The Pension Benefit Guaranty Corporation (PBGC) has proposed an expanded enforcement
program, including a new penalty structure, for administrators of underfunded
pension plans who fail to inform participants of the plan's funding status and
PBGC's guarantee limits.
Under the proposed policy, penalties for failure to issue an underfunding notice
would be tied primarily to the number of plan participants, rather than the
number of days of delinquency. The guideline penalty ranges from $5 to $100
per participant, depending on whether the failure is a first-time violation
and whether the plan corrects the failure prior to audit.
The penalty rate would be prorated for failures corrected within one year,
and could be adjusted up or down by the PBGC based on the facts and circumstances
of the case. A stepped-up audit program, with tougher enforcement and significantly
higher penalties for repeated non-compliance, would accompany the new policy,
according to the PBGC..
Comments on the proposed penalty policy, which appeared in the Federal Register
on May 7, 2004, must be received by July 6, 2004, and may be submitted electronically
through the PBGC's website at www.pbgc.gov/regs. (See the links below.)
The PBGC also is announcing a Voluntary Correction Program (VCP) for administrators
of underfunded pension plans who failed to issue notices on the plan's funding
status. The VCP aims to encourage administrators of PBGC-insured pension plans
to correct recent compliance failures and to facilitate future compliance.
The VCP generally covers any 2002 or 2003 participant notice due before May
7, 2004, that is not as of that date the subject of a PBGC audit. Under the
VCP, plan administrators may avoid the penalty that would apply for a participant
notice failure for the 2002 or 2003 plan year by:
- issuing a corrective notice in accordance with the VCP by the 2004 participant
notice due date; and
- notifying PBGC, within 30 days after the 2004 participant notice due date,
that they are participating in the VCP.
The PBGC anticipates that many plan administrators will want to participate
in the VCP as a precaution, even in the absence of a known participant notice
failure. Participation in the VCP will not affect the likelihood that a plan
will be audited for compliance with the participant notice requirement in the
future, with the PBGC premium requirement for any plan year, or with any other
PBGC requirement. All information related to the VCP and to participant notice
requirements is available on the PBGC's website at www.pbgc.gov/participantnotice.
PBGC is a federal corporation created under the Employee Retirement Income
Security Act of 1974. It currently guarantees payment of basic pension benefits
earned by over 44 million American workers and retirees participating in more
than 31,000 private-sector defined benefit pension plans. The agency receives
no funds from general tax revenues. Operations are financed largely by insurance
premiums paid by companies that sponsor pension plans and by investment returns.
Pension Benefit Guarantee Corporation