Micks

Thank you for your input. Here are the relevant facts: The defined contribution plan had more than 120 participants with account balances in 2024 and was subject to an ERISA audit. During our audit, we identified several concerns related to the actuarial reporting and communicated those matters to the plan sponsor in a significant deficiency letter. The related defined benefit plan covers only four eligible participants with cash balance accounts The plan sponsor adopted a resolution to terminate the defined benefit plan effective June 30, 2025. We are currently engaged to perform the audit covering the final plan year and the stub period through the termination date, and the sponsor intends to file a final Form 5500. As part of our audit procedures, we requested documentation supporting the termination, including any plan termination amendment and evidence of required participant and regulatory notifications. During this process, we noted that no Notice of Intent to Terminate (NOIT) had been issued. We also observed that the plan sponsor answered "No" to the PBGC coverage question on all previously filed Form 5500s. Given the absence of the NOIT and the historical reporting that the plan was not subject to PBGC coverage, we are trying to determine whether a board resolution alone is sufficient to terminate the plan, or whether a formal plan termination amendment would also be required under these circumstances. We are also interested in understanding the implications of discovering potential PBGC coverage issues only after the plan sponsor has initiated the termination process.

Thank you @Effen

We’ve recommended that the Plan Administrator obtain guidance from an ERISA attorney, but I’m interested in how others would view this situation. The TPA designed the floor offset defined benefit plan and prepares the Form 5500. The 2024 plan year is the first year the plan met the audit requirement threshold. Per the Form 5500 filings, the TPA has consistently indicated that PBGC premiums are not required (i.e., “No” to PBGC coverage) since plan inception. However, based on our understanding of the Plan sponsor, it does not appear to fall within a typical PBGC exemption category (e.g., not a governmental plan, church plan, small professional service employer, or owner-only plan). Given that private-sector DB plans are generally covered by PBGC unless an exemption applies, the lack of PBGC premiums raises a question as to whether the plan has been appropriately classified. In addition, if the plan should have been subject to PBGC coverage, this would introduce additional compliance concerns, including the apparent failure to issue required Notices of Intent to Terminate (NOITs). In your experience, have you seen situations where a floor offset DB plan would legitimately not be subject to PBGC coverage under these facts? Or would this typically warrant further review (e.g., potential missed premiums or misclassification)?

We are reviewing documentation for a defined benefit plan termination, and the plan administrator/TPA has taken the position that a signed board resolution establishing the plan termination date can serve in place of a formal plan termination amendment. In our experience, a written plan amendment executed in accordance with the plan document is typically required as part of the termination process. Has anyone seen guidance or practical examples where a board resolution alone is considered sufficient, or is a formal plan amendment still required for compliance (e.g., for purposes of IRS/DOL expectations and audit support)? Any insights or references would be appreciated.

Thank you for all the input. Here is additional information. The Plan changed providers in 2022. This is what the new Plan custodian who prepared the 5500 did- the $214K was a receivable on the prior year 5500 that was funded in 2023 and they lumped it in with other income. The $10K are "new forfeitures" from less than 100% vested distributions while the plan was at the previous custodian also included in other income . I am reclassing the $214K as a receivable on the financials and total distributions will be shown as gross amount. I think the only "other income" that should be shown on the 5500 is the $2500. The $10,622 should be shown on the net assets available for benefit in whatever fund the forfeiture account is being held in.

The Form 5500 preparer will not net new forfeitures collected in the year with the distributions, but is showing them as "other income". Is this correct?