Payment of Premiums; Large-Plan Flat-Rate Premium, 347-350 [2013-31109]
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Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Rules and Regulations
Environmental Review
The FAA has determined that this
action qualifies for categorical exclusion
under the National Environmental
Policy Act in accordance with FAA
Order 1050.1E, ‘‘Environmental
Impacts: Policies and Procedures,’’
paragraph 311a. This airspace action is
not expected to cause any potentially
significant environmental impacts, and
no extraordinary circumstances exist
that warrant preparation of an
environmental assessment.
Lists of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the
Federal Aviation Administration
amends 14 CFR Part 71 as follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
1. The authority citation for Part 71
continues to read as follows:
■
Authority: 49 U.S.C. 106(g); 40103, 40113,
40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–
1963 Comp., p. 389.
§ 71.1
[Amended]
2. The incorporation by reference in
14 CFR 71.1 of Federal Aviation
Administration Order 7400.9X, Airspace
Designations and Reporting Points,
dated August 7, 2013, effective
September 15, 2013, is amended as
follows:
■
Paragraph 6002 Class E Airspace Areas
Extending Upward From the Surface of the
Earth.
*
*
*
AEA VA E2
*
*
Leesburg, VA [New]
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Leesburg Executive Airport, VA
(Lat. 39°04′41″ N., long. 77°33′27″ W.)
That airspace extending upward from the
surface within a 6-mile radius of Leesburg
Executive Airport.
Issued in College Park, Georgia, on
December 19, 2013.
Paul Lore,
Acting Manager, Operations Support Group,
Eastern Service Center, Air Traffic
Organization.
[FR Doc. 2013–31062 Filed 1–2–14; 8:45 am]
BILLING CODE 4910–13–P
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PENSION BENEFIT GUARANTY
CORPORATION
29 CFR Part 4007
RIN 1212–AB26
Payment of Premiums; Large-Plan FlatRate Premium
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:
Based on its regulatory review
under Executive Order 13563
(Improving Regulation and Regulatory
Review), the Pension Benefit Guaranty
Corporation (PBGC) is moving the flatrate premium due date for large plans to
later in the premium payment year—to
the same date as the variable-rate
premium due date for such plans—
starting with the 2014 plan year. Thus,
large calendar-year plans’ 2014 flat-rate
premiums will be due October 15, 2014.
This action implements part of a PBGC
project to make its premium rules more
effective and less burdensome by
simplifying due dates, coordinating the
due date for terminating plans with the
termination process, making conforming
and clarifying changes to the variablerate premium rules, providing for relief
from penalties, and making other
changes. The rest of the project will be
implemented by a separate final rule.
DATES: Effective January 3, 2014.
Applicable to plan years that begin on
or after January 1, 2014.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Assistant General
Counsel for Regulatory Affairs
(klion.catherine@pbgc.gov), or Deborah
C. Murphy, Deputy Assistant General
Counsel for Regulatory Affairs
(murphy.deborah@pbgc.gov), Office of
the General Counsel, Pension Benefit
Guaranty Corporation, 1200 K Street
NW., Washington DC 20005–4026; 202–
326–4024. (TTY and TDD users may call
the Federal relay service toll-free at
800–877–8339 and ask to be connected
to 202–326–4024.)
SUPPLEMENTARY INFORMATION:
SUMMARY:
Executive Summary—Purpose of the
Regulatory Action
This rulemaking is needed as part of
a larger project to make PBGC’s
premium rules more effective and less
burdensome. The rule contributes to the
simplification and streamlining of due
dates by making the flat-rate premium
due date for large plans the same as the
variable-rate premium due date for such
plans.
PBGC’s legal authority for this action
comes from section 4002(b)(3) of the
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347
Employee Retirement Income Security
Act of 1974 (ERISA), which authorizes
PBGC to issue regulations to carry out
the purposes of title IV of ERISA, and
section 4007 of ERISA, which gives
PBGC authority to set premium due
dates and to assess late payment
penalties.
Executive Summary—Major Provisions
of the Regulatory Action
In recent years, premium due dates
have depended on size of plan and type
of premium. Large plans have paid the
flat-rate premium early in the premium
payment year and the variable-rate
premium later in the year. Mid-size
plans have paid both the flat- and
variable-rate premiums by that same
later due date. Small plans have paid
the flat- and variable-rate premiums in
the following year. On July 23, 2013,
PBGC proposed to simplify the due-date
rules by providing that all annual
premiums for plans of all sizes will be
due on the same day in the premium
payment year—the historical variablerate premium due date. As part of that
simplification process, this rule
eliminates the separate due date for the
flat-rate premiums of large plans
beginning with the 2014 plan year.
Background
PBGC administers the pension plan
termination insurance program under
title IV of the Employee Retirement
Income Security Act of 1974 (ERISA).
Under ERISA sections 4006 and 4007,
plans covered by the program must pay
premiums to PBGC. PBGC’s premium
regulations—on Premium Rates (29 CFR
part 4006) and on Payment of Premiums
(29 CFR part 4007)—implement ERISA
sections 4006 and 4007.
There are two kinds of annual
premiums.1 The flat-rate premium is
based on the number of plan
participants, determined as of the
participant count date. The participant
count date is generally the last day of
the plan year preceding the premium
payment year; in some cases, however
(such as for plans that are new or are
involved in certain mergers or spinoffs),
the participant count date is the first
day of the premium payment year. The
variable-rate premium (which applies
only to single-employer plans) is based
on a plan’s unfunded vested benefits
(UVBs)—the excess of its premium
funding target over its assets.
