terminating church plan

[Guest Keith N]

If a non-electing church plan doesn't need to file a 5500 and they are not covered by the PBGC, do they need to notify either the IRS or the PBGC if they terminate?

Do they need to do any of the various participant notices? ie: Notice of Intent to Terminate, Notice of Plan Benefits

Do they really need to do much of anything to terminate?

[Kirk Maldonado]

Getting a determination letter with respect to the termination of the plan is always a good idea.

[Guest Keith N]

Let me try another one.... since church plans are generally exempt from funding standards under 412, what recourse do the participants have if a greatly underfunded plan terminates?

In other words, is there anything stopping a church plan from terminating and just paying the partipants what ever - maybe a prorata share based on the available assets. Or taken to an extreme, the director gets 100% of his benefit, but none of the employees get anything.

Any comments would be appreciated.

[mbozek]

Only recourse would be contractual obligation of Church if plan/trust agreement required full funding of the plan for all benefits accrued prior to terminaton. Usually plan language will limit payment of accrued benefit to the extent funded. This was the state of the law pre ERISA when several large pension plans were terminated and participants received a small proportion of their vested benefits because there were not enough assets to pay all accrued benefits.