[Federal Register Volume 71, Number 105 (Thursday, June 1, 2006)]
[Rules and Regulations]
[Pages 31077-31082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-8433]
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 4000, 4006, and 4007
RIN 1212-AB02
Electronic Premium Filing
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
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SUMMARY: The PBGC is changing its regulations to require that premium
declarations be filed electronically. The requirement becomes effective
for plans with 500 or more participants for the prior plan year
starting with filings for plan years beginning in 2006 that are made on
or after July 1, 2006, and for smaller plans starting with filings for
plan years beginning after 2006. Plans may apply for exemptions on a
case-by-case basis. Filings may be submitted through the PBGC's on-line
e-filing application (``My Plan Administration Account,'' or ``My
PAAA''). My PAA has data entry and editing screens that can be used to
create and submit a filing, and can also accept uploaded files
containing filing information that has been prepared and formatted
using private-sector software in accordance with the PBGC's published
standards.
DATES: Effective date: July 1, 2006. For a discussion of applicability
of these amendments, see the Applicability section in SUPPLEMENTARY
INFORMATION.
FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, or Deborah
C. Murphy, Attorney, Legislative and Regulatory Department, Pension
Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-
4026, 202-326-4024. (For TTY/TTD users, call the Federal relay service
toll-free at 1-800-877-8339 and ask to be connected to 202-326-4024.)
SUPPLEMENTARY INFORMATION: This final rule is part of an ongoing
implementation of the Government Paperwork Elimination Act by the
Pension Benefit Guaranty Corporation (``PBGC'') and is consistent with
the Office of Management and Budget's directive to remove regulatory
impediments to electronic transactions. The rule addresses electronic
submission of premium filings that are required under the regulation on
Payment of Premiums (29 CFR part 4007) and builds in the flexibility
needed to allow updating of the electronic filing process as technology
advances.
The PBGC administers the pension insurance programs under Title IV
of the Employee Retirement Income
[[Page 31078]]
Security Act of 1974 (``ERISA''). Pension plans covered by Title IV
must pay annual premiums to the PBGC. Premium filings must include
information to identify the plans for which premiums are paid and to
demonstrate that the amounts paid are correct.
The PBGC has been processing premium filings for 30 years. The
volume of filings processed annually is in the tens of thousands.
Processing methods have become progressively more automated, and the
specially designed premium forms that have been used for some years can
be read by optical character recognition (``OCR'') devices. Even with
OCR, however, the capture of data from paper premium forms and the
translation of the data into electronic data files is an imperfect
process that inevitably gives rise to errors that can be difficult and
burdensome to detect and correct. These errors cause problems for both
the PBGC and premium filers, because they can lead to the issuance of
improper bills for premiums that have in fact been paid, to delays in
the processing of refund requests, to erroneous filing histories, etc.
With a view to reducing problems of this kind, and consistent with
the Government Paperwork Elimination Act, optional electronic premium
filing was introduced for plan years beginning in 2004 using an
application on the PBGC's Web site (http://www.pbgc.gov) called ``My
Plan Administration Account'' (``My PAA''). To make a premium filing
using My PAA, a user logs onto a secure account on the Web site. My PAA
has been enhanced since 2004 and now offers multiple methods for making
premium filings.
The filing method first introduced in 2004 enables users to create
electronic premium filings by entering information in on-line data
entry screens, route those premium filings among themselves
electronically for editing and for electronic certification, and submit
completed filings with the click of a mouse. The information submitted
can be loaded directly into the PBGC's premium data processing systems,
thus eliminating the errors inherent in the OCR data capture process.
Premium payments can also be made online as part of the filing process.
A second filing method, introduced in late summer 2005,
accommodates pension practitioners who may prefer to continue using
private-sector software--either purchased from a commercial developer
or developed ``in-house''--for preparing premium filings. The PBGC has
issued standards for structuring a computer file containing premium
filing information; by incorporating those standards into their
software, developers give software users the ability to create premium
data files that they can upload through My PAA. (These standards are
available on the PBGC's Web site, http://www.pbgc.gov.) Using this new
method, practitioners can prepare premium filing information using
their own software, which will put the information into files that meet
the formatting standards, and can electronically transmit those files
to the PBGC.
