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Alternate Payee and Schedule SB


Calavera

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Line 7 instruction to 5500 clearly says: "For pension benefit plans, “alternate payees” entitled to benefits under a qualified domestic relations order are not to be counted as participants for this line." (emphasis mine).

What about Schedule SB Line 3 Column (1): Funding Target/Participant Count Breakdown—Enter the number of participants, including beneficiaries of deceased participants, who are or who will be entitled to benefits under the plan? There are no mentioning of "alternate payees" here. Do you include them in the count?

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It is my understanding that the following are true:

1.  For PBGC premium purposes, only participants are counted.  Please note that the alternate payee of a participant is counted as that participant, as are beneficiaries of a deceased participant.  Count the participant only once (i.e., if the participant has cashed out but the AP remains, that is 1 participant, while if the participant remains in the plan, the total is still 1; if there are five beneficiaries of a deceased participant, that is 1 participant).  Exception:  If participant A has died and death benefits are being paid to B and B was also a participating employee, then B is counted as 2 people:  once as A (who participated and on whose account benefits are still payable) and also once as B (whose benefits, earned in B's capacity of an employee of the sponsor, are also still payable).  If A is still around and B is A's alternate payee and a participant on his or her own account, then there are 2 participants for premium purposes:  A (covering both benefits payable to A and benefits payable to B as A's alternate payee) and B (with respect to any benefits B has earned as an employee of the sponsor).

2.  If is my understanding that one never counts an alternate payee of a participant as a separate person, As above, if the participant is no longer a participant, then one would count the AP as though they were the participant.  For the SB, this sort of thing would only matter in deciding whether one has over 100 participants or over 500 participants (to determine if the at-risk rules apply, for example).  For all such purposes, all benefits originating from the service of 1 person could only contribute 1 to the headcount, but one person (who is both an alternate payee or beneficiary but also a participant on account of service with the sponsor) can count as 2, as noted above.

Always check with your actuary first!

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I agree with everything above. We just have some different opinions in our office regarding the count on Schedule SB. So here are 2 scenarios:

1. Participant and AP are both alive and receiving benefits. 5500 count is 1, PBGC count is 1. Do you show 1 or 2 on Schedule SB?

2. Participant is deceased but AP is still alive and receiving benefits. 5500 count is 0, PBGC count is 1. Do you show 0 or 1 on Schedule SB?

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1.  One should stand on one's head to not overstate the number of participants to the extent that doing so would expose the plan to extra rules (such as the at-risk rules).  Beyond combining multiple recipients with respect to benefits earned by one person and reporting them as 1, what other consideration is there for the Schedule SB count.  If you show 105 people on question 3 of the SB and check off the under 100 box in F, would that raise questions?

2.  If you are holding a liability for someone, I don't see how you could show a count of 0.  Also, I am surprised to hear that the count for the 5500 should be 0.  Really?  The benefits payable to the AP are payable on account of the deceased participant.  Why would you count it differently from a beneficiary under a QPSA or an annuity form paying benefits after the death of the participant?

Always check with your actuary first!

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1 hour ago, My 2 cents said:

If you show 105 people on question 3 of the SB and check off the under 100 box in F, would that raise questions?

I like this point. I personally prefer not to count APs on Schedule SB. The 5500 instruction is silent regarding the Schedule SB, so I was trying to see what others would do.

 

1 hour ago, My 2 cents said:

Also, I am surprised to hear that the count for the 5500 should be 0.

Well, the 5500 instruction says that “alternate payees” are not to be counted as participants. There are no reference on alive or deceased participant. This is different from a PBGC instruction where it says: "However, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant."

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