Distress Termination with sufficient assets to pay guaranteed benefits

[Guest Victoria Pelletiere]

I have a DB plan that has sufficient assets to pay PBGC guaranteed benefits but not enough to pay all benefits. I will file a distress termination with the PBGC. I can follow the allocation of assets under 4044; however, there is the reference to IRC 401(a)(4) under 4044(B)(4) that adds a twist. Assets are sufficient to pay benefits through level 4B. If I allocate the remaining assets at level 5 and then review the distributable benefits as a % of earned benefits, the HCEs are receiving a higher allocation than most NHCEs because the NHCEs are not all fully vested before plan termination. Should I reallocate the remaning assets after level 4A based on the combination of additional benefits payable to all participants under levels 4B, 5, and 6?

How does the IRS look at the allocation of assets?

Before this case, I had only filed distress terminations that required the PBGC to completely take over as trustee.

Thanks in advance for your help!