Section 4007 of ERISA authorizes
PBGC to set premium due dates and
assess penalties for failure to pay
1 There is also a termination premium, which is
unaffected by this final rule.
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Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Rules and Regulations
premiums timely. Beginning in 1999,2
PBGC set the variable-rate premium due
date for plans of all sizes as 91⁄2 calendar
months after the beginning of the
premium payment year (October 15 for
calendar-year plans). This was done so
that the due date would correspond
with the extended due date for the
annual report for the prior year that is
filed on Form 5500. Coordination of the
premium and Form 5500 due dates
promotes consistency and simplicity
and avoids confusion and
administrative burden. In 2008,
however, to conform to changes made
by the Pension Protection Act of 2006
(PPA 2006), small-plan due dates were
extended to 16 months after the
beginning of the premium payment year
(April 30 of the following year for
calendar-year plans).
Most plans’ flat-rate premiums have
been due at the same time as variablerate premiums. However, flat-rate
premiums for large plans (those with
500 or more participants) are due two
calendar months after the beginning of
the premium payment year (the end of
February for calendar-year plans).3
Because of the impracticality of
counting participants so soon after the
participant count date, the premium
payment regulation provides an
elaborate system of safe harbors from
late-payment penalties for estimated
large-plan flat-rate premiums, and the
practice of most large plans has been to
pay an estimate of the flat-rate premium
at the early due date and ‘‘true up’’
when they pay the variable-rate
premium later in the year.
Proposed Rule
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On January 18, 2011, the President
issued Executive Order 13563,
‘‘Improving Regulation and Regulatory
Review,’’ to ensure that Federal
regulations seek more affordable, less
intrusive means to achieve policy goals,
and that agencies give careful
consideration to the benefits and costs
of those regulations. In response to and
in support of the Executive Order, PBGC
on August 23, 2011, promulgated its
Plan for Regulatory Review,4 noting
several regulatory areas—including
premiums—for immediate review.
2 See PBGC final rule at 63 FR 68684 (Dec. 14,
1998).
3 This requirement was adopted in response to a
recommendation in the 1984 report of the Grace
Commission (the President’s Private Sector Survey
on Cost Control). See PBGC final rule at 50 FR
12533 (Mar. 29, 1985). The requirement was
effective for 1985 for very large plans (those with
10,000 or more participants) and for 1986 for all
other large plans.
4 See https://www.pbgc.gov/documents/plan-forregulatory-review.pdf.
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PBGC reviewed its premium
regulations and identified a number of
ways to simplify and clarify the
regulations, reduce burden, provide
penalty relief, and generally make the
regulations work better. On July 23,
2013 (at 78 FR 44056), PBGC published
a proposed rule to replace the system of
three premium due dates (based on plan
size and premium type) with a single
due date corresponding to the Form
5500 extended due date, to coordinate
the due date for terminating plans with
the termination process, to make
conforming and clarifying changes to
the variable-rate premium rules, to
provide for relief from penalties, and to
make other changes. Under the
proposal, large plans would no longer
have to pay flat-rate premiums early and
small plans would have the same due
dates as other plans but get more time
to value benefits.
PBGC received comments from six
commenters—two employer
associations, two associations of
pension practitioners, an actuarial firm,
and an individual actuary. All of the
commenters approved of the proposal,
and one specifically urged that it be
made effective for 2014. The
commenters also had suggestions for
additional changes PBGC might make in
its premium regulations or procedures.
None of those suggestions dealt with the
large-plan flat-rate premium due date.
The first large-plan flat-rate filing
deadline for 2014 is February 28, 2014.
Thus the provision of the proposed rule
setting the flat-rate premium due date
for large plans later in the year—on the
same date as the variable-rate premium
due date for such plans—is by far the
most time-sensitive aspect of the
proposal. For that reason, and in light of
the fact that this provision generated
only positive comments, PBGC is
finalizing this one change separately
and ahead of the other changes in the
proposal.
PBGC expects to deal with all other
aspects of the July 23 proposal in a
separate final rule to be issued in time
to provide all plans with adequate
advance guidance for timely compliance
with the new procedures in 2014. If the
situation changes, PBGC will advise the
public as appropriate.
Regulatory Changes Made by This Final
Rule
This final rule makes the flat-rate
premium due date for large plans the
same as their variable-rate due date. For
calendar-year plans, that due date will
be October 15.5
5 To conform to this change in the large-plan flatrate premium due date, which makes unnecessary
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For many large plans, making the flatrate premium due when the variablerate premium is due will cut the number
of premium transactions with PBGC by
two, rather than just one. That is
because underestimating the flat-rate
premium has typically given rise not
only to penalties (which are often
waived) but also to interest charges
(which cannot be waived). Thus, after
paying an estimate of the flat-rate
premium, and then paying the balance
due, a large plan has usually had to
make yet another payment, of the
interest on the amount by which its
initial estimated payment fell short of
the correct amount. Eliminating the
need for flat-rate premium estimates
will eliminate interest payments on
shortfalls in those estimates.