Finally, My PAA was enhanced in early 2006 to permit importation of
draft filings that have been prepared with private-sector software into
the My PAA data entry and editing screens, thus combining features of
the first two methods.
E-filers using any of the My PAA filing methods can pay premiums
either through My PAA (by credit card, electronic check, or Automated
Clearing House (ACH) transfer) or outside My PAA (by paper check or
wire transfer).
My PAA streamlines the premium filing process for users and
contributes to making the processing of premium filings faster and more
accurate. Thus it has the potential to help reduce the number of
erroneous bills, to speed up refund processing, and in general to
improve premium collection functions while enhancing service to premium
payers.
On March 9, 2005 (at 70 FR 11592), a proposed rule was published
that would require premium filings for large plans to be made
electronically for plan years beginning after 2005, and premium filings
for all plans to be made electronically for plan years beginning after
2006; exemptions from the electronic filing requirement could be
granted for good cause in appropriate circumstances. (The electronic
filing requirement would not apply to submission of information
specially requested in connection with a premium compliance review.)
Four commenters submitted comments on the proposal. Changes to My
PAA since the publication of the proposed rule address many of the
comments on the proposed rule, and in most respects, the substance of
the proposed rule has not been changed. However, to provide more time
for software developers and filers to prepare for e-filing,
applicability of the mandatory e-filing requirement has been delayed
for six months. The comments are discussed below.
Payment Methods
Two commenters urged that filers be permitted to make payment
outside the e-filing system (e.g., by paper check). As noted above, My
PAA has been enhanced to offer this feature. Like the proposed rule,
the final rule does not require electronic payment, only electronic
filing of premium information. However, the final rule clarifies that
filing methods for payments (as well as for information) are governed
by the premium filing instructions. While not anticipated, it is
possible that at some future date, as e-filing becomes more prevalent,
the electronic payment of premiums (via My PAA) may be required.
Certification
A number of comments addressed the procedures for certifying
filings. For filings created and edited within My PAA, My PAA provides
an electronic certification method similar to that used historically
for paper premium filings. Before such a filing can be submitted, the
plan administrator--and, where appropriate, the plan actuary--must
provide a certification using an authentication process that
establishes the identity of the person making the certification. For
uploaded filings, a different certification process is provided: The
plan administrator--and, where appropriate, the plan actuary--provide
certifications that must be preserved for six years (as is already
required for the information supporting the premium filing) but that
need not be transmitted to the PBGC at the time of upload. The identity
of the uploader is authenticated in a manner similar to that used for
filings created within My PAA.
One commenter urged that the certification method used by those who
create their filings within My PAA also be made available to filers who
create their filings with private-sector software; another commenter
urged that the certification method provided for uploaders be made
available to those who create their filings within My PAA. The first of
the two comments has already been addressed through the introduction of
the import filing method in early 2006; filings created with private-
sector software and imported into the data entry and editing screens
can be certified in the same manner as filings created using those
screens. The second suggestion is also worthwhile and is being
considered for a future My PAA enhancement.
The same two commenters also objected to the logistical burden of
obtaining and retaining plan administrator and enrolled actuary
certifications of uploaded filings prepared with private-sector
software. The upload certification process is no
[[Page 31079]]
more burdensome than the certification process for paper filings,
especially if the plan administrator makes the upload. And the import
filing method permits electronic certification of filings prepared with
private-sector software. Nonetheless, consideration is being given to
how the certification process (and indeed the whole premium filing
process) can be further streamlined through future enhancements to My
PAA. To provide more flexibility in improving the certification
process, this final rule removes from the regulation on Premium Rates
(29 CFR part 4006) the provisions for certification of specified items
of information and replaces them with a centralized provision (in Sec.
4007.3 of the premium payment regulation) for certifications in
accordance with the premium instructions. This is a simplification from
the current situation where some certification rules are in the
regulations and others in the instructions.
