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Fine with me! (for what that's worth) Long ago experience with investments that suddenly turned illiquid, especially with respect to plans that were trying to terminate, soured me on the idea for good. Surely there are enough investments out there, no riskier than your everyday equity fund, to make many "alternate investments" a bad idea for qualified retirement plans. Feel free to invest your IRA in them if you are feeling lucky (but watch out for liquidity issues when it's time for minimum distributions!). Still seems as though a normal REIT (if one wants real estate in the plan's portfolio), sold in established markets, would be more prudent than a private REIT that is going to be illiquid for a period of time.

Higher commissions.

I trust LDorsa to cite me any time she wants. "Does the plan sponsor have to make some election/statement re this methodology?" Since the plan is not being submitted, I would hope that the four corners of the document either reference a specific application of RR 80-229 or 4044 of ERISA. If there really is an election to be made, I suggest amending that provision of the plan *before* the plan termination date *and* submitting a 5310. I don't believe that the allocation methodology specified in the plan regarding how to divide assets in the case of an underfunded plan is subject to 411(d)(6), so making whatever changes need to be made should be doable through a pre-termination amendment. "What do I put on the participant benefit statements since participants are 100% vested in the full AB by formula but will only receive some % of that benefit (for sake of argument we can call it 90%)?" Anything you think is an honest reflection of the benefits they are entitled to. As has been mentioned in at least one prior response there are unknowns that may cause the assets allocated to various priority categories to shift. Chief among them is if a participant demands an annuity. This is likely to cause a loss to the plan thereby reducing the amount available to other participants. This makes the communication tricky. I know I've included a paragraph that essentially tells the participants that the plan is underfunded, that we have estimated the benefits shown on the distribution paperwork and that the actual benefit payable will be increased or decreased in accordance with the plan's provisions which depend, in part, on the actual cost to the plan of the benefits elected by participants. As long as the resulting benefit is not significantly different from the displayed benefit then the termination can chug right along. If something happens to change things dramatically, another round of elections can be sought, potentially devolving into an iterative process that is quite lengthy. Important to tell the client of this possibility, although in practice almost everybody elects a lump sum. "Anything else I need to consider?" I agree with the hold harmless suggestion. It might also be helpful to educate the client on the history of how the IRS has treated underfunded non-PBGC plans. There was a period (two or three years in length, ending about two years ago --- ballpark timeframes as I don't remember the specifics) where the lower level reviewers were bullying plan sponsors into making non-owner's whole and "insisting" on owner (not just majority owners) waivers. Only those that pushed back hard were able to resolve things in favor of the plan document's provisions which invariably cite 80-229 or 4044 in some manner. "FYI - client is not going to file for an IRS determination letter." Since this client isn't submitting the issue framed in the last paragraph should be based on the expected behavior of an IRS auditor rather than a reviewer. In essence, the whole process should be laid out before the plan sponsor and the communication to the participants needs to be honest and transparent. Be prepared for lots of questions from the plan sponsor, other advisors (like "Do you really need to do that?") and participants. mike

Oh you can spin it any way you want, but you see my point. A dollar in your account is a dollar in your account. If there was hair brained public policy agenda to ban forfeitures from being used to offset ANY employer contributions, then sure everyone gets more money and the economists are happy happy happy. But that's not what's going on here. What's going on here is a silly nuanced ultra-literal interpretation of a vaguely worded reg and nothing more. It's a wholly manufactured burden on businesses (in particular small ones).

Shame on you Bird! This is the dumbest position I've ever heard of! It's a classic example of a solution in search of a problem that just did not exist. The employees get the safe harbor contribution. That's the only thing that matters.