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WASHINGTON-The Pension Benefit Guaranty Corp. is easing employers' burden of complying with a government audit program that determines whether employers have paid the correct pension insurance premiums.

Effective immediately, employers targeted for audits of their premium payments made to the PBGC generally only will have to produce three years of premium-related information, such as W-2 income statements and pension financial reports, for agency auditors. The agency had been requiring six years of records.

The PBGC only would go back farther if problems appear in the first three years of information, said PBGC Executive Director David Strauss, who announced the change in audit policy last week at the annual membership meeting of the ERISA Industry Committee in Washington.

The audit program was launched in late 1995 amid agency concerns that as much as 20% of premium filings understated participant counts or funding levels due to calculation errors. The PBGC now collects from employers more than $1 billion a year in premiums, which are based on the number of participants in corporate pension plans and their funding levels. Employer mistakes in premium calculations, if widespread, could cost the agency a significant amount of revenue.

A pilot program conducted in the Eastern United States between September 1995 through the following September generated about $4 million in additional income for the PBGC. The program since has been expanded nationwide.

But benefit experts, who welcome the change, said the administrative burden on employers of dredging up six years of premium-related information has been difficult and expensive.

"It is a great move. It will have a huge positive impact. The further you have to go back to comply with audits, the harder it is to produce credible data," concurred Colin England, a principal at William M. Mercer Inc. in Washington.

The six-year requirement "posed a severe hardship on plan sponsors who are not accustomed to maintaining that kind of data" in a readily accessible way, said Pam Scott, a principal with The Kwasha Lipton Group in Fort Lee, N.J.

The problem of obtaining the information is compounded by the fact that so many employers have changed computer systems in the last few years and that the new systems may have difficulty reading information on tapes that was generated by the prior system, said Dick Joss, an actuary and consultant with Watson Wyatt Worldwide in Bethesda, Md.

Mr. Joss said he is aware of one situation where an employer spent about $120,000 trying to obtain the information requested by the PBGC during a premium audit.

Cutting down to three from six the number of years premium data will be required may only be a first step of the agency's goal of ensuring that it receives premiums that are due, while minimizing time and expense for employers, Mr. Strauss said.

"I have asked my team to look closely at what we are hearing from plan sponsors selected for review, to talk with our auditors around the country and to be open to sponsors' ideas on how to look for smarter ways to demonstrate the reliability of premium payments without undue burden," he said.

Currently, a PBGC team has been exploring with benefit trade groups and accounting and actuarial firms the feasibility of a voluntary premium "self-review program.

Employers enrolling in the self-review program would be assured that if they later were selected for audit by the PBGC, the audit would be limited to determining whether the correct procedures were followed.

"Only in cases where we had reason to question that would we look behind the self-review and require something more," Mr. Strauss said.

Moving to ease the burden of plan audits on employers is Mr. Strauss' second major decision since he joined the PBGC in July after nearly four years as deputy chief of staff for Vice President Gore. In September, Mr. Strauss abolished the PBGC's Top 50 list, an annual compilation of the 50 worst-funded corporate pension plans, a decision that also was applauded by employers (BI, Sept. 8).

But Mr. Strauss reiterated that it is too soon for the agency to consider reducing the premium that the agency charges employers with defined benefit plans.

The basic rate is $19 per plan participant for fully funded plans. Aside from the base premium, sponsors of underfunded plans pay a variable rate premium, which is $9 per plan participant per $1,000 of plan underfunding.

Last year, the PBGC posted an $869 million surplus, a dramatic turnaround from 1993, when its deficit neared $3 billion.

While the PBGC's financial situation has improved significantly, a couple of big losses could quickly turn the surplus into a deficit, Mr. Strauss warned.

"One or two large cases the size of Eastern Airlines or Pan American Airways could put us back in the red," he said. The 1991 terminations of those two failed airlines' massively underfunded pension plans were by far the PBGC's biggest losses, with total claims of $1.3 billion