Payment of Premiums; Assessment of and Relief From Penalties, 66867-66871 [E6-19436]
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Federal Register / Vol. 71, No. 222 / Friday, November 17, 2006 / Rules and Regulations
Subpart N—[Amended]
16. The authority citation for subpart
N is revised to read as follows:
I
Authority: Secs. 702(a)(5), 1631, and 1633
of the Social Security Act (42 U.S.C.
902(a)(5), 1383, and 1383b); sec. 202, Pub. L.
108–203, 118 Stat. 509 (42 U.S.C. 902 note).
17. Section 416.1403 is amended by
adding new paragraph (a)(25) to read as
follows:
I
§ 416.1403 Administrative actions that are
not initial determinations.
(a) * * *
(25) Issuing a receipt in response to
your report of a change in your earned
income.
Subpart R—[Amended]
18. The authority citation for subpart
R is revised to read as follows:
I
Authority: Secs. 702(a)(5), 1612(b),
1614(b), (c), and (d), and 1631(d)(1) and (e)
of the Social Security Act (42 U.S.C.
902(a)(5), 1382a(b), 1382c(b), (c), and (d) and
1383(d)(1) and (e)).
19. Section 416.1861 is amended by
redesignating paragraphs (b), (c), (d), (e)
and (f) as (c), (d), (e), (f) and (g), adding
new paragraph (b), and revising newly
redesignated paragraph (f) to read as
follows:
I
*
*
*
*
*
(b) If you are instructed at home. You
may be a student regularly attending
school if you are instructed at home in
grades 7–12 in accordance with a home
school law of the State or other
jurisdiction in which you reside and for
at least 12 hours a week.
*
*
*
*
*
(f) When we need evidence that you
are a student. We need evidence that
you are a student if you are 18 years old
or older but under age 22, because we
will not consider you to be a child
unless we consider you to be a student.
*
*
*
*
*
I 20–21. Add a new § 416.1870 and
undesignated center heading to read as
follows:
Who Is Considered a Student for
Purposes of the Student Earned Income
Exclusion
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Effect of being considered a
If we consider you to be a student, we
will not count all of your earned income
when we determine your SSI eligibility
and benefit amount. If you are an
ineligible spouse or ineligible parent for
deeming purposes and we consider you
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§ 416.1872
Who is considered a student.
We consider you to be a student if you
are under 22 years old and you regularly
attend school or college or training that
is designed to prepare you for a paying
job as described in § 416.1861(a)
through (e).
I 23. Add a new § 416.1874 to read as
follows:
§ 416.1874 When we need evidence that
you are a student.
We need evidence that you are a
student if you are under age 22 and you
expect to earn over $65 in any month.
Section 416.1861(g) explains what
evidence we need.
[FR Doc. E6–19232 Filed 11–16–06; 8:45 am]
BILLING CODE 4191–02–P
PENSION BENEFIT GUARANTY
CORPORATION
§ 416.1861 Deciding whether you are a
child: Are you a student?
§ 416.1870
student.
to be a student, we will not count all of
your income when we determine how
much of your income to deem. Section
416.1110 explains what we mean by
earned income. Section 416.1112(c)(3)
explains how much of your earned
income we will not count. Section
416.1161(a)(27) explains how the
student earned income exclusion
applies to deemors.
I 22. Add a new § 416.1872 to read as
follows:
29 CFR Part 4007
RIN 1212–AA95
Payment of Premiums; Assessment of
and Relief From Penalties
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:
SUMMARY: This final rule adopts policy
guidance on premium penalty waivers,
including guidance on the meaning of
‘‘reasonable cause’’ for premium penalty
waivers. For the convenience of the
public, this guidance is being codified
as an appendix to PBGC’s premium
payment regulation.
DATES: Effective date: December 18,
2006. The amendments made by this
rule apply to PBGC actions taken on or
after December 18, 2006.
FOR FURTHER INFORMATION CONTACT: John
H. Hanley, Director, Legislative &
Regulatory Department, or Deborah C.
Murphy, Attorney, Legislative &
Regulatory Department, Pension Benefit
Guaranty Corporation, 1200 K Street,
NW., Washington, DC 20005–4026; 202–
326–4024. (TTY/TDD users may call the
Federal relay service toll-free at 1–800–
PO 00000
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877–8339 and ask to be connected to
202–326–4024.)
SUPPLEMENTARY INFORMATION:
Background
Pension Benefit Guaranty Corporation
(PBGC) administers the pension plan
termination insurance program under
Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA).
When a single-employer plan terminates
without sufficient assets to provide all
benefits, PBGC steps in to ensure that
participants and beneficiaries receive
their plan benefits, subject to certain
legal limits. PBGC also provides
financial assistance to multiemployer
plans that become unable to pay
benefits.
ERISA and PBGC’s regulations require
that premiums be paid to PBGC. To
promote the effective operation of the
insurance program under Title IV,
ERISA section 4007 authorizes PBGC to
assess penalties for not paying
premiums in full and on time
(‘‘premium penalties’’). See PBGC’s
regulation on Payment of Premiums (29
CFR Part 4007).
A premium penalty is owed by any
person that was liable for the
premium—generally the plan
administrator and, in the case of a
single-employer plan, the contributing
sponsor(s) and any controlled group
members. (Under ERISA section
4006(a)(7)(D)(i)(II), as added by section
8101 of the Deficit Reduction Act of
2005, Pub. L. 109–171, February 8,
2006, the plan administrator is not
liable for the $1,250 per-participant
premium that applies to certain distress
and involuntary plan terminations
under that section.) Thus, a premium
penalty (other than a penalty for failure
to timely pay the $1,250 per-participant
premium under ERISA section
4006(a)(7)), may generally be paid out of
plan assets; see PBGC Opinion Letter
94–6 and the legislative history cited in
that letter.
PBGC’s premium payment regulation
includes provisions for determining the
amount of premium penalties and
provides for the waiver of those
penalties upon demonstration of
reasonable cause and in other specified
circumstances. Reconsideration of
premium penalty assessments is
covered by PBGC’s regulation on Rules
for Administrative Review of Agency
Decisions (29 CFR Part 4003). However,
neither the premium payment
regulation nor the administrative review
regulation currently provides a thorough
and detailed treatment of reasonable
cause and other bases for premium
penalty waivers.
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On January 12, 2001, PBGC published
in the Federal Register, at 66 FR 2856,
a proposed rule to expand and codify its
previously published penalty policies.