A final objection to the certification process by one of the same
two commenters was that plan administrators without Internet access
would be unable to log on to My PAA to certify filings created within
My PAA. Filers can avoid this difficulty by using the upload method,
which does not require the plan administrator to certify on-line. Thus,
this problem does not present an obstacle to adoption of the e-filing
requirement.
Moving Between Systems/Formats
Three commenters raised issues about the need to move between
different systems or formats in using the new premium e-filing methods.
For example, one commenter noted that a filing for upload must be in a
format (an XML computer file meeting prescribed specifications) that a
plan administrator cannot typically read. Thus, the commenter noted,
the filing data must be reproduced in another format for plan
administrator review. The commenter suggested that there be a way to
allow plan administrators to review (in My PAA) filings prepared with
private-sector software, in the same way that filings created within My
PAA can be reviewed. The recently introduced import filing method
provides this capability.
The same commenter pointed out that many pension service providers
prepare only variable-rate premium information (information that would
go on paper Schedule A) for their pension plan clients, and that this
information must then be combined with other information (information
that would go on paper Form 1) for submission to the PBGC. The
commenter expressed concern that transcription errors could occur in
the process of combining these two sets of data into a single
uploadable file. The commenter recommended that there be a way to merge
these two sets of data after upload. This data-merging problem can be
avoided by having the service provider and the plan administrator enter
their data into My PAA's data entry screens to produce a single filing
that both parties can review. Nonetheless, the commenter's suggestion
has merit and will be considered for a possible future enhancement to
My PAA.
A second commenter objected that if a plan prepared a filing with
private-sector software and then decided to use My PAA's data entry
screens, the data would have to be reentered into My PAA. Of course, if
the private-sector software were designed to work with the upload and
import systems, the filing as initially prepared could simply be
uploaded or imported; if the software were not so designed, the plan
might choose not to use it in the first place, and simply use My PAA
from the beginning.
A third commenter noted that My PAA neither performs actuarial
calculations for determining the variable-rate premium nor produces
Participant Notices required under the regulation on Disclosure to
Participants (29 CFR part 4011), requiring the use of other systems for
both purposes. Neither of these functions has been performed in the
past by the paper filing system, and the information required for
Participant Notices (e.g., the plan's current funded liability
percentage and the guarantee limits under the pension insurance system)
is different from the information required for premium filings. The
2005 enhancements to My PAA do, however, automate many of the
calculations that filers have heretofore done themselves.
Work Flow
Two commenters raised work flow issues. One of them--a ``volume
preparer'' of premium filings--recommended that a method be devised for
accepting ``batch'' filings (multiple filings prepared with private-
sector software and transmitted to the PBGC in a single computer file).
The 2006 My PAA enhancements permit both batch uploads and batch
imports.
The other commenter catalogued a number of difficulties in
beginning to use My PAA: The need to educate clients, get authority to
act as filing coordinator, determine filing team members, get them to
register in My PAA, identify errors in information displayed in My PAA
(due for example to inaccurate data capture in the paper filing
process), correct the errors, etc. (The commenter also noted that
clients might need to rethink who certifies their filings ``now that it
requires more than physically signing the form placed in front of the
individual.'')
There are one-time burdens associated with the shift to e-filing,
although some of those mentioned by this commenter can be avoided by
using the upload process. Furthermore, errors in a plan's information
displayed in My PAA can generally be corrected while creating the
plan's e-filings, and the PBGC stands ready to work with service
providers who want to correct errors outside the e-filing process. But
these start-up burdens are far outweighed by the benefits of electronic
filing.
Effective Date
Start-up difficulties, however--those just mentioned and others--
were also the basis for several requests for delay of the effective
date of the mandatory premium e-filing requirements. One commenter
stated that 12 months would be needed to convert its systems to produce
uploadable filings. Another expressed concerns that the upload system
would not be in place early enough to make sure that it was functioning
properly before the first mandatory e-filings came due.
