PBGC filing - new plan

[Guest guppy]

A new plan effective January 1, 2003 is adopted December 15, 2003.

According to PBGC instructions, the first premium is due 90 days after the plan is adopted.

What is the premium?

Since this plan does not have an initial liability, there is no unfunded vested liability at 1/1/03 - so the variable premium is $0.

Is there a flat rate premium? Since all employees became participants on 1/1/03 (there were 0 participants in the prior year), can they be excluded from the flat rate premium?

[david rigby]

This links to the 2003 Instructions: http://www.pbgc.gov/plan_admin/2003ppp.pdf

See Item C.13 on page 21 (the page with number 21 at the bottom of the page): “Count the number of plan participants as of the premium snapshot date.” "Premium snapsshot date" is defined in Item A.6 on page 2 (the page with number 2 at the bottom of the page).

[Mike Preston]

Are you one of Blinky's offspring?

[david rigby]

I've been around much longer than Blinky.

[Mike Preston]

Yes, but your name isn't guppy.

[Blinky the 3-eyed Fish]

I sired him/her not.

As for the original question, here is how I understand it. The participant count is determined as of the premium snapshot date, which is the first day of the premium payment year in the first year. In this case it's 1/1/03, and my guess is you have participants that meet the eligibility requirements as of that date.

Participants for premium purposes only count only those with a benefit, so if you plan's formula does not grant past service, you have no one with a benefit and no participants for premium purposes. Thus, you end up having to file PBGC form with no payment. I know if seems ridiculous, but I don't see a way around not having to file, even if there is no premium due.

If the formula does count past service, then you probably have some participants for premium purposes and a payment due.

[Guest guppy]

Thanks everybody - the first filing is due 90 days after adoption. As Blinky mentioned, there is no variable premium. However, the snapshot date is 1/1 (not 12/31) and there are participants on that date so the flat rate premium will apply.

[Guest guppy]

And no, I have no relation to Blinky....funny stuff.

[Blinky the 3-eyed Fish]

Guppy, yes, I mentioned the premium snapshot date is the first day of the first premium payment year. But the more important question is do the participants have an accrued benefit as of 1/1? In other words, does the plan benefit formula accrue over participation or service? If it's the former, then like I said before, there is no premium due, but you still must file.

[Guest guppy]

Yes indeed - the key is you only count partcipants with "benefit liabilities" as of that date. At the snapshot date, there are no such participants (credited service based on participation). Therefore, there are no benefit liabilities and no premium. Thanks!

[Mike Preston]

Change the facts a little. Assume the plan provides for past service such that the participants as of 1/1/2003 have an accrued benefit. Further, assume the plan sponsor does not make the election in 412(l)(7)(D)(iv) to take into account past service (hence, the default action is to ignore past service).

Is your interpretation that the flat rate premium would apply, since the participants clearly have a benefit under the terms of the plan, but that the variable rate premium would not apply since the effective current liability is 0% phased in?

[Guest guppy]

Mike,

Good question -

The PBGC instructions say that the plan is exempt from the flat rate premium if it "grants no past service credits".

In your example, your plan clearly does so I believe the flat rate premium would apply.

I'm not sure how the CL phase-in affects the variable rate premium without further research.