Full Version: First Year PBGC Premium for New Plan
A defined benefit plan, subject to PBGC, was adopted on December 22, 2004 effective retroactively to January 1, 2004. The contribution is based on a full year's cost for 2004. The plan credits past service for vesting and benefit service, and has an unfunded vested current liability. Does the client pay PBGC premium based on a full year or partial year for 2004? I.e. can we prorate the premium based on a December adoption date? Or do we base the premium on a full year based on the January effective date?
The following example is found in the 2004-R Premium Payment Package.
Example 4 A new calendar-year plan is adopted February 18, 2004, retroactively effective as of January 1, 2004. The plan administrator may select either January 1 or February 18, 2004, as the premium snapshot date; the date selected must also be used for purposes of prorating the premium for the plan’s first year.
Example 4 A new calendar-year plan is adopted February 18, 2004, retroactively effective as of January 1, 2004. The plan administrator may select either January 1 or February 18, 2004, as the premium snapshot date; the date selected must also be used for purposes of prorating the premium for the plan’s first year.
Generally, if the plan granted no past service for benefits then on the first day of the first plan year the liability is $0. If the liability is $0, then the premium is $0, but the plan still must file a PBGC form.
If you use the effective date, 12/22/04, the liability won't be $0, since the plan would have at least one year's accrual. Therefore, the premium would not be $0, but it could be prorated.
I haven't seen the 04 PBGC form, but I think this is explained on Pg. 27 (?) on the 03 PBGC instructions.
If you use the effective date, 12/22/04, the liability won't be $0, since the plan would have at least one year's accrual. Therefore, the premium would not be $0, but it could be prorated.
I haven't seen the 04 PBGC form, but I think this is explained on Pg. 27 (?) on the 03 PBGC instructions.
Effen, you mean the variable portion of the premium, right? There is still the fixed rate portion.
I didn't know you could prorate the first year. These rules are incredibly convoluted.
I didn't know you could prorate the first year. These rules are incredibly convoluted.
No fixed rate portion either CBMMN since there are no participants for premium payment purposes in the first year if no past service credits are granted.
I want to guess as to who this "could be". I guess it's MoeHoward2 in disguise.
I want to guess as to who this "could be". I guess it's MoeHoward2 in disguise.
It could be that I was wrong and that Effen and fish were right. Hmm. Guess that's what theez Boards are for. I actually haven't handled any new ones in quite a while. Good thing. Thx.
The only reason I knew the answer was someone pointed it out to me after I had done a few wrong. We all learn from our mistakes.... except Blinky, who never makes any 
This is a "lo-fi" version of our main content. To view the full version with more information, formatting and images, please click here.