The due date change will mean that
plan consultants can do all of a plan’s
premium filing work at one time, once
a year. PBGC will receive one premium
filing for each plan each year and will
be able to process a plan’s entire annual
premium in a single operation.
Reducing the number of due dates will
be simpler for all concerned. Less
complexity means less chance for
mistakes and the time and expense of
correcting them. Moving to a single due
date will also simplify PBGC’s premium
processing systems and save PBGC
money on future periodic changes to
those systems (because it is less
expensive to modify simpler systems).
In short, PBGC believes that this
change in the large-plan flat-rate
premium due date will produce a
significant reduction in administrative
burden for both plans and PBGC.
Executive Orders 12866 and 13563
PBGC has determined, in consultation
with the Office of Management and
Budget, that this rulemaking is a
‘‘significant regulatory action’’ under
Executive Order 12866. The Office of
Management and Budget has therefore
reviewed this rule under Executive
Order 12866.
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
the penalty safe harbors for under-estimates of large
plans’ flat-rate premiums, this final rule eliminates
those safe harbor provisions from the premium
payment regulation.
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Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Rules and Regulations
reducing costs, of harmonizing rules,
and of promoting flexibility. This final
rule is associated with retrospective
review and analysis in PBGC’s Plan for
Regulatory Review issued in accordance
with Executive Order 13563.
Executive Orders 12866 and 13563
require that a comprehensive regulatory
impact analysis be performed for any
economically significant regulatory
action, which, under Section 3(f)(1) of
Executive Order 12866, is one that ‘‘is
likely to result in a rule that may . . .
[h]ave an annual effect on the economy
of $100 million or more or adversely
affect in a material way the economy, a
sector of the economy, productivity,
competition, jobs, the environment,
public health or safety, or State, local,
or tribal governments or communities.’’
PBGC premium payments are
included as receipts in the Federal
budget, and the large-plan flat-rate
premium deferral will cause a one-time
shift of about $1.5 billion (attributable
primarily to calendar year plans) from
one fiscal year to the next. Although no
premium revenue will be lost, there will
be the appearance of a one-time loss for
the year when the due dates change, and
PBGC has therefore determined that this
final rule is economically significant
under the criteria in Executive Order
12866.
The estimate of the amount of flat-rate
premium shifted from one fiscal year to
the next, and the estimate (below) of the
amount of interest shifted from PBGC to
plans, are revised from the estimates in
the proposed rule to reflect projected
2014 per-participant flat premium rates
($49 (instead of $35) for single-employer
plans and $12 (instead of $9) for
multiemployer plans) and the following
participant-count data for large plans for
plan years beginning in 2012 (instead of
2010):
Approximate number of participants in large plans (millions)
All large plans
Single-employer .......................................................................................................................................................
Multiemployer ...........................................................................................................................................................
In accordance with OMB Circular A–
4, PBGC has examined the economic
and policy implications of this final rule
and has concluded that the action’s
benefits justify its costs. That
conclusion is based on the following
analysis of the impact of the due date
change.
The due date change will shift, from
PBGC to plans, the earnings on
premium payments by large plans for
the 7c months between the old and new
due dates. PBGC estimates that the
average gain per large plan will be about
$11,300 per year. To put this figure in
perspective, large plans pay over $1
billion in flat-rate premiums—about 95
percent of PBGC’s flat-rate premium
income.
Because earning rates differ between
PBGC and plans, PBGC’s loss will be
about one-third as much as plans’ gain.
PBGC estimates its rate of return, from
investment in U.S. Government
Large plans
whose flat-rate
premium shifts
to the next
fiscal year
30
10
28
9
securities, at about 2 percent. PBGC
estimates plans’ rate of return at 6
percent. The following table shows the
estimated average interest earnings
calculated with four rates: two percent
(PBGC’s best estimate for PBGC’s rate of
return), six percent (PBGC’s best
estimate for plans’ rate of return), and
three and seven percent (the discount
rates recommended by OMB Circular A–
4).
Approximate average interest earnings per large plan at—
3 percent
6 percent
7 percent
$3,800
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2 percent
$5,600
$11,300
$13,200
In addition, PBGC estimates that the
reduction in large plans’ administrative
burden attributable to the change in
their flat-rate premium due date will
translate into average annual savings of
3 hours per plan. (PBGC arrived at this
estimate on the basis of inquiries made
to pension practitioners.) The dollar
equivalent of this saving is about
$1,050.6
Accordingly, PBGC foresees an
average net benefit (in dollar terms)
from adoption of the new uniform due
date of about $12,350 for each large plan
(about $11,300 in saved interest plus
about $1,050 in saved administrative
expenses).
6 PBGC assumes for this purpose that enrolled
actuaries charge about $350 per hour.
