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If a DB plan is non-compliant (either a discriminatory benefit formula or failed 401(a)(4)) may it still terminate under PBGC if the assets are sufficient? We understand that a plan may potentially be disqualified, but does the PBGC care or is it only concerned with sufficiency? Case in point floor/offset plan, but the sponsor did not correctly fund the DC plan to meet aggregated testing. They want to terminate the DB plan. We are reluctant until they get the combo compliant. They dispute the need for additional contributions to the DC plan in order to terminate the otherwise sufficient DB plan. If we warn the sponsor of consequences, will the PBGC allow the termination without regard to testing?

Is a calendar year plan that terminated on 12/31/2021 exempt from filing a PBGC Form 4010 for the 2021 plan year (due date is 4/15/2022)? The PBGC Form 500 is scheduled to be filed on 4/29/2022.

Is there any regulation for determining who is an active participant under a professional service DB plan? It appears regulations under §4006.2 may be obsolete. I don't see any regulations under 29 USC §1321 (ERISA §4021), which sets up the exemption. I'm looking at a CB plan with 22 definitely actives, two eligibles but with a $0 HAC, and two terminated participants with accrued benefits. There are different definitions for different purposes, but the definition of "active participant" for this purpose is elusive. By some definitions there are 26 actives, 24 actives, and 22 actives. Any direction is appreciated.

I apologize, I'm sure this question has been asked and answered - so if someone could point me to the correct thread, I'm happy to read up on it. I also wasn't sure if this question was better suited for the distribution message board or this on. I don't deal with PBGC covered plans often - so my apologies in advance if I am using the wrong terminology or asking the wrong type of question. PBGC covered plan - terminated and closed. There were a about a dozen participants whose benefit was sent to the PBGC per the lost participant rules. We are now preparing 1099-Rs for the plan. The participants who elected something ( lump sum cash, rollover, etc) I have no problem preparing the 1099-Rs. But I don't know how to report those whose benefit was transferred to the PBGC. Do they get 1099-Rs? I'm thinking yes - but I've been wrong before If they get a 1099-R what code goes on the form? I'm sure there is a publication or guide that deals with this - I'm just not sure where to look. I called the PBGC for an answer and was told I would get a call back - but I haven't heard yet so thought I would ask all you smart folks here.

I’m looking for some thoughts/assistance on a somewhat unusual situation I’ve come across: Situation: Small Medical Practice Non-PBGC Plan Term with Asset Surplus. As of DOPT just the owner/participant had an accrued benefit. They also have 7 non-excludable employees that have been excluded from benefiting in the plan. Not as familiar with Non-PBGC Plan Terms and I’m trying to re-allocate the excess in a non-discriminatory manner. Benefits and Participation frozen on 4/30/12; Amended excess assets to be re-allocated to participants eff 8/30/17; Non-PBGC Plan Termination eff 8/31/17. The document is a prototype with standard language on excess assets if a plan is not covered by the PBGC. States “…if elected in the Adoption Agreement, excess assets shall be reallocated to the Participants on the basis of their Present Value of Accrued Benefit…” To allocate the excess, I used a safe harbor formula covering the owner and three other employees. (Three of the non-excludable, excluded employees) I came up with .62% x HI3 Comp resulting in accruals that produce a large enough total in PVABs for all four participants to cover the Excess Assets. (Still have four excluded employees) Note that 415 is not an issue for the owner. So, the excess ends up being allocated on a pro-rata on the PV of that .62% x Hi3. Thoughts on this excess allocation method? This formula satisfies 401(a)(26) and is a safe harbor formula satisfying 401(a)(4)/410(b). The plan was frozen and met top-heavy requirements before and after the freeze. Granted this accrual can be considered anew allocation. Thoughts on T-H requirements? On a side note, Rev. Rul. 80-229, Paragraph 2 of SEC. 3. ASSETS NOT LESS THAN PRESENT VALUE OF ACCRUED BENEFIT states: “If the assets as of the date of termination exceed the present value of the accrued benefits (whether or not nonforfeitable) as of such date, the plan will not be considered discriminatory if such excess reverts to the employer or is applied to increase benefits in a nondiscriminatory manner. One method of applying the assets to increase benefits in a non-discriminatory manner is to amend the plan to provide a new benefit structure such that (1) the benefit structure would not be discriminatory if the plan were not terminated and (2) the present value of the revised accrued benefits (whether or not nonforfeitable) as of the date of termination equals the value of plan assets, and to distribute assets equal to the present value of the revised accrued benefits. The new benefit structure must satisfy other requirements of the law such as sections 411(d)(6) and 415 of the Code.” I would think an amendment explaining how the excess is allocated, along with the formula, and included participants would work in this situation. Thoughts? Thanks in advance for reading through this whole thing. --Jeff

Are PBGC plans exempt from an ERISA bond? Specifically asking about small DB plans that typically would not be subject to audit if the bond requirement is met. Does anyone have a citation for an answer?

Plan covers owner and sister. So covered by PBGC since sister does not have ownership. That's good as it allows 25% deduction for DC plan. Sister terminates. If she is not paid her benefit, remains in plan as terminated vested, I think the plan remains covered by PBGC, so we can still have a 25% DC deduction. Correct?