The 2001 proposed rule dealt both with
premium penalties under ERISA section
4007 and with penalties for failures to
provide certain information in a timely
manner under ERISA section 4071. In
particular, the proposed rule set forth
detailed guidance on determining
whether there is ‘‘reasonable cause’’ that
would justify a waiver of premium
penalties. The PBGC received no
comments on the 2001 proposed rule.
Provisions of This Rule
This final rule provides policy
guidance on premium penalty waivers,
including guidance on the meaning of
‘‘reasonable cause’’ for premium penalty
waivers. As discussed below, guidance
is not being issued at this time on the
determination of the amount of
premium penalties nor on procedures
for the assessment and review of
premium penalties. Otherwise, the
provisions in this final rule are
generally the same as the premium
penalty provisions in the 2001 proposed
rule with only minor changes. As in the
2001 proposed rule, the premium
penalty policy guidance in this final
rule takes the form of an appendix to
PBGC’s regulation on Payment of
Premiums (29 CFR part 4007).
This rule does not affect the use of
any other remedies available to PBGC
and does not address the settlement of
legal disputes involving penalties, either
alone or in the context of other legal
issues. This rule does not address
penalties under ERISA section 4302,
which applies to certain failures to
provide multiemployer plan notices
required under subtitle E of title IV of
ERISA and implementing regulations, or
under ERISA section 4071, which
applies to failures to provide
information on time.
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Premium Penalty Assessment
The 2001 proposed rule summarized
the rules on determining the amount of
premium penalties in the premium
payment regulation. That summary
provided no new guidance and is not
being included in the premium penalty
policy appendix at this time.
Premium Penalty Waivers
As described in the premium penalty
policy appendix, a premium penalty
may be waived, in whole or in part, for
a number of reasons, based on the facts
and circumstances. The most common
reason for waiving a penalty is
‘‘reasonable cause.’’ Reasonable cause is
generally found if—
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• Circumstances beyond control. The
violation arises from circumstances
beyond the control of the person whose
action or inaction may be the basis for
a penalty assessment, and
• Ordinary business care and
prudence. The failure could not be
avoided by exercising ordinary business
care and prudence. The size of the
organization and of the premium
involved may affect the ordinary
business care and prudence that is
expected in order to find reasonable
cause.
The premium penalty policy
appendix includes examples of
situations where reasonable cause might
be found, such as the sudden and
unexpected absence or inability to act of
an individual with responsibility to act,
the destruction of relevant records or
inability to comply resulting from a fire
or other casualty or natural disaster, and
reasonable reliance on erroneous oral or
written communication by a PBGC
employee.
The appendix also describes other
types of waivers:
• Statutory or regulatory requirement.
The appendix notes for completeness
that a penalty is waived if a statute or
regulation so requires.
• Legal error. The appendix provides
that a penalty may be waived if the
violation arises from reliance on an
erroneous interpretation of law—with
different standards depending on
whether the interpretation is or is not
disclosed to PBGC—or, in appropriate
circumstances, from a recent change in
the law.
• Pendency of PBGC procedures. The
appendix provides for waiver in some
cases of all or a part of a premium
penalty that is attributable to the
pendency of PBGC review or other
procedures.
• Other circumstances. The appendix
also notes that, in other narrow
circumstances, we may waive a penalty
where appropriate.
This part of the appendix has been
reorganized to group the material
differently (placing all the provisions
about legal errors under one heading),
eliminate an example about an
insignificant math error, and add an
example of PBGC procedures (other
than review procedures) whose
pendency could be the basis for a
waiver.
The explanation of the ‘‘other
circumstances’’ waiver category has also
been revised. In the 2001 proposed rule,
this provision was said to be aimed
primarily at cases where a premium
penalty assessment would be
‘‘inconsistent with the purposes of title
IV.’’ That language conveys a standard
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more restrictive than PBGC now
considers appropriate and has been
eliminated.
In exercising premium penalty waiver
authority and determining whether
reasonable cause exists, the premium
penalty policy appendix provides that
an organization’s outside advisors, such
as lawyers or actuaries, are treated as if
they were part of the organization. Thus,
organizations with in-house advisors are
treated the same in this respect as those
that choose to retain outside advisors.
Exercising care in selecting and
monitoring advisors is not a basis for a
reasonable cause waiver when the
advisors are in-house; similarly, it is not
considered a basis for a reasonable
cause waiver where outside advisors are
involved. Because it is so common for
premium payers to use advisors in
determining premiums, the payment of
premiums could not adequately be
enforced if premium penalties were
waived in such circumstances. Nothing
in this final rule is intended to limit any
recourse that an organization may have
against its outside advisors.
Premium Penalty Procedures
The 2001 proposed rule set forth
procedures for assessing and reviewing
premium penalties. The procedural
provisions are not included in the
premium penalty policy appendix at
this time. Procedural implications of the
new $1,250 per-participant premium
may affect further premium penalty
procedural guidance.
Miscellaneous Changes
There are a number of organizational
and editorial changes from the 2001
proposed rule. Principal among these is
the placement of provisions on
assessment and waiver toward the
beginning of the appendix, with a place
reserved for procedural provisions at the
end of the appendix. In addition, a new
§ 4 has been added to the appendix,
briefly summarizing the information in
the appendix and indicating where it is
located.
Compliance With Rulemaking
Guidelines
The PBGC has determined that this
action is not a ‘‘significant regulatory
action’’ under the criteria set forth in
Executive Order 12866.
This rule is not subject to notice and
comment rulemaking requirements
under section 553 of the Administrative
Procedure Act because it deals only
with general statements of PBGC policy.
The PBGC nonetheless invited comment
on the 2001 proposed rule. Because no
general notice of proposed rulemaking
is required, the Regulatory Flexibility
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Act does not apply. See 5 U.S.C. 601(2),
603, 604.
List of Subjects in 29 CFR Part 4007
reasonable cause for a failure to pay a
premium?
24 What are some situations that might
justify a ‘‘reasonable cause’’ waiver?
25 What are some situations that might
justify a partial ‘‘reasonable cause’’
waiver?
Employee benefit plans, Penalties,
Pension insurance, Reporting and
recordkeeping requirements.
I For the reasons given above, 29 CFR
part 4007 is amended as follows.
Procedures
[Reserved.]
PART 4007—PAYMENT OF PREMIUMS
General Provisions
1. The authority citation for part 4007
continues to read as follows:
I
Authority: 29 U.S.C. 1302(b)(3), 1303(a),
1306, 1307.
2. In § 4007.8, the introductory text of
paragraph (a) is amended by removing
the words ‘‘The charge will be based
on’’ and adding in their place the words
‘‘The amount determined under this
paragraph (a) will be based on’’; and
paragraphs (c) and (d) are revised to
read as follows:
I
§ 4007.8
Late payment penalty charges.