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Immediate Effective Date
Pursuant to section 553(d)(3) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and section 808(2) of the
Congressional Review Act (5 U.S.C. 801
et seq.), PBGC for good cause finds that
notice and public procedure on this
final rule are unnecessary and contrary
to the public interest and that this final
rule should be effective upon
publication. The project as a whole,
including the relief provided by this
final rule, has received only positive
comment from the public. This rule
requires no affirmative action by the
regulated community. On the contrary,
it provides relief from the restrictive
large-plan flat-rate early-filing
requirement for PBGC premiums (see
section 553(d)(1) of the Administrative
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Procedure Act). The first large-plan flatrate filing deadline for 2014 is February
28, 2014. To ensure that all large plans
will be able to rely on this final rule for
the 2014 plan year, PBGC is making this
rule effective upon publication.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) imposes certain
requirements with respect to rules that
are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act. Unless
an agency determines that a final rule is
not likely to have a significant economic
impact on a substantial number of small
entities, section 604 of the Regulatory
Flexibility Act requires that the agency
present a final regulatory flexibility
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Federal Register / Vol. 79, No. 2 / Friday, January 3, 2014 / Rules and Regulations
analysis at the time of the publication of
the final rule describing the impact of
the rule on small entities and steps
taken to minimize the impact. Small
entities include small businesses,
organizations and governmental
jurisdictions.
Small Entities
For purposes of the Regulatory
Flexibility Act requirements with
respect to this final rule, PBGC
considers a small entity to be a plan
with fewer than 100 participants. This
is consistent with certain requirements
in title I of ERISA 7 and the Internal
Revenue Code,8 as well as the definition
of a small entity that the Department of
Labor (DOL) has used for purposes of
the Regulatory Flexibility Act.9 Using
this proposed definition, about 64
percent (16,500 of 25,600) of plans
covered by title IV of ERISA in 2011
were small plans.10
Further, while some large employers
may have small plans, in general most
small plans are maintained by small
employers. Thus, PBGC believes that
assessing the impact of the rule on small
plans is an appropriate substitute for
evaluating the effect on small entities.
The definition of small entity
considered appropriate for this purpose
differs, however, from a definition of
small business based on size standards
promulgated by the Small Business
Administration (13 CFR 121.201)
pursuant to the Small Business Act. In
its proposed rule, therefore, PBGC
requested comments on the
appropriateness of the size standard
used in evaluating the impact of the
proposed rule on small entities. No
comments were received on this issue.
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Certification
On the basis of its definition of small
entity, PBGC certifies under section
605(b) of the Regulatory Flexibility Act
that the amendments in this final rule
will not have a significant economic
impact on a substantial number of small
entities. Accordingly, as provided in
section 605 of the Regulatory Flexibility
Act, sections 603 and 604 do not apply.
This certification is based on the fact
7 See, e.g., ERISA section 104(a)(2), which permits
the Secretary of Labor to prescribe simplified
annual reports for pension plans that cover fewer
than 100 participants.
8 See, e.g., Code section 430(g)(2)(B), which
permits plans with 100 or fewer participants to use
valuation dates other than the first day of the plan
year.
9 See, e.g., DOL’s final rule on Prohibited
Transaction Exemption Procedures, 76 FR 66637,
66644 (Oct. 27, 2011).
10 See PBGC 2011 pension insurance data table S–
31, https://www.pbgc.gov/documents/pensioninsurance-data-tables-2011.pdf.
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that the change in the large-plan flat-rate
premium due date will have no impact
on any small plans.
Paperwork Reduction Act
The information requirements under
this final rule have been approved by
the Office of Management and Budget
under the Paperwork Reduction Act (44
U.S.C. 3501 et seq.) (OMB control
number 1212–0009; expires October 31,
2015). An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
The only changes PBGC is making in
its premium information collection in
connection with this final rule are that
PBGC will give notice that estimated
flat-rate filings are discontinued for plan
years starting in 2014. (PBGC will also
notify private-sector premium filing
software developers of the change so
that it can be reflected in their
products.) 11
PBGC needs the information in a
premium filing to identify the plan for
which the premium is paid to PBGC, to
verify the amount of the premium, to
help PBGC determine the magnitude of
its exposure in the event of plan
termination, to help PBGC track the
creation of new plans and the transfer
of plan assets and liabilities among
plans, and to keep PBGC’s inventory of
insured plans up to date. PBGC receives
premium filings from about 25,700
respondents each year and estimates
that the total annual burden of the
collection of information will be about
8,900 hours and $59,250,000.12
List of Subjects in 29 CFR Part 4007
Employee benefit plans, Penalties,
Pension insurance, Reporting and
recordkeeping requirements.
In consideration of the foregoing,
PBGC amends 29 CFR part 4007 as
follows:
11 The more comprehensive changes to PBGC’s
premium information collection arising from the
separate final rule that PBGC anticipates issuing—
dealing with aspects of the July 23 proposal other
than the large-plan flat-rate premium due date—
will be addressed in that separate final rule.
12 This burden estimate reflects both a decrease in
burden attributable to the change in the large-plan
flat-rate premium due date under this final rule and
an increase in burden attributable to a re-estimate
of the existing premium filing burden. The increase
in burden due to re-estimation is about 31,300
hours, and the decrease due to the due date change
is about 17,000 hours, a net increase of about 14,300
hours from the currently approved burden (about
163,600). PBGC assumes that about 95 percent of
the work is contracted out at $350 per hour, so the
17,000-hour decrease attributable to the final rule
is equivalent to about 850 hours of in-house labor
and about $5,650,000 of contractor costs.
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PART 4007—PAYMENT OF PREMIUMS
1. The authority citation for part 4007
continues to read as follows:
■
Authority: 29 U.S.C. 1302(b)(3), 1303(A),
1306, 1307.
§ 4007.8
[Amended]
2. In § 4007.8, paragraphs (f), (g), (h),
and (i) are removed and reserved.