Actuarial vendor performs the annual actuarial valuation for a DB plan, and delivers the report to the sponsoring employer (i.e., the PA). Actuarial vendor then sends its invoice for services rendered. The plan provisions have always permitted the plan to pay reasonable expenses if not paid by the sponsor. "The trust fund shall be used for the exclusive benefit of the participants and their beneficiaries and to pay administrative expenses of the plan and trust to the extent not paid by the Hospital." In prior years, the sponsor has elected to have the plan pay some expenses, including fees from the actuary, but not necessarily the same each year. In some years the plan has paid expense X, Y, and Z, while in other years the plan has paid expense X and Y. For the current invoice, the sponsor does not pay promptly, nor is the invoice paid by the plan. A few months later, the sponsor declares chapter 11 bankruptcy. The sponsor also files for a PBGC distress termination (without involvement of this actuary). Sponsor refuses to pay the actuary's invoice, and refuses to send the invoice to the plan trustee for payment. Bankruptcy attorney says, “get in line, like everyone else”. Research includes ERISA sections 403 and 404, and DOL Advisory Opinion 2001-01A, Distress Termination instructions. Nothing appears to restrict the payment of reasonable administrative expenses in the event of bankruptcy. My view is that plan provisions require the sponsor to direct payment from the trust since the sponsor has not made the payment, but I’m willing to consider other viewpoints. Any comments or experience that you are willing to share?

There is a cash balance off-set plan with a participant count of 32 before the offset. After the offset, there is only one participant receiving a benefit under the cash balance side of the plan. When counting participants for the PBGC flat-rate premium, would we use the number of participants receiving a benefit before or after the offset?

I'm curious what the penalties are, if any, for a first year PBGC Premium Filing that is submitted after its due date. Assuming the first year filing had no payment due, would there be a penalty charged for a late submission? This is what I found on the PBGC website: The late payment penalty charge is established by us, subject to ERISA's restriction that the penalty not exceed 100 percent of the unpaid premium amount. Subject to this cap, the penalty is a percentage of the unpaid amount for each month (or portion of a month) it remains unpaid with a minimum penalty of $25. So if the unpaid premium amount is $0, would there be any fees?

On terminations where we have filed a form 501 with the PBGC within the last 3 months they are asking for: 1) A copy of the current plan document; and 2) Proof (cancelled checks) of each distribution Does anyone know why this is happening or why there is no announcement? Thank you.

I was employed with TWA from 1977 -2003. My pension from 1977-1999, which was the date American Airlines aquired TWA, is held by the PBGC. They claim to not have any record of me in their data base. They requested TAX returns from 1999 and before. I have been on the IRS website and they only go back to 2005. How do I prove employment? I provided letters of my 10 and 20 year employment but they want IRS proof.

Bear with me folks, my post is a bit lengthy, but I would really appreciate any feedback or insight. Neither the IRS nor PBGC had an answer, so I'm hoping someone here will. I didn't know if should post this on the 401(k) board instead. THE QUESTION: When the employer has both a DB and DC plan and the DB plan goes from being PBGC covered to not PBGC covered , what is the deduction limit for the DC plan? If it helps, keep in mind that the employer had to pay full year PBGC premiums per the PBGC instructions, even though coverage was for only part of the year. My analysis so far: When an employer sponsors both a DC and DB plan, the deduction limit as provided in IRC §404(a)(7)(A) generally applies. This provides in part: 404(a)(7)(A) If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of— (i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or (ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year).” A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limiting employer contributions to amounts deductible under this section. In the case of a defined benefit plan which is a single employer plan, the amount necessary to satisfy the minimum funding standard provided by section 412 shall not be less than the excess (if any) of the plan’s funding target (as defined in section 430 (d)(1)) over the value of the plan’s assets (as determined under section 430 (g)(3)). There are exceptions to 404(a)(7)(A) outlined in 404(a)(7)©. Paragraph not to apply in certain cases One notable exception is : 404(a)(7)©(iv). Guaranteed plans In applying this paragraph, any single-employer plan covered under section 4021 of the Employee Retirement Income Security Act of 1974 shall not be taken into account. Well, §4021 of ERISA happens to be the part that explains which plans are subject to coverage under PBGC. It is is also known as 29 U.S.C $1321 if someone is having a hard time finding the code reference. This means that the employer doesn’t have to take into account any PBGC covered DB plan when looking at the deduction limit. Per 404(a)(7)(A)(i) the limit for the remaining DC plan would just be the typical 25%. But what is the deduction limit for the DC plan when the DB plan status changes during the year?

Hi, All - My plan was terminated by the PBGC in 2013, and all assets were transferred back to the PBGC at the time of termination. I have categorized the assets as a transfer from the plan, but I get an error message when trying to file the Schedule H with the transfer of assets since I do not have a plan EIN for a transferee plan. I have spoken with the IRS, who tells me to check with the PBGC (for a 5500 instruction??). The PBGC basically laughed at me, as expected, since this pertains to the 5500. No answer from either of them. Has anyone had to file a 5500 Schedule H for a plan terminated by the PBGC? If so, how did you categorize the transfer of assets to the PBGC? Thanks!