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Lost participants - terminating DB plan (Non PBGC)


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non pbgc  cash balance plan is terminating and they cant locate a few participants. is it possible to send  participant benefits to state unclaimed property?  i realize they could come back and request an annuity but wondering if people have  a practical solution for his problem.

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I don't believe you have any legitimate fixes, other than forcing IRA rollovers if < 5000, or purchasing an annuity if greater.  Bigger problem is you probably won't be able to buy an annuity if you don't have an SSN or an address.  Insurance companies don't want your problems either.

If you have an SSN, we have had good luck with various search firms - Penchecks & Berwyn Group.  Berwyn offers a "relative search", which can be helpful. If you don't have an SSN, I really don't know what you are supposed to do.  I would suggest that you work with counsel and come up with a reasonable solution, but likely there is no "right" answer, just degrees of "wrong".

 

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Doesn't a company have to have a Social Security Number to pay someone*?  Whether it is right or not may be a different story, but "if you don't have an SSN" should not be possible.

 

*assuming that the company is at least pretending to follow the rules

Always check with your actuary first!

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For a small CBP, which I assume has not been around for ages, I agree that having a SSN shouldn't even be questioned, but that doesn't guarantee you can find someone, or that an insurance company will write an annuity contract. However, I've seen "ancient" DB plans that have very aged TVR benefits tied to a first initial and last name and nothing else - and it boggles my mind. Anyway, even though not a PBGC plan, is their missing participant program a possibility? Heck, they'll take missing DC participants now so why not non-PBGC DB/CB plan participants?

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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7 minutes ago, CuseFan said:

For a small CBP, which I assume has not been around for ages, I agree that having a SSN shouldn't even be questioned, but that doesn't guarantee you can find someone, or that an insurance company will write an annuity contract. However, I've seen "ancient" DB plans that have very aged TVR benefits tied to a first initial and last name and nothing else - and it boggles my mind. Anyway, even though not a PBGC plan, is their missing participant program a possibility? Heck, they'll take missing DC participants now so why not non-PBGC DB/CB plan participants?

Well, you have few "rights benefits and features" of a takeover DC account.  PBGC might not want the burden of administering CB annuity options if they don't get enough money.

 

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I've seen examples of missing participants who will never be located because they have moved back to the country of origin.  Since PBGC is not available, does this argue in favor of "forfeiting" the benefit (of course, with the promise of restoration it if the participant reappears)?

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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In all DC plans there is a provision that says if the person is lost and after a diligent search the balance can be forfeited with the promise it will be restored if the person is found.  Do DB plans not have such provisions? 

In this case I understand who is going to restore but we have shut down DC plans under those provisions with the lawyer's blessing. 

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36 minutes ago, Scuba 401 said:

i realize no good answer but seems to me sending the money to unclaimed property could be the best bad choice. 

 

ESOP, the DB plans do not contain that provision.

I have seen defined benefit plans that call for forfeiture in the event that the participant cannot be located, with provisions requiring restoration if the participant or beneficiary is found.

I think the PBGC requires, however, that full provision be made for anyone whose benefits have been treated as so forfeited without regard to the forfeiture.  I don't know what is required when the plan is not subject to Title IV.  And what happens if the plan is being terminated in connection with the closing of the sponsor?  Where would the money come from for restoration later?

Always check with your actuary first!

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In a CB plan, you determine the plan's accrued benefit, using the plan's actuarial equivalence.

Then you determine the QJS and other plan options.  PBGC handles covered plan participants by valuing those benefits with their methodology to determine the amount to be received from the plan.  There is zero chance that this will equal the CB account held by the plan.

Do you think the PBGC wants to administer these non-covered DB benefits?  

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The PBGC does not pay lump sums, so when would the PBGC be calculating anything other than annuities equivalent to the CB account?

Is it not true that, were the PBGC to agree to cover missing participants under a non-PBGC CB plan, the plan would have to (a) calculate the equivalent annuity (under the plan's equivalence basis) and (b) provide the PBGC the assets necessary for that annuity (without regard to the balance in the CB account)?  After all, when any CB plan terminates, the annuity rates for those to be paid annuities (which is everyone over $5,000 who does not waive the right to an annuity, with spousal consent) are set by the insurance company, and the annuity cost is NEVER limited to the current balance in the CB account!

Were the PBGC to agree to cover missing participants under a non-PBGC CB plan, what would be different from the way the PBGC covers missing participants under a covered CB plan (of which, I have no reason to doubt, there are many)?

Always check with your actuary first!

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  • 2 weeks later...
On 9/13/2017 at 3:18 PM, CuseFan said:

Anyway, even though not a PBGC plan, is their missing participant program a possibility? Heck, they'll take missing DC participants now so why not non-PBGC DB/CB plan participants?

I think this option (PBGC offering lost participant services for DC plans) is not going to be available until 2018 at the earliest.

https://www.pbgc.gov/prac/terminations/missing-participants

Anyone know for sure?

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