Underfunded DB plan termination; can family members of business owners waive their benefits, too?

[Dougsbpc]

We administer a 12 participant DB that has benefit liabilities that exceed assets by about $600K. The plan is covered by PBGC. The owners (stockholders) would be happy to waive a portion of their benefits to terminate as a standard termination. The majority owners are brothers. One has 50% of the stock, the other has 30% and his daughter owns 20%.

Clearly the one who owns 50% can waive his benefits, but it is less clear as to whether the 30% and 20% family members can waive their benefits.

Although the constructive ownership rules of code section 318 appear to aggregate family members, resulting in two 50% owners, PBGC reg 4041.21(b)(2) references the constructive distribution rules of IRC sections 414(b) and © when defining a majority owner. 414(b) and © deal with controlled groups, which we do not have here.

Anyone have any thoughts as to whether the family members can waive their benefits?

Thanks.

[Blinky the 3-eyed Fish]

The attribution rules under 1563 govern ownership for PBGC purposes. So, whether or not the brother who owns 30% is attributed his daughter's shares depends if the daughter is age 21 or not. If she's over 21, then the shares are not attributed to her father, he is not a majority owner and only the 50% owner can waive benefits.