PBGC sets effective date for penalty waiver rule

WASHINGTON--The Pension Benefit Guaranty Corp.'s final rule providing policy guidance on premium penalty waivers will take effect Dec. 18.

Under the Employee Retirement Income Security Act, the PBGC has the right to assess penalties when premiums are not paid on time. According to the final rule, which appeared in Friday's Federal Register, "a premium penalty is owed by any person who was liable for the premium--generally the plan administrator and, in the case of a single-employer plan, the contributing sponsor(s) and any controlled group members." But the PBGC can waive the penalties if it determines that there is "reasonable cause" for the late payment.

The rule gives guidance as to what constitutes reasonable cause. In general, reasonable cause exists when the failure arises from circumstances beyond the payer's control or the payer could not avoid the failure by exercising ordinary business care and prudence.

Overlooking legal requirements does not constitute reasonable cause, according to the PBGC.