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DB plan termination before 2019 funding due

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We have a client that has terminated his DB plan in May 2020

It is a calendar year plan with sole owner as only participant 

2019 minimum funding has not been made and there are no funds to make it 

CARES Act appears to delay 2019 minimum funding until January 1, 2021


1. How to complete 2019 Schedule SB: show minimum funding as $0?

2. Since the owner executed a majority owner’s waiver of accrued benefits to match the remaining assets, and the 2020 minimum funding is $0, does the 2019 contribution ever have to be made?

A puzzlement for sure

All suggestions are welcome except jumping off a bridge 



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1. We don't really know yet how to complete the 2019 SB.  We don't know if delaying the deposit until 1/1/2021 is treated as an unpaid 2019 contribution, or if there will be an extension on the 5500 due date, or if there will be a way to apply it to 2019.  Personally, I think treating it as an unpaid minimum is the most logical.  Either way, it is definitely not $0.  The due date has been delayed, but the amount due isn't $0.

2.  First question, why is the 2020 MRC =$0?  You are not permitted to recognize the benefits waiver to determine the MRC.  At the very least the 2020 MRC will exist because they never paid 2019.  The unpaid amount from 2019 becomes part of the MRC in 2020.

One way to handle this is if he doesn't make either the 2019 or 2020 MRC, both would eventually be subject to 10% excise tax.  Once the plan is terminated and the assets are distributed, you are no longer required to file 5500s.  Therefore, the sponsor can probably get out of the MRC, but they would owe a 10% excise tax on the unpaid amounts.  The IRS might try to force him to pay the full MRC, but I don't think they would waste the effort for a one life plan, assuming there weren't other issues.  If he is bankrupt, maybe he gets out of the 10% excise tax as well, but the IRS will fight harder for that. 

Also, just as an aside, the "majority owner waiver" is a PBGC thing, not an IRS thing.  One life plans are generally not covered by PBGC.  The plan document should already contain language related to the distribution of assets upon termination, included provisions for excess assets, and insufficient assets.  


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I appreciate your point 


I dug a bit further and found an article by Jim Holland

” Defined Benefit Plan Termination with Funding Deficiency 3/15/18”

that traces the history quite nicely 


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