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Discovered plan was a PBGC Plan after termination


Randy Watson

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Relatively small employer sponsored a DB plan for a short period of time. The company had financial issues and decided to terminate the plan. Distributions were processed. No determination letter was sought on the termination. After termination it was discovered that the plan was a PBGC plan and should have gone through a standard termination. Of course premiums were never paid as the employer did not know it was a PBGC plan. Now what? What would happen if the DOL discovered this? What are the chances they discover it?

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Relatively small employer sponsored a DB plan for a short period of time. The company had financial issues and decided to terminate the plan. Distributions were processed. No determination letter was sought on the termination. After termination it was discovered that the plan was a PBGC plan and should have gone through a standard termination. Of course premiums were never paid as the employer did not know it was a PBGC plan. Now what? What would happen if the DOL discovered this? What are the chances they discover it?

This reminds me of the question if a tree falls in the forest and no one hears it, is there a sound?

mjb

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You can pay the missed premiums, submit the Form 500 (and Form 501) to the PBGC, and explain what happened. They will do a PBGC audit of the plan termination, and then tell you that no additional action is needed (this may be over a year later), unless something else got messed up too.

You could do that, but first it might be worthwhile to ask this question of an experienced ERISA attorney, who will probably present more than one possible response.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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