*
*
*
*
*
(c) Reasonable cause waivers. PBGC
will waive all or part of a late payment
penalty charge if PBGC determines that
there is reasonable cause for the late
payment. Policy guidelines for applying
the ‘‘reasonable cause’’ standard are in
§§ 22 through 25 of the Appendix to this
part.
(d) Other waivers. PBGC may waive
all or part of a late payment penalty
charge in other circumstances without
regard to whether there is reasonable
cause. Policy guidelines for waivers
without reasonable cause are in
§ 21(b)(1), (b)(3), (b)(4), and (b)(5) of the
Appendix to this part.
*
*
*
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I 3. An appendix is added to part 4007
to read as follows:
APPENDIX TO PART 4007—POLICY
GUIDELINES ON PREMIUM
PENALTIES
General Provisions
1 What is the purpose of this Appendix?
2 What defined terms are used in this
Appendix?
3 What is the purpose of a premium
penalty?
4 What information is in this Appendix and
how is it organized?
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Premium Penalty Assessment
[Reserved.]
Waiver Standards
21 What are the standards for waiving a
premium penalty?
22 What is ‘‘reasonable cause’’?
23 What kinds of facts does PBGC consider
in determining whether there is
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What is the purpose of this Appendix?
This appendix sets forth principles
and guidelines that we intend to follow
in assessing, reviewing, and waiving
premium penalties. However, this is
only general policy guidance. Our
action in each case is guided by the facts
and circumstances of the case.
§ 2 What defined terms are used in this
Appendix?
The following terms are defined in
part 4001 of this chapter: contributing
sponsor, ERISA, PBGC, person, plan,
and plan administrator. In addition, in
this appendix:
(a) Premium penalty means a penalty
under ERISA section 4007 and under
this part for failing to pay a premium in
full and on time.
(b) Waiver means reduction or
elimination of a premium penalty that is
being or has been assessed.
(c) We means PBGC.
(d) You means, according to the
context,—
(1) A plan administrator, contributing
sponsor, or other person, if—
(i) The person’s action or inaction
may be the basis for a premium penalty
assessment,
(ii) The person may be required to pay
the premium penalty, or
(iii) The person is requesting review
of the premium penalty; or
(2) An employee or agent of, or
advisor to, any of these persons.
§ 3 What is the purpose of a premium
penalty?
Sec.
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The basic purpose of a premium
penalty is to encourage you to pay
premiums in full and on time and to
voluntarily self-correct any failure to do
so.
§ 4 What information is in this Appendix
and how is it organized?
This Appendix has four divisions:
(a) General provisions. The General
Provisions division (§§ 1–4) tells you
the purpose and organization of the
Appendix, the purpose of a premium
penalty, and the definitions of terms
used in the Appendix.
(b) Premium penalty assessment. The
Premium Penalty Assessment division
is reserved.
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(c) Waiver standards. The Waiver
Standards division (§§ 21–25) explains
the principles that PBGC follows in
waiving premium penalties.
(1) Reasonable cause. We waive
premium penalties for reasonable cause,
as explained in §§ 22–25.
(2) Other waivers. We also waive
premium penalties in some other
circumstances, such as mistake of law,
as explained in § 21.
(d) Procedures. The Procedures
division is reserved.
Premium Penalty Assessment
[Reserved.]
Waiver Standards
§ 21 What are the standards for waiving a
premium penalty?
(a) Facts and circumstances. In
deciding whether to waive a premium
penalty in whole or in part under
paragraph (b), we consider the facts and
circumstances of each case.
(b) Waivers.
(1) Provisions of law. We waive all or
part of a premium penalty if a statute or
regulation requires that we do so. For
example, ERISA section 4007(b) and
§ 4007.8 of this part provide for a waiver
in certain circumstances involving
business hardship, and § 4007.8 of this
part also provides for waivers if certain
‘‘safe harbor’’ tests are met, and for a
waiver of a premium penalty that
accrues after the date of a bill for a
premium underpayment if you pay the
premium owed within 30 days after the
date of the bill.
(2) Reasonable cause. We waive a
premium penalty if you show
reasonable cause for a failure to pay a
premium in full and on time. See §§ 22
through 25 for guidelines on
‘‘reasonable cause’’ waivers. If there is
reasonable cause for only part of a
failure to pay a premium, we waive the
premium penalty only for that part.
(3) Legal errors. We may waive all or
part of a premium penalty if the failure
to pay a premium in full and on time
that gives rise to the premium penalty
results from certain kinds of legal errors.
(i) Erroneous legal interpretation—
disclosed. If a failure to pay a premium
in full and on time results from your
reliance on an erroneous interpretation
of the law, we waive a premium penalty
that arises from the failure if you
promptly and adequately call our
attention to the interpretation and the
relevant facts, and the erroneous
interpretation is not frivolous. If the
interpretation affects a filing that you
make with us, you should call our
attention to the interpretation in writing
with the filing. If you rely on the
interpretation to justify not making a
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filing with us, you should call our
attention to the interpretation in writing
by the time prescribed for the filing not
made.
(ii) Erroneous legal interpretation—
undisclosed. If a failure to pay a
premium in full and on time results
from your reliance on an erroneous
interpretation of the law, and you do not
promptly and adequately call our
attention to the interpretation and the
relevant facts, we may nevertheless
waive a premium penalty if the weight
of authority supporting the
interpretation is substantial in relation
to the weight of opposing authority and
it is reasonable for you to rely on the
interpretation.
(iii) Recent change in the law. We
may waive all or part of a premium
penalty if the law changes shortly before
the date a premium payment is due and
the premium payment that you make by
the due date would have been correct
under the law as in effect before the
change. In determining whether and to
what extent to grant a waiver in a case
of this kind, we consider such factors as
the length of time between the change
in the law and the premium due date,
the nature and timing of any publicity
given to the change in the law, the
complexity of the legal issues, and your
general familiarity with those issues.
(4) Pendency of PBGC procedures. We
may waive all or a part of a premium
penalty that is attributable to the
pendency of PBGC review or other
procedures. For example:
(i) If you request review of a premium
penalty, and you make a non-frivolous
argument in your request for review that
you were not required to pay the
premium or that you were, and still are,
unable to obtain the information needed
to determine the premium, we may
waive the portion of the premium
penalty that accrues during the review
process. If you make such a nonfrivolous argument with respect to a
portion of the premium, we may apply
this principle to that portion.
