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Terminated PBGC covered cash balance plan unresponsive participant


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A PBGC-covered cash balance plan terminated.  Two participants who had terminated employment years ago, have not responded to the distribution election forms.  The mail was delivered, and a commercial locator service confirms the last known addresses.  One participant did respond to the plan administrator's attempts to connect by phone and email, indicating he would complete and return the forms but still has failed to do so several weeks later despite repeated reminders.  The other participant could not be contacted through email, LinkedIn, Facebook, etc.

Both participants have cash balance accounts of approximately $10,000 each.  Neither participant is at normal retirement age.  Working with an annuity broker, we were told that they could not find a carrier that is willing to accept a liability of this nature.  

Can these funds be transferred to PBGC under the Missing Person Program?  I don't think the participants technically qualify as "missing", but they are both unresponsive.  If the plan can't purchase the annuities, what other option is there?

Thanks for your help.

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Unresponsive participants can only be turned over to PBGC as missing if they are under the cash out threshold or they did not accept their lump sum payment. From MP-100 instructions:

Who counts as missing In general, a distributee is considered missing if, when the plan closes out, the plan doesn’t know the individual’s location (e.g., if a notice from the plan is returned as undeliverable). For purposes of these instructions, we use the term “Unlocatable” to describe a distributee in this situation. P 1F P 2 An individual is also considered missing if: • The individual’s benefit was subject to a mandatory cash-out under the plan’s terms and the individual did not return the necessary paperwork providing instructions about how the payment should be made (e.g., by check or as a direct rollover to an IRA); or • The individual did not accept a lump sum payment, whether elected voluntarily or subject to mandatory cash-out (see “Unaccepted lump sum payments” below). We use the term “Unresponsive” to describe a distributee in either of the two situations noted immediately above. Note that a distributee may be both “Unlocatable” and “Unresponsive.”

Maybe a letter explaining how the benefit will have to be turned over to an insurance company will get the participants off the snide. This is the biggest pain for small CBPs. Even if the balances were $50k you'd have trouble finding an insurer, and the premiums would likely be 120%-140% or more of the current account balance.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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