Can the PBGC premium be paid out of plan assets?

[Guest Connie]

But, check the plan document to make sure there are no specific provisions requiring the plan sponsor to pay these expenses.

Also, if the sponsor has been paying directly there could be a practice in place, changing it would probably need documentation.

[Guest llic]

Can the PBGC premium be paid out of plan assets?

[Guest]

Yes. I think it's in the Department of Labor ERISA regulations, or if not in a Department of Labor letter (it may have been and info letter, not an advisory opinion).

[david rigby]

Connie,

Why would it need documentation?

[Guest Connie]

pax,

Comfort, mostly. Seems like good business practice to note changes to procedures when they involve qualified plans.

[Guest mt]

And I believe that if a plan is underfunded and is about to terminate, the PBGC regs say you can't pay the premiums from plan assets.

[mwyatt]

One other point to consider with the payment of expenses from a Plan, including administrative costs, is the expense assumption used in the annual actuarial valuation. If the employer has in the past paid all expenses, and now wants to have the plan pay these annual expenses, the actuary needs to modify the expense assumption. In reality, the contribution goes up to reflect these expenses (and hence lower net investment return). In essence, no free lunch (unless of course we are talking about an overfunded plan).