The upload and import systems are now in operation, and the
original My PAA data entry filing method has been proven effective and
reliable since 2004. Furthermore, e-filing will not become mandatory
for the majority of plans--those with fewer than 500 participants--
until the 2007 plan year, for which the earliest filings are due in
October 2007. But for large plans, some delay in the proposed January
1, 2006, effective date seems appropriate to provide additional time to
make software changes and become familiar with My PAA and the
electronic filing process. Accordingly, the applicability of the
mandatory premium e-filing requirements for large plans has been
delayed until July 1, 2006. Premium e-filing will be mandatory for
large plans starting with estimated or final filings for plan years
beginning in 2006 that are made on or after July 1, 2006.
For example, a 2006 estimated filing for a large plan with a plan
year starting May 1 that is made by the due date (June 30, 2006) may be
made using paper Form 1-ES, whereas for a plan with a plan year
starting July 1, the estimated filing would have to be made
electronically. If the plan year begins June 1, the estimated filing
(with a due date of July 31, 2006) would have to be made electronically
if made on or after
[[Page 31080]]
July 1, 2006, but could be made on Form 1-ES if made before that date.
The PBGC believes that, with this delay, there will be adequate
time for compliance with the mandatory e-filing requirements. In any
event, the discretion to grant exemptions from the e-filing requirement
for good cause in appropriate circumstances obviates any need to
further delay the effective date of the whole regulation. The
applicability of mandatory premium e-filing requirements for small
plans has not changed from the proposed rule.
Resistance to Change
Two commenters advanced the thesis that a number of plan
administrators are computer-illiterate, lack comfort with or confidence
in electronic transactions, resist change, or for other reasons are
reluctant to file electronically. To accommodate this circumstance
(and/or other perceived difficulties, discussed above, with the e-
filing proposal), one of them suggested the need for leniency in
granting exemptions for the first year of mandatory e-filing, and the
other that e-filing be made voluntary and be encouraged through the use
of incentives, some of which also are discussed above. Other incentives
mentioned were providing more edit checks and granting limited relief
from penalties and/or interest for late e-filings.
The 2005 enhancements to My PAA's data entry and editing screens
include more edit checks. ERISA does not provide for relief from
interest on late premium payments. The policy on penalties for the late
submission of premium information is sufficiently flexible to permit
penalty relief where there is reasonable cause for delay in filing
(although e-filing should make it easier, rather than harder, to file
on time). And filers can expect that exemptions from the e-filing
requirement will be granted wherever there is good cause in appropriate
circumstances to do so. Conducting business electronically is becoming
commonplace. As it continues to increase in popularity, individual
reluctance to e-file is expected to diminish. Furthermore, the upload
process offers a filing alternative for plan administrators who are
uncomfortable about working in an electronic environment: They may
choose to have their consultants do the electronic part of the filing
process.
Exemptions
Finally, one commenter made some detailed comments about the
exemption process. One was that plans with 25 or fewer participants
should be exempted from mandatory e-filing. Plans in this size range
have until October 2007 to prepare to file electronically. Moreover,
plans in this size range would inevitably move above and below the 25-
participant cutoff from year to year, introducing the opportunity for
confusion and administrative complexity.
The commenter also requested that guidance be provided on what
constitutes ``good cause in appropriate circumstances'' for granting an
exemption from the e-filing requirement. Each case must be judged on
the basis of its own facts and circumstances. Because the nature and
scope of exemption requests cannot be anticipated, it is difficult at
this time to provide much guidance on what might be appropriate grounds
for granting an exemption. Of course, if there should be some massive
breakdown in the Internet or the electronic premium filing system, a
broad e-filing exemption could be granted to deal with the problem or
provide for relief from late filing penalties. As experience with
exemption requests is gained, it may be possible to provide more
guidance in this area.
Applicability
The changes to the filing requirements made by this final rule are
applicable to filings for plan years beginning in 2006 that are made on
or after July 1, 2006, for large plans (those with 500 or more
participants for the prior plan year) and to filings for all plans for
plan years beginning after 2006.
