PBGC Issues Proposed Rule on Penalties for Untimely Filings and Disclosures; Comments Due September 21

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed regulations for calculating, imposing, and waiving monetary penalties to pension plans for failure to provide certain required notices or other material information timely to PBGC and plan participants. 

The proposed rule would:

• Establish that, for most failures to timely provide required notices or other material information, PBGC assesses penalties that are significantly below the maximum amounts allowed under the statute
• Provide that PBGC, in its discretion and based on the facts and circumstances of each case, generally waives penalties for failure to timely provide required information, upon a showing of reasonable cause, error of law, or PBGC delay, or in other circumstances, as the agency deems appropriate
• Encourage voluntary self-reporting and self-correction by providing lower penalties for violations reported and corrected early
• State that penalty amounts are intended to reflect the potential for harm to plan participants and to PBGC’s insurance program caused by the untimely filing, meaning that higher potential for harm generally results in a higher penalty than lower potential for harm.

• Small plans: PBGC would proportionately reduce the general penalty amounts of $25 and $50 per day for untimely information concerning plans with fewer than 100 participants. The penalty would be reduced proportionately based on the number of participants by multiplying the general penalty times a fraction where the numerator is equal to the number of plan participants and the denominator is 100, subject to a floor of $10 per day.

• Multiemployer plans: PBGC is codifying its practice of not assessing penalties for untimely multiemployer plan notices covered under ERISA part 4302 until after the filers has been informed of the requirement and still remains noncompliant after being informed of the lateness, PBGC assesses a penalty under part 4302.