Funding Rules.