Other Changes
The adoption of this final rule provides an opportunity to make a
technical correction to Sec. 4007.11(b)(2) of the premium payment
regulation. Section 4007.11(b) explains how to determine the number of
plan participants for purposes of the early filing rule for flat-rate
premiums of large plans. Paragraph (b)(2) states the dates as of which
multiemployer plan participants are to be counted for this purpose, but
the language was inadvertently truncated when the regulations were
reorganized and renumbered in 1996. The technical correction being made
in this final rule corrects that error. This correction makes no change
in the substance of the regulation.
The adoption of this final rule also provides an opportunity to
remove from the premium regulations references to the ``Premium Payment
Package,'' the paper premium filing booklet, which is expected to
change function or be phased out as the need for paper forms
diminishes.
The final regulation includes some editorial changes from the
proposed regulation designed to make the rules easier to understand.
Compliance with Rulemaking Guidelines
The PBGC has determined, in consultation with the Office of
Management and Budget (``OMB''), that this rule is a ``significant
regulatory action'' under Executive Order 12866. OMB has therefore
reviewed this rule under Executive Order 12866.
The PBGC certifies under section 605(b) of the Regulatory
Flexibility Act that the amendments in this rule will not have a
significant economic impact on a substantial number of small entities.
The PBGC expects electronic premium filing to be no more burdensome
than paper filing for filers generally and will grant exemptions from
the electronic filing requirement for good cause in appropriate
circumstances. Accordingly, as provided in section 605 of the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604
do not apply.
OMB has approved under the Paperwork Reduction Act the changes to
the PBGC's collection of information for premium filing (OMB control
number 1212-0009) made by this rule and by the My PAA enhancements
discussed in this preamble.
List of Subjects
29 CFR Part 4000
Pension insurance, Pensions, Reporting and recordkeeping
requirements.
29 CFR Part 4006
Pension insurance, Pensions.
29 CFR Part 4007
Penalties, Pension insurance, Pensions, Reporting and recordkeeping
requirements.
0
For the reasons given above, the PBGC is amending 29 CFR parts 4000,
4006, and 4007 as follows.
PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD
RETENTION
0
1. The authority citation for part 4000 continues to read as follows:
Authority: 29 U.S.C. 1082(f), 1302(b)(3).
0
2. In Sec. 4000.3, paragraph (b) and paragraph (c) introductory text
are revised to read as follows:
[[Page 31081]]
Sec. 4000.3 What methods of filing may I use?
* * * * *
(b) Electronic filings.
(1) You must file premium declarations under part 4007 of this
chapter electronically in accordance with the instructions on the
PBGC's Web site subject to the following provisions:
(i) This electronic filing requirement applies to filings for plan
years beginning in 2006 that are made on or after July 1, 2006, for
plans with 500 or more participants for the prior plan year and to
filings for all plans for plan years beginning after 2006.
(ii) This electronic filing requirement does not apply to premium
information to the extent that the PBGC grants an exemption for good
cause in appropriate circumstances.
(iii) This electronic filing requirement does not apply to premium
payments except to the extent that the PBGC so provides in the
instructions on the PBGC's Web site.
(iv) This electronic filing requirement does not apply to
information you file to comply with a request we make under Sec.
4007.10(c) of this chapter (dealing with providing record information
in connection with a premium compliance review).
(2) You must submit the information required under part 4010 of
this chapter electronically in accordance with the instructions on the
PBGC's Web site, except as otherwise provided by the PBGC.
(c) Information on how to file. Current information on how to file,
including permitted filing methods, fax numbers, and mail and e-mail
addresses, is--
* * * * *
PART 4006--PREMIUM RATES
0
3. The authority citation for part 4006 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.
0
4. In Sec. 4006.4, paragraph (a) introductory text is amended by
removing the words ``(a)(2), and shall be certified to in accordance
with paragraph (a)(4)'' and adding in their place ``(a)(2)''; paragraph
(b)(1) introductory text is amended by removing the words ``an enrolled
actuary certifies that''; paragraph (c) introductory text is amended by
removing the words ``shall be determined, in accordance with the
Premium Payment Package, from values'' and adding in their place the
words ``shall be determined from values''; paragraph (c) introductory
text is further amended by removing the words ``the plan administrator
certifies that''; paragraph (c)(3) is amended by removing the words
``Premium Payment Package'' and adding in their place the words
``PBGC's premium instructions''; and paragraphs (a)(4), (d)(1)(i) and
(d)(1)(ii) are revised to read as follows:
Sec. 4006.4 Determination of unfunded vested benefits.