(ii) We may waive all or a part of a
premium penalty if we believe that the
pendency of PBGC procedures for
identifying a premium delinquency and
notifying you of the delinquency
contributed to your failure to correct the
delinquency more promptly.
(5) Other circumstances. We may
waive all or part of a premium penalty
in other circumstances if we determine
that it is appropriate to do so. We intend
to exercise this waiver authority only in
narrow circumstances.
(c) Action or inaction of outside
parties. In some cases an accountant,
actuary, lawyer, pension consultant, or
other individual or firm that is not part
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of your organization may assist you in
complying with PBGC requirements. If
the outside individual’s or firm’s action,
inaction, or advice causes or contributes
to a failure to pay a premium in full and
on time, we apply our waiver authority
as if the outside individual or firm were
part of your organization. In the case of
an outside individual who is part of a
firm, we generally consider both the
individual and the firm to be part of
your organization.
§ 22
What is ‘‘reasonable cause’’?
(a) General rule. In general, there is
‘‘reasonable cause’’ for a failure to pay
a premium in full and on time to the
extent that—
(1) The failure arises from
circumstances beyond your control, and
(2) You could not avoid the failure by
the exercise of ordinary business care
and prudence.
(b) Overlooking legal requirements.
Overlooking legal requirements does not
constitute reasonable cause.
(c) Action or inaction of outside
parties. If an accountant, actuary,
lawyer, pension consultant, or other
individual or firm that is not part of
your organization assists you in
complying with PBGC requirements,
there is generally no reasonable cause
for a failure to pay a premium in full
and on time that arises from
circumstances within the control of the
outside individual or firm, or could be
avoided by the exercise of ordinary
business care and prudence by the
outside individual or firm. The fact that
you exercised care and prudence in
selecting and monitoring the outside
individual or firm is not a basis for a
reasonable cause waiver.
(d) Size of organization. If an
organization or one or more of its
employees is responsible for taking
action, the size of the organization may
affect what ordinary business care and
prudence would require. For example,
ordinary business care and prudence
would typically require a larger
organization to establish more
comprehensive backup procedures than
a smaller organization for dealing with
situations such as computer failure, the
loss of important records, and the
inability of an individual to carry out
assigned responsibilities. Thus, there
may be reasonable cause for a small
organization’s failure to pay a premium
in full and on time even though, if the
organization were larger, the exercise of
ordinary business care and prudence
would have avoided the failure.
(e) Size of premium underpayment. In
general, the larger a premium, the more
care and prudence you should use to
make sure that you pay it in full and on
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time. Thus, there may be reasonable
cause for a small underpayment even
though, under the same circumstances,
we would conclude that a larger
underpayment could have been avoided
by the exercise of ordinary business care
and prudence.
(f) Collection and enforcement. In
determining whether reasonable cause
exists, we do not consider either—
(i) The likelihood or cost of collecting
the premium penalty, or
(ii) The costs and risks of enforcing
the premium penalty by litigation.
§ 23 What kinds of facts does PBGC
consider in determining whether there is
reasonable cause for a failure to pay a
premium?
In determining the extent to which a
failure to pay a premium in full and on
time arose from circumstances beyond
your control and the extent to which
you could have avoided the failure by
the exercise of ordinary business care
and prudence—and thus the extent to
which waiver of a premium penalty for
reasonable cause is appropriate—we
consider facts such as the following:
(a) What event or circumstance
caused the underpayment and when the
event happened or the circumstance
arose. The dates you give should clearly
correspond with the underpayment
upon which the premium penalty is
based.
(b) How that event or circumstance
kept you from paying the premium in
full and on time. The explanation you
give should relate directly to the failure
to pay a premium that is the subject of
the premium penalty.
(c) Whether you could have
anticipated the event or circumstance.
(d) How you responded to the event
or circumstance, including what steps
you took, and how quickly you took
them, to pay the premium and how you
conducted other business affairs.
Knowing how you responded to the
event or circumstance may help us
determine what degree of business care
and prudence you were capable of
exercising during that period and thus
whether the failure to pay the premium
could or could not have been avoided
by the exercise of ordinary business care
and prudence.
§ 24 What are some situations that might
justify a ‘‘reasonable cause’’ waiver?
The following examples illustrate
some of the reasons often given for
failures to pay premiums for which we
may assess penalties. The situation
described in each example may
constitute reasonable cause, and each
example lists factors we consider in
determining whether to grant a
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premium penalty waiver for reasonable
cause in a case of that kind.
(a) An individual with responsibility
for taking action was suddenly and
unexpectedly absent or unable to act.
We consider such factors as the
following: The nature of the event that
caused the individual’s absence or
inability to act, for example, the
resignation of the individual or the
death or serious illness of the individual
or a member of the individual’s
immediate family; the size of the
organization and what kind of backup
procedures it had to cope with such
events; how close the event was to the
deadline that was missed; how abrupt
and unanticipated the event was; how
the individual’s absence or inability to
act prevented compliance; how
expensive it would have been to comply
without the absent individual; whether
and how other business operations and
obligations were affected; how quickly
and prudently a replacement for the
absent individual was selected or other
arrangements for compliance were
made; and how quickly a replacement
for the absent individual took
appropriate action.
(b) A fire or other casualty or natural
disaster destroyed relevant records or
prevented compliance in some other
way. We consider such factors as the
following: The nature of the event; how
close the event was to the deadline that
was missed; how the event caused the
failure to pay the premium; whether
other efforts were made to get needed
information; how expensive it would
have been to comply; and how you
responded to the event.
(c) You reasonably relied on
erroneous oral or written advice given
by a PBGC employee. We consider such
factors as the following: Whether there
was a clear relationship between your
situation and the advice sought;
whether you provided the PBGC
employee with adequate and accurate
information; and whether the
surrounding circumstances should have
led you to question the correctness of
the advice or information provided.
(d) You were unable to obtain
information, including records and
calculations, needed to comply. We
consider such factors as the following:
What information was needed; why the
information was unavailable; when and
how you discovered that the
information was not available; what
attempts you made to get the
information or reconstruct it through
other means; and how much it would
have cost to comply.
VerDate Aug<31>2005
16:36 Nov 16, 2006
Jkt 211001
§ 25 What are some situations that might
justify a partial ‘‘reasonable cause’’ waiver?
DEPARTMENT OF DEFENSE
(a) Assume that a fire destroyed the
records needed to compute a premium
payment. If in the exercise of ordinary
business care and prudence it should
take you one month to reconstruct the
records and pay the premium, but the
payment was made two months late, it
might be appropriate to waive that part
of the premium penalty attributable to
the first month the payment was late,
but not the part attributable to the
second month.