■
§ 4007.11
[Amended]
3. In § 4007.11:
a. Paragraph (a) introductory text is
amended by removing the words ‘‘due
dates for large plans are prescribed’’ and
adding in their place the words ‘‘due
date for large plans is prescribed’’.
■ b. Paragraphs (a)(3)(i) and (iii) are
removed and reserved.
■ c. Paragraph (a)(3)(ii) is amended by
removing the words ‘‘for the variablerate premium required by § 4006.3(b) of
this chapter for single-employer plans’’.
■
■
Issued in Washington, DC, this 20 day of
December 2013.
Joshua Gotbaum,
Director, Pension Benefit Guaranty
Corporation.
[FR Doc. 2013–31109 Filed 1–2–14; 8:45 am]
BILLING CODE 7709–02–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Parts 9, 260 and 261
[EPA–HQ–RCRA–2010–0695; FRL–9904–
84–OSWER]
RIN 2050–AG60
Hazardous Waste Management
System: Conditional Exclusion for
Carbon Dioxide (CO2) Streams in
Geologic Sequestration Activities
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
The U.S. Environmental
Protection Agency (EPA or the Agency)
is revising the regulations for hazardous
waste management under the Resource
Conservation and Recovery Act (RCRA)
to conditionally exclude carbon dioxide
(CO2) streams that are hazardous from
the definition of hazardous waste,
provided these hazardous CO2 streams
are captured from emission sources, are
injected into Underground Injection
Control (UIC) Class VI wells for
purposes of geologic sequestration (GS),
and meet certain other conditions. EPA
is taking this action because the Agency
believes that the management of these
CO2 streams, when meeting certain
conditions, does not present a
SUMMARY:
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[Federal Register Volume 79, Number 2 (Friday, January 3, 2014)]
[Rules and Regulations]
[Pages 347-350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31109]
=======================================================================
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4007
RIN 1212-AB26
Payment of Premiums; Large-Plan Flat-Rate Premium
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Based on its regulatory review under Executive Order 13563
(Improving Regulation and Regulatory Review), the Pension Benefit
Guaranty Corporation (PBGC) is moving the flat-rate premium due date
for large plans to later in the premium payment year--to the same date
as the variable-rate premium due date for such plans--starting with the
2014 plan year. Thus, large calendar-year plans' 2014 flat-rate
premiums will be due October 15, 2014. This action implements part of a
PBGC project to make its premium rules more effective and less
burdensome by simplifying due dates, coordinating the due date for
terminating plans with the termination process, making conforming and
clarifying changes to the variable-rate premium rules, providing for
relief from penalties, and making other changes. The rest of the
project will be implemented by a separate final rule.
DATES: Effective January 3, 2014. Applicable to plan years that begin
on or after January 1, 2014.
FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Assistant General
Counsel for Regulatory Affairs (klion.catherine@pbgc.gov), or Deborah
C. Murphy, Deputy Assistant General Counsel for Regulatory Affairs
(murphy.deborah@pbgc.gov), Office of the General Counsel, Pension
Benefit Guaranty Corporation, 1200 K Street NW., Washington DC 20005-
4026; 202-326-4024. (TTY and TDD users may call the Federal relay
service toll-free at 800-877-8339 and ask to be connected to 202-326-
4024.)
SUPPLEMENTARY INFORMATION:
Executive Summary--Purpose of the Regulatory Action
This rulemaking is needed as part of a larger project to make
PBGC's premium rules more effective and less burdensome. The rule
contributes to the simplification and streamlining of due dates by
making the flat-rate premium due date for large plans the same as the
variable-rate premium due date for such plans.
PBGC's legal authority for this action comes from section
4002(b)(3) of the Employee Retirement Income Security Act of 1974
(ERISA), which authorizes PBGC to issue regulations to carry out the
purposes of title IV of ERISA, and section 4007 of ERISA, which gives
PBGC authority to set premium due dates and to assess late payment
penalties.
Executive Summary--Major Provisions of the Regulatory Action
In recent years, premium due dates have depended on size of plan
and type of premium. Large plans have paid the flat-rate premium early
in the premium payment year and the variable-rate premium later in the
year. Mid-size plans have paid both the flat- and variable-rate
premiums by that same later due date. Small plans have paid the flat-
and variable-rate premiums in the following year. On July 23, 2013,
PBGC proposed to simplify the due-date rules by providing that all
annual premiums for plans of all sizes will be due on the same day in
the premium payment year--the historical variable-rate premium due
date. As part of that simplification process, this rule eliminates the
separate due date for the flat-rate premiums of large plans beginning
with the 2014 plan year.
Background
PBGC administers the pension plan termination insurance program
under title IV of the Employee Retirement Income Security Act of 1974
(ERISA). Under ERISA sections 4006 and 4007, plans covered by the
program must pay premiums to PBGC. PBGC's premium regulations--on
Premium Rates (29 CFR part 4006) and on Payment of Premiums (29 CFR
part 4007)--implement ERISA sections 4006 and 4007.
There are two kinds of annual premiums.\1\ The flat-rate premium is
based on the number of plan participants, determined as of the
participant count date. The participant count date is generally the
last day of the plan year preceding the premium payment year; in some
cases, however (such as for plans that are new or are involved in
certain mergers or spinoffs), the participant count date is the first
day of the premium payment year. The variable-rate premium (which
applies only to single-employer plans) is based on a plan's unfunded
vested benefits (UVBs)--the excess of its premium funding target over
its assets.
