In 2012, Congress passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), which allowed plan sponsors of defined benefit (DB) plans to use higher interest rates in determining the minimum funding requirements. MAP-21 gave many plan sponsors much needed relief from escalating pension contributions that have been due to declining interest rates. However, as with most good deals, it is always essential to read the proverbial fine print.

The MAP-21 fine print comes in the form of premium increases for Pension Benefit Guaranty Corporation (PBGC) insurance. PBGC premiums come in two parts:

1. Flat rate premium
2. Variable rate premium

For single employers, the flat rate premium is a flat dollar-per-participant charge. As part of MAP-21, the premium increases from $35 in 2012, to $42 in 2013, to $49 in 2014. MAP-21 also calls for future flat-rate premiums to be adjusted for inflation.

The variable rate premium is based on the amount of unfunded vested benefits (UVB). The UVB is the excess, if any, of the premium funding target over the fair market value of plan assets. In 2013, employers must pay $9 for every $1,000 of UVB. In 2014, the premium will increase to $13 (adjusted for inflation) per $1,000 of UVB, and in 2015 to $18 (adjusted for inflation) per $1,000 of UVB. The variable rate premium will have a per-participant cap of $400 beginning in 2013 and will be adjusted for inflation beginning in 2014.

However, the calculation of the premium funding target is unaffected by the higher MAP-21 interest rates. Therefore, the premium funding target will be significantly higher than the plan's liability for purposes of minimum funding.

For multiemployer plans, the flat-rate premium increases from $9 in 2012 to $12 in 2013. MAP-21 also calls for future flat-rate premiums to be adjusted for inflation. Multiemployer plans are not subject to the variable premium.

With the 2013 filing deadline of October 15, 2013, approaching for mid-size and large calendar-year plans, employers may be in for a shock if they haven t read the fine print.