(b) Assume that a plan administrator
underpaid the plan’s flat-rate premium
because of reasonable reliance on
erroneous advice from a PBGC
employee, and also underpaid the plan’s
variable-rate premium because the plan
actuary used the wrong interest rate. A
PBGC audit revealed both errors. PBGC
billed the plan for a premium penalty of
$5,000—$1,000 for underpayment of the
flat-rate premium and $4,000 for
underpayment of the variable-rate
premium. The plan administrator
requested a waiver of the premium
penalty. While the erroneous PBGC
advice constituted reasonable cause for
underpaying the flat-rate premium,
there was no showing of reasonable
cause for the error in the variable-rate
premium. Therefore, we would waive
only the part of the premium penalty
based on underpayment of the flat-rate
portion of the premium ($1,000).
66871
Office of the Secretary
Procedures
[Reserved.]
Issued in Washington, DC, this 13th day of
November, 2006.
Elaine L. Chao,
Chairman, Board of Directors, Pension Benefit
Guaranty Corporation.
Issued on the date set forth above pursuant
to a resolution of the Board of Directors
authorizing its Chairman to issue this interim
final rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit
Guaranty Corporation.
[FR Doc. E6–19436 Filed 11–16–06; 8:45 am]
BILLING CODE 7709–01–P
PO 00000
32 CFR Part 199
[DoD–2006–OS–0209]
RIN 0720–AB02
TRICARE; Changes Included in the
National Defense Authorization Act for
Fiscal Year 2006; TRICARE Dental
Program
Office of the Secretary, DoD.
Interim final rule.
AGENCY:
ACTION:
SUMMARY: The Department is publishing
this interim final rule to implement
section 713 of the National Defense
Authorization Act for Fiscal Year 2006
(NDAA for FY06), Public Law 109–163.
Specifically, that legislation expands the
eligibility for survivor benefits under
the TRICARE Dental Program (TDP) to
include the active duty spouse of a
member who dies while on active duty
for a period of more than 30 days. The
rule is being published as an interim
final rule with comment period in order
to comply with statutory effective dates.
Public comments are invited and will be
considered for possible revisions to the
final rule.
DATES: This rule is effective November
17, 2006.
Comments: Written comments
received at the address indicated below
by January 16, 2007 will be accepted.
ADDRESSES: You may submit comments,
identified by docket number and or RIN
number and title, by any of the
following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Federal Docket Management
System Office, 1160 Defense Pentagon,
Washington, DC 20301–1160.
Instructions: All submissions received
must include the agency name and
docket number or Regulatory
Information Number (RIN) for this
Federal Register document. The general
policy for comments and other
submissions from members of the public
is to make these submissions available
for public viewing on the Internet at
https://regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
Col.
Gary C. Martin, Office of the Assistant
Secretary of Defense (Health Affairs),
TRICARE Management Activity,
telephone (703) 681–0039.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
Frm 00045
Fmt 4700
Sfmt 4700
E:\FR\FM\17NOR1.SGM
17NOR1
]]>Agencies
[Federal Register Volume 71, Number 222 (Friday, November 17, 2006)]
[Rules and Regulations]
[Pages 66867-66871]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19436]
=======================================================================
-----------------------------------------------------------------------
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4007
RIN 1212-AA95
Payment of Premiums; Assessment of and Relief From Penalties
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule adopts policy guidance on premium penalty
waivers, including guidance on the meaning of ``reasonable cause'' for
premium penalty waivers. For the convenience of the public, this
guidance is being codified as an appendix to PBGC's premium payment
regulation.
DATES: Effective date: December 18, 2006. The amendments made by this
rule apply to PBGC actions taken on or after December 18, 2006.
FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, Legislative
& Regulatory Department, or Deborah C. Murphy, Attorney, Legislative &
Regulatory Department, Pension Benefit Guaranty Corporation, 1200 K
Street, NW., Washington, DC 20005-4026; 202-326-4024. (TTY/TDD users
may call the Federal relay service toll-free at 1-800-877-8339 and ask
to be connected to 202-326-4024.)
SUPPLEMENTARY INFORMATION:
Background
Pension Benefit Guaranty Corporation (PBGC) administers the pension
plan termination insurance program under Title IV of the Employee
Retirement Income Security Act of 1974 (ERISA). When a single-employer
plan terminates without sufficient assets to provide all benefits, PBGC
steps in to ensure that participants and beneficiaries receive their
plan benefits, subject to certain legal limits. PBGC also provides
financial assistance to multiemployer plans that become unable to pay
benefits.
ERISA and PBGC's regulations require that premiums be paid to PBGC.
To promote the effective operation of the insurance program under Title
IV, ERISA section 4007 authorizes PBGC to assess penalties for not
paying premiums in full and on time (``premium penalties''). See PBGC's
regulation on Payment of Premiums (29 CFR Part 4007).
A premium penalty is owed by any person that was liable for the
premium--generally the plan administrator and, in the case of a single-
employer plan, the contributing sponsor(s) and any controlled group
members. (Under ERISA section 4006(a)(7)(D)(i)(II), as added by section
8101 of the Deficit Reduction Act of 2005, Pub. L. 109-171, February 8,
2006, the plan administrator is not liable for the $1,250 per-
participant premium that applies to certain distress and involuntary
plan terminations under that section.) Thus, a premium penalty (other
than a penalty for failure to timely pay the $1,250 per-participant
premium under ERISA section 4006(a)(7)), may generally be paid out of
plan assets; see PBGC Opinion Letter 94-6 and the legislative history
cited in that letter.
PBGC's premium payment regulation includes provisions for
determining the amount of premium penalties and provides for the waiver
of those penalties upon demonstration of reasonable cause and in other
specified circumstances. Reconsideration of premium penalty assessments
is covered by PBGC's regulation on Rules for Administrative Review of
Agency Decisions (29 CFR Part 4003). However, neither the premium
payment regulation nor the administrative review regulation currently
provides a thorough and detailed treatment of reasonable cause and
other bases for premium penalty waivers.
[[Page 66868]]
On January 12, 2001, PBGC published in the Federal Register, at 66
FR 2856, a proposed rule to expand and codify its previously published
penalty policies. The 2001 proposed rule dealt both with premium
penalties under ERISA section 4007 and with penalties for failures to
provide certain information in a timely manner under ERISA section
4071. In particular, the proposed rule set forth detailed guidance on
determining whether there is ``reasonable cause'' that would justify a
waiver of premium penalties. The PBGC received no comments on the 2001
proposed rule.
