PBGC Premiums Got You Down?

With the Pension Benefit Guaranty Corporation (PBGC) announcing their premium rates for 2015, now may be the ideal time to consider strategies to reduce future premium payments. A plan sponsor pays premiums based on the funded status of the plan as well as the number of participants in the plan. To improve funded status, a plan sponsor will need to make additional contributions and this may not be in the budget.  However there are ways to reduce the number of participants in the plan without impacting the budget. And since the PBGC per participant rates are increasing to $57 and $64 in 2015 and 2016 respectively, it is worth taking a look at these options now for future annual savings.

At a minimum, if your plan is not currently providing for the mandatory distribution to a terminated participant whose present value of an accrued benefit is less than $5,000, you should consider it. Depending on your plan design and whether you froze benefits and/or participation in the plan, you may have many terminated participants affected. It is simple to amend the plan and to set up the required automatic rollover procedures. BPAS offers a service that we call AutoRollovers, which will accept the rollovers into an IRA of benefits associated with mandatory distributions for participants that fail to affirmatively elect a distribution.

Explore Your Options

In order to reduce the number of participants more significantly, there are other strategies to consider including limited lump sum distribution options/windows for terminated vested participants and annuity buy-outs for retirees. If you would like to discuss these or other strategies to help reduce costs associated with your pension plan, BPAS’ Harbridge Consulting Group can help you explore options.