PBGC penalties - can anything be done?

[Guest emmaboo]

We had a client fail to file a PBGC form, and apparently received notices for a while that they ignored, and now have received a bill for $45,000 in penalties! The plan had one participant and less than that amount in assets! Is there any way to get relief after they've already sent the penalty invoice with threat to refer the debt to the Treasury by the end of the month?

[david rigby]

One participant? Is the plan subject to PBGC coverage?

(Just asking to make sure that hurdle has been considered.)

[Guest emmaboo]

Yes, it previously had more participants but eventually existed only to pay a benefit to one retired employee.

[Calavera]

Seems too high for 1 person plan where a variable premium is only $5.

"The late payment penalty charge is established by us, subject to ERISA's restriction that the penalty not exceed 100 percent of the unpaid premium amount." - http://www.pbgc.gov/prac/prem/late-payment-charges.html. The waivers and how to contact PBGC are under the PBGC Penalty Waivers section. Also see Past Due Filing Notices section at the bottom of this web page.

It could be that the last filing was done when there were more participants, and PBGC is estimating the penalty and interest based on the higher annual premium. I suggest to contact them and have an open discussion.

[Guest emmaboo]

Thanks for replying, David and Calavera. However, does that premium penalty cap apply to failure to provide information? "PBGC also may assess penalties under ERISA section 4071 for failure to timely provide premium-related information." 4071 provides for a maximum penalty of $1,100 per day (they were assessed at $100 per day).

[AndyH]

There is a specific adminstrative and legal process to this, with specific timelines. I suggest that you hire an attorney that specializes in PBGC matters. Like right away.

[Calavera]

Ouch.

Well, PBGC's people are very smart and reasonable. It may be worthwhile to try to resolve the issue by contacting them and asking to waive the 4071 penalties based on facts and circumstances before engaging the attorney.

The questions to consider would be: Is this one participant an owner? If yes, what year the last filing was done, and when it becomes an owner only plan. Does this company have a defined contribution plan? If yes, was any employer contribution made to this defined contribution plan that would be different if this plan wouldn't be covered by PBGC.