Provisions of This Rule
This final rule provides policy guidance on premium penalty
waivers, including guidance on the meaning of ``reasonable cause'' for
premium penalty waivers. As discussed below, guidance is not being
issued at this time on the determination of the amount of premium
penalties nor on procedures for the assessment and review of premium
penalties. Otherwise, the provisions in this final rule are generally
the same as the premium penalty provisions in the 2001 proposed rule
with only minor changes. As in the 2001 proposed rule, the premium
penalty policy guidance in this final rule takes the form of an
appendix to PBGC's regulation on Payment of Premiums (29 CFR part
4007).
This rule does not affect the use of any other remedies available
to PBGC and does not address the settlement of legal disputes involving
penalties, either alone or in the context of other legal issues. This
rule does not address penalties under ERISA section 4302, which applies
to certain failures to provide multiemployer plan notices required
under subtitle E of title IV of ERISA and implementing regulations, or
under ERISA section 4071, which applies to failures to provide
information on time.
Premium Penalty Assessment
The 2001 proposed rule summarized the rules on determining the
amount of premium penalties in the premium payment regulation. That
summary provided no new guidance and is not being included in the
premium penalty policy appendix at this time.
Premium Penalty Waivers
As described in the premium penalty policy appendix, a premium
penalty may be waived, in whole or in part, for a number of reasons,
based on the facts and circumstances. The most common reason for
waiving a penalty is ``reasonable cause.'' Reasonable cause is
generally found if--
Circumstances beyond control. The violation arises from
circumstances beyond the control of the person whose action or inaction
may be the basis for a penalty assessment, and
Ordinary business care and prudence. The failure could not
be avoided by exercising ordinary business care and prudence. The size
of the organization and of the premium involved may affect the ordinary
business care and prudence that is expected in order to find reasonable
cause.
The premium penalty policy appendix includes examples of situations
where reasonable cause might be found, such as the sudden and
unexpected absence or inability to act of an individual with
responsibility to act, the destruction of relevant records or inability
to comply resulting from a fire or other casualty or natural disaster,
and reasonable reliance on erroneous oral or written communication by a
PBGC employee.
The appendix also describes other types of waivers:
Statutory or regulatory requirement. The appendix notes
for completeness that a penalty is waived if a statute or regulation so
requires.
Legal error. The appendix provides that a penalty may be
waived if the violation arises from reliance on an erroneous
interpretation of law--with different standards depending on whether
the interpretation is or is not disclosed to PBGC--or, in appropriate
circumstances, from a recent change in the law.
Pendency of PBGC procedures. The appendix provides for
waiver in some cases of all or a part of a premium penalty that is
attributable to the pendency of PBGC review or other procedures.
Other circumstances. The appendix also notes that, in
other narrow circumstances, we may waive a penalty where appropriate.
This part of the appendix has been reorganized to group the
material differently (placing all the provisions about legal errors
under one heading), eliminate an example about an insignificant math
error, and add an example of PBGC procedures (other than review
procedures) whose pendency could be the basis for a waiver.
The explanation of the ``other circumstances'' waiver category has
also been revised. In the 2001 proposed rule, this provision was said
to be aimed primarily at cases where a premium penalty assessment would
be ``inconsistent with the purposes of title IV.'' That language
conveys a standard more restrictive than PBGC now considers appropriate
and has been eliminated.
In exercising premium penalty waiver authority and determining
whether reasonable cause exists, the premium penalty policy appendix
provides that an organization's outside advisors, such as lawyers or
actuaries, are treated as if they were part of the organization. Thus,
organizations with in-house advisors are treated the same in this
respect as those that choose to retain outside advisors. Exercising
care in selecting and monitoring advisors is not a basis for a
reasonable cause waiver when the advisors are in-house; similarly, it
is not considered a basis for a reasonable cause waiver where outside
advisors are involved. Because it is so common for premium payers to
use advisors in determining premiums, the payment of premiums could not
adequately be enforced if premium penalties were waived in such
circumstances. Nothing in this final rule is intended to limit any
recourse that an organization may have against its outside advisors.
Premium Penalty Procedures
The 2001 proposed rule set forth procedures for assessing and
reviewing premium penalties. The procedural provisions are not included
in the premium penalty policy appendix at this time. Procedural
implications of the new $1,250 per-participant premium may affect
further premium penalty procedural guidance.
Miscellaneous Changes
There are a number of organizational and editorial changes from the
2001 proposed rule. Principal among these is the placement of
provisions on assessment and waiver toward the beginning of the
appendix, with a place reserved for procedural provisions at the end of
the appendix. In addition, a new Sec. 4 has been added to the
appendix, briefly summarizing the information in the appendix and
indicating where it is located.
Compliance With Rulemaking Guidelines
The PBGC has determined that this action is not a ``significant
regulatory action'' under the criteria set forth in Executive Order
12866.
This rule is not subject to notice and comment rulemaking
requirements under section 553 of the Administrative Procedure Act
because it deals only with general statements of PBGC policy. The PBGC
nonetheless invited comment on the 2001 proposed rule. Because no
general notice of proposed rulemaking is required, the Regulatory
Flexibility
[[Page 66869]]
Act does not apply. See 5 U.S.C. 601(2), 603, 604.
List of Subjects in 29 CFR Part 4007
Employee benefit plans, Penalties, Pension insurance, Reporting and
recordkeeping requirements.
0
For the reasons given above, 29 CFR part 4007 is amended as follows.
PART 4007--PAYMENT OF PREMIUMS
0
1. The authority citation for part 4007 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1303(a), 1306, 1307.
0
2. In Sec. 4007.8, the introductory text of paragraph (a) is amended
by removing the words ``The charge will be based on'' and adding in
their place the words ``The amount determined under this paragraph (a)
will be based on''; and paragraphs (c) and (d) are revised to read as
follows:
Sec. 4007.8 Late payment penalty charges.
* * * * *
(c) Reasonable cause waivers. PBGC will waive all or part of a late
payment penalty charge if PBGC determines that there is reasonable
cause for the late payment. Policy guidelines for applying the
``reasonable cause'' standard are in Sec. Sec. 22 through 25 of the
Appendix to this part.
(d) Other waivers. PBGC may waive all or part of a late payment
penalty charge in other circumstances without regard to whether there
is reasonable cause. Policy guidelines for waivers without reasonable
cause are in Sec. 21(b)(1), (b)(3), (b)(4), and (b)(5) of the Appendix
to this part.
* * * * *
0
3. An appendix is added to part 4007 to read as follows:
APPENDIX TO PART 4007--POLICY GUIDELINES ON PREMIUM PENALTIES
Sec.