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\1\ There is also a termination premium, which is unaffected by
this final rule.
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Section 4007 of ERISA authorizes PBGC to set premium due dates and
assess penalties for failure to pay
[[Page 348]]
premiums timely. Beginning in 1999,\2\ PBGC set the variable-rate
premium due date for plans of all sizes as 9\1/2\ calendar months after
the beginning of the premium payment year (October 15 for calendar-year
plans). This was done so that the due date would correspond with the
extended due date for the annual report for the prior year that is
filed on Form 5500. Coordination of the premium and Form 5500 due dates
promotes consistency and simplicity and avoids confusion and
administrative burden. In 2008, however, to conform to changes made by
the Pension Protection Act of 2006 (PPA 2006), small-plan due dates
were extended to 16 months after the beginning of the premium payment
year (April 30 of the following year for calendar-year plans).
---------------------------------------------------------------------------
\2\ See PBGC final rule at 63 FR 68684 (Dec. 14, 1998).
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Most plans' flat-rate premiums have been due at the same time as
variable-rate premiums. However, flat-rate premiums for large plans
(those with 500 or more participants) are due two calendar months after
the beginning of the premium payment year (the end of February for
calendar-year plans).\3\ Because of the impracticality of counting
participants so soon after the participant count date, the premium
payment regulation provides an elaborate system of safe harbors from
late-payment penalties for estimated large-plan flat-rate premiums, and
the practice of most large plans has been to pay an estimate of the
flat-rate premium at the early due date and ``true up'' when they pay
the variable-rate premium later in the year.
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\3\ This requirement was adopted in response to a recommendation
in the 1984 report of the Grace Commission (the President's Private
Sector Survey on Cost Control). See PBGC final rule at 50 FR 12533
(Mar. 29, 1985). The requirement was effective for 1985 for very
large plans (those with 10,000 or more participants) and for 1986
for all other large plans.
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Proposed Rule
On January 18, 2011, the President issued Executive Order 13563,
``Improving Regulation and Regulatory Review,'' to ensure that Federal
regulations seek more affordable, less intrusive means to achieve
policy goals, and that agencies give careful consideration to the
benefits and costs of those regulations. In response to and in support
of the Executive Order, PBGC on August 23, 2011, promulgated its Plan
for Regulatory Review,\4\ noting several regulatory areas--including
premiums--for immediate review.
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\4\ See https://www.pbgc.gov/documents/plan-for-regulatory-review.pdf.
---------------------------------------------------------------------------
PBGC reviewed its premium regulations and identified a number of
ways to simplify and clarify the regulations, reduce burden, provide
penalty relief, and generally make the regulations work better. On July
23, 2013 (at 78 FR 44056), PBGC published a proposed rule to replace
the system of three premium due dates (based on plan size and premium
type) with a single due date corresponding to the Form 5500 extended
due date, to coordinate the due date for terminating plans with the
termination process, to make conforming and clarifying changes to the
variable-rate premium rules, to provide for relief from penalties, and
to make other changes. Under the proposal, large plans would no longer
have to pay flat-rate premiums early and small plans would have the
same due dates as other plans but get more time to value benefits.
PBGC received comments from six commenters--two employer
associations, two associations of pension practitioners, an actuarial
firm, and an individual actuary. All of the commenters approved of the
proposal, and one specifically urged that it be made effective for
2014. The commenters also had suggestions for additional changes PBGC
might make in its premium regulations or procedures. None of those
suggestions dealt with the large-plan flat-rate premium due date.
The first large-plan flat-rate filing deadline for 2014 is February
28, 2014. Thus the provision of the proposed rule setting the flat-rate
premium due date for large plans later in the year--on the same date as
the variable-rate premium due date for such plans--is by far the most
time-sensitive aspect of the proposal. For that reason, and in light of
the fact that this provision generated only positive comments, PBGC is
finalizing this one change separately and ahead of the other changes in
the proposal.
PBGC expects to deal with all other aspects of the July 23 proposal
in a separate final rule to be issued in time to provide all plans with
adequate advance guidance for timely compliance with the new procedures
in 2014. If the situation changes, PBGC will advise the public as
appropriate.
Regulatory Changes Made by This Final Rule
This final rule makes the flat-rate premium due date for large
plans the same as their variable-rate due date. For calendar-year
plans, that due date will be October 15.\5\
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\5\ To conform to this change in the large-plan flat-rate
premium due date, which makes unnecessary the penalty safe harbors
for under-estimates of large plans' flat-rate premiums, this final
rule eliminates those safe harbor provisions from the premium
payment regulation.
---------------------------------------------------------------------------
For many large plans, making the flat-rate premium due when the
variable-rate premium is due will cut the number of premium
transactions with PBGC by two, rather than just one. That is because
underestimating the flat-rate premium has typically given rise not only
to penalties (which are often waived) but also to interest charges
(which cannot be waived). Thus, after paying an estimate of the flat-
rate premium, and then paying the balance due, a large plan has usually
had to make yet another payment, of the interest on the amount by which
its initial estimated payment fell short of the correct amount.
Eliminating the need for flat-rate premium estimates will eliminate
interest payments on shortfalls in those estimates.
