PBGC Coverage Determination

[ConnieStorer]

We took over administration of a small defined benefit plan.  The Plan covers Husband and Wife who each own 50% of an S Corp.  The Plan also covers a son and his wife, both well over age 21.  All four individuals have been in the Plan since it was effective.  The prior administration firm indicated in both the Plan Document and Form 5500 that this was not covered by the PBGC.  The Plan Sponsor is not a professional service corp.  I believe that this plan was covered by the PBGC from its inception in 1998. 

We would like to know in advance what sort of penalties might be applied to the Plan for not filing PBGC Forms since 1998.   I am assuming that we will receive an inquiry from the PBGC when we file a 2021 PBGC form for a plan that has been in existence for over 21 years.

Any comments would be appreciated.

[C. B. Zeller]

From what you described, it certainly sounds like the plan should have been covered.

The PBGC charges both interest and a penalty on late payments. Interest rates are found here and late payment charges are found in the instructions for each year's premium filing. However the late payment charge, by law, cannot exceed 100% of the missed premium for that year.

If the plan has always been well-funded, and there was no variable-rate premium, then you can use the flat rate premium multiplied by 4 (for the 4 participants) as an upper bound for the late payment charge. Historic premium rates are published by the PBGC, for a list see the table on page 43 here.

You might want to contact the PBGC in advance and see if they have any suggestions.