General Provisions
1 What is the purpose of this Appendix?
2 What defined terms are used in this Appendix?
3 What is the purpose of a premium penalty?
4 What information is in this Appendix and how is it organized?
Premium Penalty Assessment
[Reserved.]
Waiver Standards
21 What are the standards for waiving a premium penalty?
22 What is ``reasonable cause''?
23 What kinds of facts does PBGC consider in determining whether
there is reasonable cause for a failure to pay a premium?
24 What are some situations that might justify a ``reasonable
cause'' waiver?
25 What are some situations that might justify a partial
``reasonable cause'' waiver?
Procedures
[Reserved.]
General Provisions
Sec. 1 What is the purpose of this Appendix?
This appendix sets forth principles and guidelines that we intend
to follow in assessing, reviewing, and waiving premium penalties.
However, this is only general policy guidance. Our action in each case
is guided by the facts and circumstances of the case.
Sec. 2 What defined terms are used in this Appendix?
The following terms are defined in part 4001 of this chapter:
contributing sponsor, ERISA, PBGC, person, plan, and plan
administrator. In addition, in this appendix:
(a) Premium penalty means a penalty under ERISA section 4007 and
under this part for failing to pay a premium in full and on time.
(b) Waiver means reduction or elimination of a premium penalty that
is being or has been assessed.
(c) We means PBGC.
(d) You means, according to the context,--
(1) A plan administrator, contributing sponsor, or other person,
if--
(i) The person's action or inaction may be the basis for a premium
penalty assessment,
(ii) The person may be required to pay the premium penalty, or
(iii) The person is requesting review of the premium penalty; or
(2) An employee or agent of, or advisor to, any of these persons.
Sec. 3 What is the purpose of a premium penalty?
The basic purpose of a premium penalty is to encourage you to pay
premiums in full and on time and to voluntarily self-correct any
failure to do so.
Sec. 4 What information is in this Appendix and how is it organized?
This Appendix has four divisions:
(a) General provisions. The General Provisions division (Sec. Sec.
1-4) tells you the purpose and organization of the Appendix, the
purpose of a premium penalty, and the definitions of terms used in the
Appendix.
(b) Premium penalty assessment. The Premium Penalty Assessment
division is reserved.
(c) Waiver standards. The Waiver Standards division (Sec. Sec. 21-
25) explains the principles that PBGC follows in waiving premium
penalties.
(1) Reasonable cause. We waive premium penalties for reasonable
cause, as explained in Sec. Sec. 22-25.
(2) Other waivers. We also waive premium penalties in some other
circumstances, such as mistake of law, as explained in Sec. 21.
(d) Procedures. The Procedures division is reserved.
Premium Penalty Assessment
[Reserved.]
Waiver Standards
Sec. 21 What are the standards for waiving a premium penalty?
(a) Facts and circumstances. In deciding whether to waive a premium
penalty in whole or in part under paragraph (b), we consider the facts
and circumstances of each case.
(b) Waivers.
(1) Provisions of law. We waive all or part of a premium penalty if
a statute or regulation requires that we do so. For example, ERISA
section 4007(b) and Sec. 4007.8 of this part provide for a waiver in
certain circumstances involving business hardship, and Sec. 4007.8 of
this part also provides for waivers if certain ``safe harbor'' tests
are met, and for a waiver of a premium penalty that accrues after the
date of a bill for a premium underpayment if you pay the premium owed
within 30 days after the date of the bill.
(2) Reasonable cause. We waive a premium penalty if you show
reasonable cause for a failure to pay a premium in full and on time.
See Sec. Sec. 22 through 25 for guidelines on ``reasonable cause''
waivers. If there is reasonable cause for only part of a failure to pay
a premium, we waive the premium penalty only for that part.
(3) Legal errors. We may waive all or part of a premium penalty if
the failure to pay a premium in full and on time that gives rise to the
premium penalty results from certain kinds of legal errors.
(i) Erroneous legal interpretation--disclosed. If a failure to pay
a premium in full and on time results from your reliance on an
erroneous interpretation of the law, we waive a premium penalty that
arises from the failure if you promptly and adequately call our
attention to the interpretation and the relevant facts, and the
erroneous interpretation is not frivolous. If the interpretation
affects a filing that you make with us, you should call our attention
to the interpretation in writing with the filing. If you rely on the
interpretation to justify not making a
[[Page 66870]]
filing with us, you should call our attention to the interpretation in
writing by the time prescribed for the filing not made.
(ii) Erroneous legal interpretation--undisclosed. If a failure to
pay a premium in full and on time results from your reliance on an
erroneous interpretation of the law, and you do not promptly and
adequately call our attention to the interpretation and the relevant
facts, we may nevertheless waive a premium penalty if the weight of
authority supporting the interpretation is substantial in relation to
the weight of opposing authority and it is reasonable for you to rely
on the interpretation.
(iii) Recent change in the law. We may waive all or part of a
premium penalty if the law changes shortly before the date a premium
payment is due and the premium payment that you make by the due date
would have been correct under the law as in effect before the change.
In determining whether and to what extent to grant a waiver in a case
of this kind, we consider such factors as the length of time between
the change in the law and the premium due date, the nature and timing
of any publicity given to the change in the law, the complexity of the
legal issues, and your general familiarity with those issues.
(4) Pendency of PBGC procedures. We may waive all or a part of a
premium penalty that is attributable to the pendency of PBGC review or
other procedures. For example:
(i) If you request review of a premium penalty, and you make a non-
frivolous argument in your request for review that you were not
required to pay the premium or that you were, and still are, unable to
obtain the information needed to determine the premium, we may waive
the portion of the premium penalty that accrues during the review
process. If you make such a non-frivolous argument with respect to a
portion of the premium, we may apply this principle to that portion.
(ii) We may waive all or a part of a premium penalty if we believe
that the pendency of PBGC procedures for identifying a premium
delinquency and notifying you of the delinquency contributed to your
failure to correct the delinquency more promptly.
(5) Other circumstances. We may waive all or part of a premium
penalty in other circumstances if we determine that it is appropriate
to do so. We intend to exercise this waiver authority only in narrow
circumstances.
(c) Action or inaction of outside parties. In some cases an
accountant, actuary, lawyer, pension consultant, or other individual or
firm that is not part of your organization may assist you in complying
with PBGC requirements. If the outside individual's or firm's action,
inaction, or advice causes or contributes to a failure to pay a premium
in full and on time, we apply our waiver authority as if the outside
individual or firm were part of your organization. In the case of an
outside individual who is part of a firm, we generally consider both
the individual and the firm to be part of your organization.