The due date change will mean that plan consultants can do all of a
plan's premium filing work at one time, once a year. PBGC will receive
one premium filing for each plan each year and will be able to process
a plan's entire annual premium in a single operation. Reducing the
number of due dates will be simpler for all concerned. Less complexity
means less chance for mistakes and the time and expense of correcting
them. Moving to a single due date will also simplify PBGC's premium
processing systems and save PBGC money on future periodic changes to
those systems (because it is less expensive to modify simpler systems).
In short, PBGC believes that this change in the large-plan flat-
rate premium due date will produce a significant reduction in
administrative burden for both plans and PBGC.
Executive Orders 12866 and 13563
PBGC has determined, in consultation with the Office of Management
and Budget, that this rulemaking is a ``significant regulatory action''
under Executive Order 12866. The Office of Management and Budget has
therefore reviewed this rule under Executive Order 12866.
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of
[[Page 349]]
reducing costs, of harmonizing rules, and of promoting flexibility.
This final rule is associated with retrospective review and analysis in
PBGC's Plan for Regulatory Review issued in accordance with Executive
Order 13563.
Executive Orders 12866 and 13563 require that a comprehensive
regulatory impact analysis be performed for any economically
significant regulatory action, which, under Section 3(f)(1) of
Executive Order 12866, is one that ``is likely to result in a rule that
may . . . [h]ave an annual effect on the economy of $100 million or
more or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities.''
PBGC premium payments are included as receipts in the Federal
budget, and the large-plan flat-rate premium deferral will cause a one-
time shift of about $1.5 billion (attributable primarily to calendar
year plans) from one fiscal year to the next. Although no premium
revenue will be lost, there will be the appearance of a one-time loss
for the year when the due dates change, and PBGC has therefore
determined that this final rule is economically significant under the
criteria in Executive Order 12866.
The estimate of the amount of flat-rate premium shifted from one
fiscal year to the next, and the estimate (below) of the amount of
interest shifted from PBGC to plans, are revised from the estimates in
the proposed rule to reflect projected 2014 per-participant flat
premium rates ($49 (instead of $35) for single-employer plans and $12
(instead of $9) for multiemployer plans) and the following participant-
count data for large plans for plan years beginning in 2012 (instead of
2010):
------------------------------------------------------------------------
Approximate number of
participants in large plans
(millions)
-------------------------------
Large plans
whose flat-
All large rate premium
plans shifts to the
next fiscal
year
------------------------------------------------------------------------
Single-employer......................... 30 28
Multiemployer........................... 10 9
------------------------------------------------------------------------
In accordance with OMB Circular A-4, PBGC has examined the economic
and policy implications of this final rule and has concluded that the
action's benefits justify its costs. That conclusion is based on the
following analysis of the impact of the due date change.
The due date change will shift, from PBGC to plans, the earnings on
premium payments by large plans for the 7[frac12] months between the
old and new due dates. PBGC estimates that the average gain per large
plan will be about $11,300 per year. To put this figure in perspective,
large plans pay over $1 billion in flat-rate premiums--about 95 percent
of PBGC's flat-rate premium income.
Because earning rates differ between PBGC and plans, PBGC's loss
will be about one-third as much as plans' gain. PBGC estimates its rate
of return, from investment in U.S. Government securities, at about 2
percent. PBGC estimates plans' rate of return at 6 percent. The
following table shows the estimated average interest earnings
calculated with four rates: two percent (PBGC's best estimate for
PBGC's rate of return), six percent (PBGC's best estimate for plans'
rate of return), and three and seven percent (the discount rates
recommended by OMB Circular A-4).
------------------------------------------------------------------------
Approximate average interest earnings per large plan at--
-------------------------------------------------------------------------
2 percent 3 percent 6 percent 7 percent
------------------------------------------------------------------------
$3,800 $5,600 $11,300 $13,200
------------------------------------------------------------------------
In addition, PBGC estimates that the reduction in large plans'
administrative burden attributable to the change in their flat-rate
premium due date will translate into average annual savings of 3 hours
per plan. (PBGC arrived at this estimate on the basis of inquiries made
to pension practitioners.) The dollar equivalent of this saving is
about $1,050.\6\
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\6\ PBGC assumes for this purpose that enrolled actuaries charge
about $350 per hour.
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Accordingly, PBGC foresees an average net benefit (in dollar terms)
from adoption of the new uniform due date of about $12,350 for each
large plan (about $11,300 in saved interest plus about $1,050 in saved
administrative expenses).
Immediate Effective Date
Pursuant to section 553(d)(3) of the Administrative Procedure Act
(5 U.S.C. 551 et seq.) and section 808(2) of the Congressional Review
Act (5 U.S.C. 801 et seq.), PBGC for good cause finds that notice and
public procedure on this final rule are unnecessary and contrary to the
public interest and that this final rule should be effective upon
publication. The project as a whole, including the relief provided by
this final rule, has received only positive comment from the public.
