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PBGC Issues Guidance on HATFA’s Effect on PBGC Premiums

The Pension Benefit Guaranty Corporation on Sept. 24 issued Technical Update 14-1, guidance on how the Highway and Transportation Funding Act of 2014 (HATFA) affects PBGC premiums. 

PBGC expects most plans with premium filings due in calendar year 2014 that haven’t already filed a 2013 Schedule SB based on HATFA calculations will find it administratively less burdensome to determine their 2014 variable-rate premium (VRP) based on an asset value that includes contributions receivable that are discounted at the MAP-21 effective interest rate, even though many of those plans will ultimately use 2013 HATFA rates. Such a plan that ultimately uses 2013 HATFA rates should amend its premium filing and pay the additional premium and late payment charges.

HATFA applies retroactively to 2013 years depending on decisions that may be made as late as Dec. 31, 2014 (or, if later, the due date for the 2013 Form 5500). Like the 2013 Form 5500, the 2014 PBGC premium filing for calendar-year plans is due less than 10 weeks after Aug. 8, 2014, the date HATFA became law. 

PBGC will not require a plan to pay additional premiums or late payment charges, or amend its 2014 premium filing if it: 

  • makes a 2014 premium filing using an asset value that includes 2013 contributions receivable that are discounted using MAP-21 effective interest rates, and 
  • uses HATFA rates for 2013 funding purposes 

as long as the following four conditions are met:

  • The 2014 premium filing is due on or before Dec. 31, 2014, and is made on time.
  • As of the 2014 premium due date, the plan has not filed a 2013 Schedule SB based on HATFA calculations.
  • The asset value reported in the 2014 premium filing included contributions made after the end of the 2013 plan year discounted using the effective interest rate that would have applied had HATFA not been enacted (i.e., based on the MAP-21 corridor).
  • The plan's contributions for the 2013 plan year made after the end of that plan year do not exceed $25 million.

Despite the IRS’ general position that a contribution designated for a particular plan year cannot be redesignated to apply for another after the Schedule SB is filed, the plan sponsor may choose to redesignate all or a portion of a contribution that was originally designated as applying to the plan year beginning in 2013 to apply to a plan year that begins in 2014. This rule applies only to contributions made after the end of the 2013 plan year and on or before Sept. 30, 2014 and applies only if the designation is on a Schedule SB for the 2013 plan year that is filed on or before Dec. 31, 2014.

Since 2011, the PBGC has considered the treatment of amended premium filings that show increased assets and decreased variable-rate premiums to be supported by amended Schedules SB (or B) that reflected recharacterization of contributions, and submitted in order to obtain premium refunds.

PBGC has reviewed this policy in light of the IRS' explicit endorsement of one specific type of redesignation in connection with HATFA implementation. Under the circumstances, plans that redesignate 2013 contributions to 2014 in accordance with IRS Notice 2014-53 should amend their 2014 premium filings to exclude the discounted value of such redesignated contributions from the value of assets used to determine the 2014 VRP. In general, such a redesignation will affect premiums for both 2014 and 2015. If the redesignation is made after the 2014 premium filing, the 2014 filing should be amended to reflect the higher premium.