PBGC question

[Guest Art Tepfer]

Does a plan ever cease to be covered under PBGC after it has been initially covered? I seem to recall an old PBGC information letter saying that once covered, always covered. But the premium form says notify PBGC if plan ceases to be covered. Whatr gives?

My Dr group client now has fewer than 25 participants and will never have more--am I now released from premiums?

[Guest Ray Williams]

Not if coverage was because more than 25 participants. Coverage is if "has or ever had more than 25 participants"

[QDROphile]

The language applies in some unusual, but real cases. We handled a matter where a county took over a library system that was conducted through a 501©(3) organization. This converted the library's retirement plan to a governmental plan, exempt from premiums.

[Lynn Campbell]

What if a DB Plan has 2 participants and is covered by PBGC and then the NHCE terminates and is paid off? Is the plan then NOT covered by the PBGC for the year in which the only participant is the 100% owner? I took this approach and did not file PBGC Form 1 for that year, and the PBGC has advised me that the plan is covered because it "does not qualify for any exclusion listed in section 4021(b)." Is this correct? Thanks for all input.

[JAY21]

Lynn, in your situation mentioned you can file an exemption request with the PBGC stating the new facts (owner only plan now) and they will give you a PBGC exemption letter that you can rely on. I don't think you can short-cut the process and just stop filing PBGC premiums without getting such an exemption letter. This process may not be available for professional firms with over 25 participants, I'm not sure on that one, so I'll leave that to people who might know for sure.

[Lynn Campbell]

Has anyone used this exemption approach recently and been successful? Will it work when the owner is the sole participant one year, but there are other participants in the prior year and the subsequent year? Thanks for your help, I am getting too many letters from PBGC on this - it makes sense just to pay the premium and file the form, but it seems to me that a one person plan should not pay PBGC premiums since technically it is not covered by ERISA, right?

[Blinky the 3-eyed Fish]

I have had no problems with the PBGC recognizing that a plan can become uncovered. Just mail a letter to the coverage determination address on the instructions and you will hear back, although I have noticed they have begun asking more questions recently.

[Lynn Campbell]

I just spoke to the PBGC person who advises that the PBGC does NOT honor the "in and out approach". They will issue an exemption notice only if the plan wants a permanent exemption from coverage. Obviously, the situation may change and there may be new entrants in the future that are not anticipated today - how does this make sense? I am giving up on this one - but it does not make sense to me. Thanks for all your input!

[Blinky the 3-eyed Fish]

I have found that the quality and correctness of answers to questions at the PBGC depends entirely on with whom you speak. If you want to put him/her on the spot, ask him on what authority he has to make this decision. Otherwise, just file the letter to the coverage department. If the plan becomes covered again, then start filing the PBGC forms again.

[AndyH]

For what it's worth, I tried this approach based upon these comments. I guess I'll have a problem?

http://benefitslink.com/boards/index.php?a...indpost&p=83026

[Blinky the 3-eyed Fish]

You'll be fine. Threaten to stick a banana in their tailpipe if they hassle you.

[AndyH]

Not a problem. I'll simply explain that Blinky the 3-Eyed fish says it is perfectly fine and suggests use of a banana in your tailpipe if you persist. Then I'll call one of the lawyers here on Benefit Boards (perhaps "Lawyer in Black") to bail me out of PBGC prison or the rubber room, whichever they decide is more inappropriate.

[Blinky the 3-eyed Fish]

There's no bail for the rubber room, silly. You can't put a price on mental health.