Penalty Relief for Pension Plans Announced

The announcement notes that many employers have said they were not able to make required contributions to their pension plans on or before September 15, 2001, because of the disruption of the financial markets caused by the September 11, 2001, terrorist attacks. Accordingly, in the case of a defined benefit or money purchase pension plan with a plan year ending after December 26, 2000, and before January 9, 2001, for which a Form 5500 is required before October 16, 2001, plan administrators and plan sponsors will not be treated as failing to file a complete and accurate return/report under section 6058, nor will enrolled actuaries be treated as failing to file an actuarial report that satisfies the requirements of section 6059(b), solely because contributions made before September 25, 2001, are included on line 3 of Schedule B of Form 5500 (showing the actual date of payment of the contribution) and line 6(b) of Schedule R of Form 5500.

In addition, the PBGC provides relief for any plan with a plan year ending after December 26, 2000, and before January 9, 2001. The PBGC will not assess any penalties for a failure to pay PBGC premiums in a timely manner or a failure to meet a PBGC reporting or disclosure requirement, nor will it treat a certification as failing to be a valid and correct certification, solely because contributions made before September 25, 2001, are included in the plan's assets for purposes of PBGC premiums or are counted for purposes of determining whether any PBGC reporting or disclosure requirement applies.

[1] The Internal Revenue Service (IRS), the Department of Labor's Pension and Welfare Benefits Administration (PWBA), and the Pension Benefit Guaranty Corporation (PBGC) provide relief from certain penalties relating to Forms 5500 for defined benefit and money purchase pension plans that are required to be filed on or before October 15, 2001. This announcement also includes PBGC's statement of relief from penalties relating to premiums, reporting and disclosure, and certifications.

BACKGROUND

[2] Section 412(a) of the Internal Revenue Code (Code) and section 302(a) of the Employee Retirement Income Security Act of 1974 (ERISA) provide that a plan meets the minimum funding standards of the Code and ERISA for a plan year if the plan does not have an accumulated funding deficiency as of the end of the plan year. Section 412(c)(10) of the Code and section 302(c)(10) of ERISA provide that, for purposes of satisfying the minimum funding requirements of the Code and ERISA, any contributions for a plan year made by an employer by the end of the 8 1/2 month period following the end of such plan year are deemed to have been made on the last day of the plan year.

[3] Section 6058 of the Code and section 104 of ERISA require plan administrators to file an annual return/report of employee benefit plan within a specified period of time after the end of the plan year. The annual return/report of employee benefit plan is Form 5500 and Form 5500-EZ (hereinafter Form 5500). For defined benefit pension plans subject to the minimum funding standard, section 6059 of the Code requires that a periodic report of the actuary be filed with the annual return. Under section 301.6059-1 of the Procedure and Administration Regulations, the periodic report is the Schedule B, which must be signed by an enrolled actuary. In order to properly complete the Schedule B, the enrolled actuary must know whether a contribution for a plan year was made within the period specified by section 412(c)(10) of the Code and section 302(c)(10) of ERISA.

[4] Under section 502(c)(2) of ERISA, a penalty of up to $1,100 a day may be assessed for each day a plan administrator fails or refuses to file a complete and accurate annual report and accompanying schedules. Similarly, section 6652(e) of the Code imposes a penalty of $25 a day (up to $15,000) for not filing returns for certain deferred compensation plans. Section 6692 of the Code imposes a penalty of $1,000 for not filing an actuarial report described in section 6059. Under section 301.6692-1(a) of the regulations a failure to provide a material item of information is considered as a failure to file an actuarial report.

[5] Because of the disruption of the financial markets caused by the events of September 11, 2001, many employers have stated they were not able to make required contributions to their pension plans on or before September 15, 2001, to satisfy the minimum funding standards.

GRANT OF RELIEF

[6] The IRS, the PWBA, and the PBGC provide the following relief. In the case of a defined benefit or money purchase pension plan with a plan year ending on or after December 27, 2000, and on or before January 8, 2001, for which a Form 5500 is required to be filed on or before October 15, 2001, plan administrators and plan sponsors will not be treated as failing to file a complete and accurate return/report under section 6058 of the Code or section 104 of ERISA, nor will enrolled actuaries be treated as failing to file an actuarial report that satisfies the requirements of section 6059(b) of the Code, solely because contributions made on or before September 24, 2001, are included on line 3 of Schedule B of Form 5500 (showing the actual date of payment of the contribution) and line 6(b) of Schedule R of Form 5500.

[7] In addition, the PBGC provides the following relief with respect to any plan with a plan year ending on or after December 27, 2000, and on or before January 8, 2001. The PBGC will not assess any penalties for a failure to pay PBGC premiums in a timely manner or a failure to meet a PBGC reporting or disclosure requirement, nor will it treat a certification as failing to be a valid and correct certification, solely because contributions made on or before September 24, 2001, are included in the plan's assets for purposes of PBGC premiums or are counted for purposes of determining whether any PBGC reporting or disclosure requirement applies.

DRAFTING INFORMATION

[8] The principal author of this announcement is James E. Holland, Jr. of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this announcement, please contact the Employee Plans' taxpayer assistance telephone service at 1-877-829-5500, between the hours of 8:00 a.m. and 9:30 p.m. Central Time, Monday through Friday (toll-free number). Mr. Holland may be reached at (202) 283-9699 (not a toll-free number).