PBGC recovery of lump sums prior to distress termination

[SRM]

ERISA Section 4045 authorizes the PBGC to recover the portion of lump sum amounts distributed in the 3 year period prior to distress termination that are greater than the life annuity that would have been paid if elected instead of the lump sum.

Does the PBGC frequently use this authorization?

The plan in question is a small plan (13 monthly retirees and 6 vested terms) that has offered lump sums for a long period of time.

The vested term wanting a lump sum is not a decision maker with the plan sponsor (not an hce, owner, key, etc.). The lump sum is not being asked for in anticipation of a distress termination which may or may not occur in the next year.

Any thoughts or experience would be appreciated.

The current thought is to pay the lump sum but caveat it with a cite of ERISA Section 4045 indicated the PBGC ability to recover certain amounts.

[david rigby]

No specific experience with this plan provision. The statute says the PBGC "is authorized", does not say "required". However, since it is a statute and not a regulation, probably wise to assume they will use it. Also, PBGC financial condition right now would indicate they want to go after every dollar they can. Might be some flexibility.