(a) General rule. * * *
* * * * *
(4) In the case of any plan that determines the amount of its
unfunded vested benefits under the general rule described in this
paragraph, the determination must be made in a manner consistent with
generally accepted actuarial principles and practices.
* * * * *
(d) Restrictions on alternative calculation method for large plans.
(1) * * *
(i) No significant event, as described in paragraph (d)(2) of this
section, has occurred between the first day and the last day of the
plan year preceding the premium payment year; or
(ii) An enrolled actuary makes an appropriate adjustment to the
value of unfunded vested benefits to reflect the occurrence of
significant events that have occurred between those dates.
* * * * *
0
5. In Sec. 4006.5, paragraph (a)(5) introductory text is amended by
removing the last sentence; paragraph (b) is amended by removing the
words ``in the Premium Payment Package''; and paragraphs (a)(1),
(a)(2), and (a)(3) are revised to read as follows:
Sec. 4006.5 Exemptions and special rules.
(a) Variable-rate premium exemptions. * * *
(1) Certain fully funded plans. A plan is described in this
paragraph if the plan had fewer than 500 participants on the last day
of the plan year preceding the premium payment year, and as of that
date, the plan had no unfunded vested benefits (valued at the interest
rate prescribed in Sec. 4006.4(b)(1)).
(2) Plans without vested benefit liabilities. A plan is described
in this paragraph if it did not have any participants with vested
benefits as of the last day of the plan year preceding the premium
payment year.
(3) Section 412(i) plans. A plan is described in this paragraph if
the plan was a plan described in section 412(i) of the Code and the
regulations thereunder on the last day of the plan year preceding the
premium payment year.
* * * * *
PART 4007--PAYMENT OF PREMIUMS
0
6. The authority citation for part 4007 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1303(a), 1306, 1307.
0
7. Section 4007.3 is revised to read as follows:
Sec. 4007.3 Filing requirement; method of filing.
The estimation, declaration, reconciliation, and payment of
premiums shall be made in accordance with the premium instructions on
the PBGC's Web site (http://www.pbgc.gov). The plan administrator of
each covered plan is responsible for filing prescribed premium
information and payments. No later than the applicable due date(s)
specified in Sec. 4007.11, a plan's required premium payment(s) and
related information, certified as provided in the premium instructions,
must be filed in the manner and format prescribed in the instructions.
Information must be filed electronically except to the extent that the
PBGC grants an exemption for good cause in appropriate circumstances.
The requirement to file electronically applies to filings for plan
years beginning in 2006 that are made on or after July 1, 2006, for
plans with 500 or more participants for the prior plan year and to
filings for all plans for plan years beginning after 2006. (The
requirement to file electronically does not apply to information filed
to comply with a PBGC request under ( 4007.10(c) (dealing with
providing record information in connection with a premium compliance
review).)
0
8. Section 4007.4 is revised to read as follows:
Sec. 4007.4 Where to file.
See Sec. 4000.4 of this chapter for information on where to file.
0
9. In Sec. 4007.11, paragraph (e) is amended by removing the words
``in the Premium Payment Package''; and paragraph (b)(2) introductory
text is revised to read as follows:
4007.11 Due dates.
* * * * *
(b) Participant count rule for purposes of determining filing due
dates. * * *
* * * * *
(2) For a multiemployer plan, the number of participants determined
as of the following date:
* * * * *
[[Page 31082]]
Issued in Washington, DC, this 25th day of May, 2006.
Elaine L. Chao,
Chairman, Board of Directors, Pension Benefit Guaranty Corporation.
Issued on the date set forth above pursuant to a resolution of
the Board of Directors authorizing its Chairman to issue this final
rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. E6-8433 Filed 5-31-06; 8:45 am]
BILLING CODE 7709-01-P