PBGC action in lieu of termination

[Guest CURUGBY]

A client received advice that its plan should consider having the PBCG take over as plan sponsor..is this something that is actually done or does this refer to PBGC taking over as Trustee upon termination?

[david rigby]

Holy cow! In what context was this "advice" and who provided it?

(BTW, the correct acronym is PBGC.)

[Mike Preston]

Yikes, indeed!

[mbozek]

From whom did the client receive such advice? Since the PBGC liabililites for benefits under insolvent plans it has taken over exceed the value of the assets in its trust needed to pay benefits why whould it voluntarily want to take over another plan?

[Mike Preston]

Huh? It takes over plans because they are in danger of becoming MORE underfunded if the PBGC doesn't take them over. Many of PBGC's takeovers are voluntary on the PBGC's part. That is, the PBGC is the instigator, rather than being passive and waiting for bankruptcy. Of course, the OP didn't give enough information to determine what is going on in this case.

[IRC401]

There are certain (very limited) circumstances under which the PBGC is required to take over a plan, and there are circumstances under which the PBGC has discretion to take over a plan. They generally aren't in the mood to take over plans.

The client has the option to file for a distess termination if it wants the PBGC to take over the plan. In addition, if the plan is in such bad shape that the PBGC should be preparing to take it over, the client or the plan probably had a "reportable event" and should be filing a notification with the PBGC.

The plan sponsor should be discussing these matters with its bankruptcy counsel.