Termination of DB Plan that hasn't paid premiums in 24 years.

[Lori Foresz]

Hi,

Just wondering if anyone has experience with a terminated DB plan that hasn't filed premiums in a very long time. We have been advised to terminate through the PBGC and not risk the plan being treated as an on-going plan. I was thinking about just filing the Form 500 package normally, check the box "no" that asks if all PBGC premium have been paid to date and wait for an inquiry from the PBGC. Since I'm not aware of a voluntary compliance program for unpaid PBGC premiums I'm not sure the best way to proceed. The plan has only had 2 or 4 participants since it's inception and many years just one. Assets are sufficient to pay all benefits for employees. The owner is waiving unfunded amounts.

If anyone has encountered this or can offer some insight, it would be greatly appreciated.

Thanks

[AndyH]

I ran into one of these several years ago, around 1998. Where there is smoke there is fire. In the case I was involved in, the missed PBGC filings were the tip of the iceberg. The client needs to hire an attorney to represent them and help them make business decisions.

In the case I was involved in, two PBGC representatives (one an actuary, one not) flew in for a week, although they did not show up at the client's office each day. It was summer and the client was located in a prime summer vacation area. I am not joking. But for all I know, they may have been taking legitimate vacation time. I was told by the client that the two reps showed up the last day in beach attire to collect the amount due.

My role was to calculate all the premiums due and estimate the interest.

There was no leniency that I was aware of on the unpaid premiums and penalties. They were paid in full retroactively with interest. And all of this was while the client was represented by very good legal counsel.

But other, much more serious issues were discovered that all began with PBGC and 5500 issues, so, where there is smoke .....

[david rigby]

Good advice.

First question might be to see if any of the exemptions may have been available to the plan.

[JanetM]

Look for exemptions, are you sure they are covered by PBGC?

[Lori Foresz]

Hi,

Thanks all. The plan covered employees, so I do not think an exception applies unless there is some other exception I am not aware of.

I actually spoke to a PBGC agent and we would need to file all back forms and pay a 1% per month penalty on the past due amounts until paid.

He also told me that he cannot supply me with the PBGC forms from 1980-1996 unless I can come into his office in DC and copy them. We are also in a prime summer vacation spot that is quite a bit away from DC. Right now we're scratching our head wondering why the government makes things so difficult.

Other than the smoke there appears to be no fire. The plan has filed all Forms 5500, had all valuations performed, and paid benefits correctly. It is a small repair shop and has always had advisors who appeard competent. Why the "competent" advisors stopped filing forms in 1980 is unclear to me. Thanks much.

[WDIK]

Why the "competent" advisors stopped filing forms in 1980 is unclear to me.

Does this mean that premiums were paid and filings made prior to 1980?

One possibility is that (as you mention) after 1980 only one participant (assumed the owner) remained for a number of years. As discussed (maybe debated) on this board previously, the plan would then be exempt. Then later (when additional participants became eligible) it would be covered again. This scenario may be far-fetched, but it may help to eliminate some premiums, penalties and interest if a number of years can be excluded because only the owner was eligible.

[david rigby]

The plan covered employees, so I do not think an exception applies unless there is some other exception I am not aware of.

Be sure to check all the exemptions in ERISA section 4021(b).

[WDIK]

For your reference, I was able to dredge up this old thread.

[flosfur]

...  The plan covered employees, so I do not think an exception applies unless there is some other exception I am not aware of.

The plan can have rank & file employees and still be exempt from PBGC's coverage if the sposor is a "professional service employer" - see ERISA 4021©(2) for lsit of professions. But don't stop there. Some professions not listed there can still be "professional service" but one has write to the PBGC to get a determination. Examples of professions not listed but have received the "professional service" exemptions are: Pharmacists, Enrolled Agents, (non-performing) artists, actors...

[WDIK]

In a prior post, lgolden noted that it was a "small repair shop."