This rule requires no affirmative action by the regulated community. On
the contrary, it provides relief from the restrictive large-plan flat-
rate early-filing requirement for PBGC premiums (see section 553(d)(1)
of the Administrative Procedure Act). The first large-plan flat-rate
filing deadline for 2014 is February 28, 2014. To ensure that all large
plans will be able to rely on this final rule for the 2014 plan year,
PBGC is making this rule effective upon publication.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) imposes
certain requirements with respect to rules that are subject to the
notice and comment requirements of section 553(b) of the Administrative
Procedure Act. Unless an agency determines that a final rule is not
likely to have a significant economic impact on a substantial number of
small entities, section 604 of the Regulatory Flexibility Act requires
that the agency present a final regulatory flexibility
[[Page 350]]
analysis at the time of the publication of the final rule describing
the impact of the rule on small entities and steps taken to minimize
the impact. Small entities include small businesses, organizations and
governmental jurisdictions.
Small Entities
For purposes of the Regulatory Flexibility Act requirements with
respect to this final rule, PBGC considers a small entity to be a plan
with fewer than 100 participants. This is consistent with certain
requirements in title I of ERISA \7\ and the Internal Revenue Code,\8\
as well as the definition of a small entity that the Department of
Labor (DOL) has used for purposes of the Regulatory Flexibility Act.\9\
Using this proposed definition, about 64 percent (16,500 of 25,600) of
plans covered by title IV of ERISA in 2011 were small plans.\10\
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\7\ See, e.g., ERISA section 104(a)(2), which permits the
Secretary of Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100 participants.
\8\ See, e.g., Code section 430(g)(2)(B), which permits plans
with 100 or fewer participants to use valuation dates other than the
first day of the plan year.
\9\ See, e.g., DOL's final rule on Prohibited Transaction
Exemption Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
\10\ See PBGC 2011 pension insurance data table S-31, https://www.pbgc.gov/documents/pension-insurance-data-tables-2011.pdf.
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Further, while some large employers may have small plans, in
general most small plans are maintained by small employers. Thus, PBGC
believes that assessing the impact of the rule on small plans is an
appropriate substitute for evaluating the effect on small entities. The
definition of small entity considered appropriate for this purpose
differs, however, from a definition of small business based on size
standards promulgated by the Small Business Administration (13 CFR
121.201) pursuant to the Small Business Act. In its proposed rule,
therefore, PBGC requested comments on the appropriateness of the size
standard used in evaluating the impact of the proposed rule on small
entities. No comments were received on this issue.
Certification
On the basis of its definition of small entity, PBGC certifies
under section 605(b) of the Regulatory Flexibility Act that the
amendments in this final rule will not have a significant economic
impact on a substantial number of small entities. Accordingly, as
provided in section 605 of the Regulatory Flexibility Act, sections 603
and 604 do not apply. This certification is based on the fact that the
change in the large-plan flat-rate premium due date will have no impact
on any small plans.
Paperwork Reduction Act
The information requirements under this final rule have been
approved by the Office of Management and Budget under the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.) (OMB control number 1212-0009;
expires October 31, 2015). An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number.
The only changes PBGC is making in its premium information
collection in connection with this final rule are that PBGC will give
notice that estimated flat-rate filings are discontinued for plan years
starting in 2014. (PBGC will also notify private-sector premium filing
software developers of the change so that it can be reflected in their
products.) \11\
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\11\ The more comprehensive changes to PBGC's premium
information collection arising from the separate final rule that
PBGC anticipates issuing--dealing with aspects of the July 23
proposal other than the large-plan flat-rate premium due date--will
be addressed in that separate final rule.
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PBGC needs the information in a premium filing to identify the plan
for which the premium is paid to PBGC, to verify the amount of the
premium, to help PBGC determine the magnitude of its exposure in the
event of plan termination, to help PBGC track the creation of new plans
and the transfer of plan assets and liabilities among plans, and to
keep PBGC's inventory of insured plans up to date. PBGC receives
premium filings from about 25,700 respondents each year and estimates
that the total annual burden of the collection of information will be
about 8,900 hours and $59,250,000.\12\
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\12\ This burden estimate reflects both a decrease in burden
attributable to the change in the large-plan flat-rate premium due
date under this final rule and an increase in burden attributable to
a re-estimate of the existing premium filing burden. The increase in
burden due to re-estimation is about 31,300 hours, and the decrease
due to the due date change is about 17,000 hours, a net increase of
about 14,300 hours from the currently approved burden (about
163,600). PBGC assumes that about 95 percent of the work is
contracted out at $350 per hour, so the 17,000-hour decrease
attributable to the final rule is equivalent to about 850 hours of
in-house labor and about $5,650,000 of contractor costs.
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List of Subjects in 29 CFR Part 4007
Employee benefit plans, Penalties, Pension insurance, Reporting and
recordkeeping requirements.
In consideration of the foregoing, PBGC amends 29 CFR part 4007 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.
Sec. 4007.8 [Amended]
0
2. In Sec. 4007.8, paragraphs (f), (g), (h), and (i) are removed and
reserved.
Sec. 4007.11 [Amended]
0
3. In Sec. 4007.11:
0
a. Paragraph (a) introductory text is amended by removing the words
``due dates for large plans are prescribed'' and adding in their place
the words ``due date for large plans is prescribed''.
0
b. Paragraphs (a)(3)(i) and (iii) are removed and reserved.
0
c. Paragraph (a)(3)(ii) is amended by removing the words ``for the
variable-rate premium required by Sec. 4006.3(b) of this chapter for
single-employer plans''.
Issued in Washington, DC, this 20 day of December 2013.
Joshua Gotbaum,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2013-31109 Filed 1-2-14; 8:45 am]
BILLING CODE 7709-02-P