Sec. 22 What is ``reasonable cause''?
(a) General rule. In general, there is ``reasonable cause'' for a
failure to pay a premium in full and on time to the extent that--
(1) The failure arises from circumstances beyond your control, and
(2) You could not avoid the failure by the exercise of ordinary
business care and prudence.
(b) Overlooking legal requirements. Overlooking legal requirements
does not constitute reasonable cause.
(c) Action or inaction of outside parties. If an accountant,
actuary, lawyer, pension consultant, or other individual or firm that
is not part of your organization assists you in complying with PBGC
requirements, there is generally no reasonable cause for a failure to
pay a premium in full and on time that arises from circumstances within
the control of the outside individual or firm, or could be avoided by
the exercise of ordinary business care and prudence by the outside
individual or firm. The fact that you exercised care and prudence in
selecting and monitoring the outside individual or firm is not a basis
for a reasonable cause waiver.
(d) Size of organization. If an organization or one or more of its
employees is responsible for taking action, the size of the
organization may affect what ordinary business care and prudence would
require. For example, ordinary business care and prudence would
typically require a larger organization to establish more comprehensive
backup procedures than a smaller organization for dealing with
situations such as computer failure, the loss of important records, and
the inability of an individual to carry out assigned responsibilities.
Thus, there may be reasonable cause for a small organization's failure
to pay a premium in full and on time even though, if the organization
were larger, the exercise of ordinary business care and prudence would
have avoided the failure.
(e) Size of premium underpayment. In general, the larger a premium,
the more care and prudence you should use to make sure that you pay it
in full and on time. Thus, there may be reasonable cause for a small
underpayment even though, under the same circumstances, we would
conclude that a larger underpayment could have been avoided by the
exercise of ordinary business care and prudence.
(f) Collection and enforcement. In determining whether reasonable
cause exists, we do not consider either--
(i) The likelihood or cost of collecting the premium penalty, or
(ii) The costs and risks of enforcing the premium penalty by
litigation.
Sec. 23 What kinds of facts does PBGC consider in determining whether
there is reasonable cause for a failure to pay a premium?
In determining the extent to which a failure to pay a premium in
full and on time arose from circumstances beyond your control and the
extent to which you could have avoided the failure by the exercise of
ordinary business care and prudence--and thus the extent to which
waiver of a premium penalty for reasonable cause is appropriate--we
consider facts such as the following:
(a) What event or circumstance caused the underpayment and when the
event happened or the circumstance arose. The dates you give should
clearly correspond with the underpayment upon which the premium penalty
is based.
(b) How that event or circumstance kept you from paying the premium
in full and on time. The explanation you give should relate directly to
the failure to pay a premium that is the subject of the premium
penalty.
(c) Whether you could have anticipated the event or circumstance.
(d) How you responded to the event or circumstance, including what
steps you took, and how quickly you took them, to pay the premium and
how you conducted other business affairs. Knowing how you responded to
the event or circumstance may help us determine what degree of business
care and prudence you were capable of exercising during that period and
thus whether the failure to pay the premium could or could not have
been avoided by the exercise of ordinary business care and prudence.
Sec. 24 What are some situations that might justify a ``reasonable
cause'' waiver?
The following examples illustrate some of the reasons often given
for failures to pay premiums for which we may assess penalties. The
situation described in each example may constitute reasonable cause,
and each example lists factors we consider in determining whether to
grant a
[[Page 66871]]
premium penalty waiver for reasonable cause in a case of that kind.
(a) An individual with responsibility for taking action was
suddenly and unexpectedly absent or unable to act. We consider such
factors as the following: The nature of the event that caused the
individual's absence or inability to act, for example, the resignation
of the individual or the death or serious illness of the individual or
a member of the individual's immediate family; the size of the
organization and what kind of backup procedures it had to cope with
such events; how close the event was to the deadline that was missed;
how abrupt and unanticipated the event was; how the individual's
absence or inability to act prevented compliance; how expensive it
would have been to comply without the absent individual; whether and
how other business operations and obligations were affected; how
quickly and prudently a replacement for the absent individual was
selected or other arrangements for compliance were made; and how
quickly a replacement for the absent individual took appropriate
action.
(b) A fire or other casualty or natural disaster destroyed relevant
records or prevented compliance in some other way. We consider such
factors as the following: The nature of the event; how close the event
was to the deadline that was missed; how the event caused the failure
to pay the premium; whether other efforts were made to get needed
information; how expensive it would have been to comply; and how you
responded to the event.
(c) You reasonably relied on erroneous oral or written advice given
by a PBGC employee. We consider such factors as the following: Whether
there was a clear relationship between your situation and the advice
sought; whether you provided the PBGC employee with adequate and
accurate information; and whether the surrounding circumstances should
have led you to question the correctness of the advice or information
provided.
(d) You were unable to obtain information, including records and
calculations, needed to comply. We consider such factors as the
following: What information was needed; why the information was
unavailable; when and how you discovered that the information was not
available; what attempts you made to get the information or reconstruct
it through other means; and how much it would have cost to comply.
Sec. 25 What are some situations that might justify a partial
``reasonable cause'' waiver?
(a) Assume that a fire destroyed the records needed to compute a
premium payment. If in the exercise of ordinary business care and
prudence it should take you one month to reconstruct the records and
pay the premium, but the payment was made two months late, it might be
appropriate to waive that part of the premium penalty attributable to
the first month the payment was late, but not the part attributable to
the second month.
(b) Assume that a plan administrator underpaid the plan's flat-rate
premium because of reasonable reliance on erroneous advice from a PBGC
employee, and also underpaid the plan's variable-rate premium because
the plan actuary used the wrong interest rate. A PBGC audit revealed
both errors. PBGC billed the plan for a premium penalty of $5,000--
$1,000 for underpayment of the flat-rate premium and $4,000 for
underpayment of the variable-rate premium. The plan administrator
requested a waiver of the premium penalty. While the erroneous PBGC
advice constituted reasonable cause for underpaying the flat-rate
premium, there was no showing of reasonable cause for the error in the
variable-rate premium. Therefore, we would waive only the part of the
premium penalty based on underpayment of the flat-rate portion of the
premium ($1,000).
Procedures
[Reserved.]
Issued in Washington, DC, this 13th day of November, 2006.
Elaine L. Chao,
Chairman, Board of Directors, Pension Benefit Guaranty Corporation.
Issued on the date set forth above pursuant to a resolution of
the Board of Directors authorizing its Chairman to issue this
interim final rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. E6-19436 Filed 11-16-06; 8:45 am]
BILLING CODE 7709-01-P
