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Termination and Liquidation of Non-Account Balance (Defined Benefit) NQDC Plan


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We are terminating and liquidating a non-account balance (defined benefit) NQDC Plan.  This is not in connection with a company dissolution, bankruptcy, or change of control.

I understand all the rules for terminating and liquidating a NQDC Plan (payment timing, aggregated plan termination, no similar plan for 3 years).  My only question is that since this is a non-account balance plan, are there any rules or best practices for determining the liquidation amount for each participant?  I don't see any official guidance, but how do we value benefits for purposes of making liquidation distributions?

Thank you!

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Does the plan document not say how to (present) value benefits? If any benefits could be paid as a lump sum there should be a provision stating how such lump sums are calculated, or there may be reference to (and possible offset from) an existing pension plan and such plan's actuarial equivalence may be the proper method. If none of that applies, then I think your NQ plan needs to be amended upon plan termination to provide the basis for determining lump sums.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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