Premium due dates currently depend on plan size, with large, mid-size and small plans all paying flat-rate and variable-rate premiums according to different schedules. The final rule eliminates the current system of three premium due dates and returns to one uniform due date for both flat-rate and variable-rate premiums of plans of all sizes.

For calendar-year plans of all sizes, the due date will be October 15. However, the final rule provides a transition rule to give small plans more time to adjust to the new rules.

For small plans, the uniform due date causes a timing issue under current rules (because small plans value plan benefits at the end of the year). To solve this problem, the final rule creates a look-back rule for small plans that values plan benefits based on prior-year data (see Look-back Rule for Small Plans).

Shifting immediately from the old due date schedule to the new schedule would result in two premium due dates for small plans in the initial transition year. To avoid the doubling up of premiums for 2014, the final rule provides a one-time extension by extending the transition year due date by four months (from October 15, 2014 to February 15, 2015, for calendar-year plans) for plans that would otherwise have two premium due dates in 2014.

This means a small plan would pay its 2014 premiums on February 15, 2015 and its 2015 premiums on October 15, 2015.

The final rule includes a chart illustrating the due dates for plans of all sizes in 2014 and 2015.

In addition, a 60-day penalty waiver is available in cases of financial hardship.

Under current rules, for a plan terminating in a standard termination, the final premium may be due months after the plan is terminated. The final 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. A plan administrator of a terminating plan must file this certification between 30-90 days after the last benefit distribution date.

Under the final rule, the special premium due date for a terminating plan's final year would be the earliest of:

This is a simplified version of the special due date created under the PBGC's proposed rule (see Legal Update, PBGC Proposed Regulations Simplify and Coordinate Premium Rate and Payment Rules: Special Due Date for Terminating Plans).

Practically 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 final rule also exempts 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. The final rule modifies the current provision to:

The final rule 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.

A small plan is defined 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 using the delayed small plan due date that is permitted under current rules for their first year . However, it does align a small plan's premium due date with the Form 5500 due date (as typically extended) and corresponding valuation.

Because a new plan does not have a prior year to look back to, the final rule exempts small plans that are new or newly covered from the variable-rate premium.

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 final rule also expands the current 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 final rule resolves 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.

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