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DB Terminated and assets distributed - somehow missed an account


waid10
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We terminated our pension plan, and distributed all assets.  Somehow we missed a plan participant.  We aren't  sure how.  But we do know that this person is owed money.  Does anyone know how to handle this?  There are no plan assets remaining.  But the balance is something we can cover from our corporate operating account.  The real question is how to process this.  Should we distribute into an IRA for the participant?  Is there any guidance for something like this?  I am guessing that we need to alert the PGGC.

Thanks for any help.

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Maybe others have researched this. One question that I have is that if you can't run it through the trust (and maybe you can, e.g. if the trust has not yet been formally terminated), how is it a qualified plan distribution? Also, obviously if >$5,000 you need to get partcipant's consent to distribute as lump sum.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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  • 2 weeks later...
On 12/20/2017 at 3:27 PM, mstick said:

In terminating the plan presumably a broker and/or insurance company was part of the process. They should be able to help you add the missing, now found, participant to the contract that was developed to provide benefits to participants of the plan.

Yes, we have reached out to the insurance company.  Thus far, we are hearing that they cannot add this participant to the contract.  Any ideas on other options?  

 

Thanks.

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Did the Plan have lump sum options? If so and she does want the money rolled to an IRA the "simplest" would be to send the funds to her IRA after the participant, and spouse if married, sign the necessary election forms.

The question then becomes one of mechanics.

Do you re-open a trust in the name of the Plan to make this one withdrawal?

Does it get reported on a 5500 some how? and for what year?

Who will do the 1099-R reporting? and for what year?

Does this need to be "fixed" with the IRS through one of their correction programs or can you self correct?

Will the deposit be treated as a Plan contribution?

Do you need to notify the PBGC and if so, how? This would seem "easy" as the PBGC is generally pretty willing to work with a Plan Sponsor especially if the Plan Sponsor is simply trying to make a participant whole and the PBGC will be assuming no liability.

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21 hours ago, Lou S. said:

Did the Plan have lump sum options? If so and she does want the money rolled to an IRA the "simplest" would be to send the funds to her IRA after the participant, and spouse if married, sign the necessary election forms.

The question then becomes one of mechanics.

Do you re-open a trust in the name of the Plan to make this one withdrawal?

Does it get reported on a 5500 some how? and for what year?

Who will do the 1099-R reporting? and for what year?

Does this need to be "fixed" with the IRS through one of their correction programs or can you self correct?

Will the deposit be treated as a Plan contribution?

Do you need to notify the PBGC and if so, how? This would seem "easy" as the PBGC is generally pretty willing to work with a Plan Sponsor especially if the Plan Sponsor is simply trying to make a participant whole and the PBGC will be assuming no liability.

Now we are hearing that the insurer will add this participant to the contract.  So I agree with Lou that the mechanics become important.  Any recommendations on the best approach?

Thanks and sorry for all of the questions.

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If the insurance company agrees that it has the liability, I don't understand why anything needs to be done, other than giving the insurance company whatever data it needs.  If, on the other hand, the insurance company is saying that it is responsible for providing the benefit but the employer must pony up an extra amount as a premium adjustment, I still don't see any need to worry about a trust, or the PBGC, or 5500s, etc. 

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On 1/3/2018 at 4:55 PM, jpod said:

If the insurance company agrees that it has the liability, I don't understand why anything needs to be done, other than giving the insurance company whatever data it needs.  If, on the other hand, the insurance company is saying that it is responsible for providing the benefit but the employer must pony up an extra amount as a premium adjustment, I still don't see any need to worry about a trust, or the PBGC, or 5500s, etc. 

Hi jpod,

Since the insurer is adding the participant to the annuity contract, would we need to amend the PBGC Form 501?

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25 minutes ago, jpod said:

Not sure.  Assuming one can read the instructions to require it, is there any risk as a practical matter if you don't? 

It is unclear to me that the instructions require it (although it would seem that the PBGC would want to be notified of an additional participant like has happened here).  The risk of not amending the filing is that the PBGC discovers the additional participant that was not included on the 501 and sanctions the plan sponsor for not disclosing the additional participant.

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