PBGC premium acceleration set to take effect for 2025
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The short version of a long story
The accelerated PBGC premium deadline was enacted in the Bipartisan Budget Act of 2015 (BBA 2015), as part of a congressional effort to improve the budget-scoring for the law by bringing an extra year of premiums within the 10-year scoring window. (The federal government’s fiscal year ends September 30, so accelerating the deadline from October 15 to September 15 would capture the premiums for calendar-year plans — which include most DB plans).
Although these measures made the law appear more affordable under the budget-scoring rubric, PBGC is a self-funded agency. All premiums collected go directly to funding the agency, which gets no other money from the federal government. Accordingly, acceleration of the premium-payment deadlines does not truly affect any other part of the overall federal budget.
Because the accelerated deadline doesn’t truly affect any other part of the federal budget, and because the earlier due date may be confusing and administratively difficult for plan sponsors, for the past eight years PBGC’s budget justification document has called for the repeal of the deadline acceleration provision. However, Congress has yet to repeal the provision, and repealing it now — in the fiscal year in which it’s effective — may not be feasible.
Concurrent deadlines may be burdensome …
With the accelerated deadline, 2025 PBGC premiums are due the same day as the year-end contribution for the 2024 plan year. Plan sponsors subject to VRPs — but not a VRP cap — may find the concurrent deadlines problematic. This is because the VRP depends on the plan’s unfunded liability as of the beginning of the 2025 plan year. Assets for this purpose reflect any contributions made for the 2024 plan year that the sponsor has deposited by the date the premium filing is submitted. Filings cannot reflect a contribution that hasn’t been paid. This means sponsors who want to pay their contribution on the last possible date will have to make the contribution and then finalize and submit the PBGC filing on the same day. This is particularly complicated because the PBGC filing requires the signature of both the plan sponsor and the plan’s enrolled actuary, neither of whom can sign the form without confirmation that the final contribution has been made. Plans subject to the VRP cap don’t have the same concern, since their premium doesn’t depend on the assets and so can be finalized earlier.
These concurrent deadlines aren’t entirely new. The VRP filing used to be due on the same day as the year-end contribution. However, PBGC pushed back the premium deadline in 1999 to coincide with the extended Form 5500 filing deadline specifically “to avoid the confusion and administrative burdens caused by the premium form’s not being coordinated” with the Form 5500 and the actuarial Schedule B (now called the Schedule SB).
… but for many plans they won’t be
For plan sponsors that don’t pay an uncapped VRP, the only impact of the accelerated deadline will be the disruption in the normal filing process. These sponsors will simply have to ensure that they file on time. Plans falling into this category include:
- Well-funded plans. Due to good asset returns in 2024 and relatively high interest rates, many plans will have no unfunded vested liability in 2025 and therefore no VRP.
- Plans not receiving contributions on the final due date. If the plan sponsor doesn’t intend to make a contribution on the last possible day, the assets reflected in the VRP determination can be calculated in advance.
- Capped plans. Plans that are significantly underfunded will pay the VRP cap, which is based on the plan’s participant count ($717 per participant, or $5 per participant for very small employers) instead of the plan’s unfunded liability. The VRP for these plans won’t be affected by the timing of any year-end contributions
Filing strategies
Assuming the provision accelerating the deadline isn’t repealed, all plan sponsors will have to take care to comply, regardless of whether the amount of the premium is affected by a year-end contribution. Plans subject to a VRP for 2025 can ease some of the challenges by:
- Preparing PBGC forms in advance. A straightforward solution is to ensure that all PBGC filings have been prepared (but not signed) in advance, reflecting a contribution made on the final day of the plan year. The actual filing process is relatively straightforward and not unduly time-consuming. Once the contribution has been made, the plan sponsor and enrolled actuary can sign the previously prepared PBGC filing, which can then be submitted that same day.
- Paying the final year-end contribution early. Sponsors that pay their final 2024 contribution early will have more time to prepare the premium filing. Paying the contribution early will also result in a smaller final contribution because contributions are discounted back to the first day of the plan year at the plan’s effective interest rate. The earlier a contribution is paid, the smaller it can be.
- Filing twice. Plan sponsors unable to file on time reflecting a final contribution — or those uncertain of when the actual contribution will be made — can simply prepare a submission without reflecting that contribution. Doing this will require making a higher premium payment than will ultimately be owed. However, after the final contribution information is available, the sponsor will file an amended return and request a refund or premium credit, if applicable. This strategy will require more work but will avoid any administrative complexities of submitting the contribution and premium filing on the same day.
Related resources
- Technical Update 25-1 (PBGC, Jan. 6, 2025)
- PBGC 2025 fiscal year congressional budget justification (DOL, March 5, 2024)
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