Pbgc coverage and final contribution

[Earl]

A plan is terminated and gone through the PBGC 60 day wait period. Now the 180 days to pay period starts. The plan however has a final contribution which the owner cannot make now. Also, he could make up the asset shortfall if he could take until next June to fund and pay his benefit.

I know I can get an extension on the 180 days to pay, but how long an extension could I get? He would need about 5 or 6 months. (June/July 05).

The minimum funding deadline will not be until 10/15/05. Jan YE.

Any thoughts?

Thanks.

[WDIK]

Some thoughts:

1) Whether or not to grant the extension is completely under the discretion of the PBGC and may depend on any of the following factors

a) the length of the extension,

b) efforts made to meet the original deadline

c) how the PBGC representative's choice for lunch interacts with his/her gastro-intestinal constitution.

2) Since qualifying as a standard termination was dependent on the contribution receivable, I would think that the PBGC would need a compelling reason as to why the anticipated contribution cannot be made as scheduled.

3) I don't think that the minimum funding deadline is a factor.

4) If the amount of the shortfall is not prohibitive, perhaps a loan could be secured to bridge the five to six month gap.

[Earl]

Thanks alot.

The receiveable is not really an issue. Putting in money to fully fund the owner's benefit will take a few more months.

I guess it is "throw myself on the mercy of the PBGC" time and see what happens.

[SoCalActuary]

I assume you are already in process of payout for the Non-owners.

FWIW, here's my suggestion:

Get them paid timely. Then apply to the PBGC for the extension.

[Earl]

Thanks also.

Yes, the rank and file are being paid. The required contribution will be made this month. It is just some additional money to fully fund the owner shortfall that I would like to have more time (actually, the client would like more time...) to fund.

[SoCalActuary]

So the issue is treatment of the final contribution after all existing plan assets were paid.

PBGC probably doesn't care if you make a late payment. So send the certification of the distribution using the assets to date. Then make the added contribution when it is available.

Is it deductible? That is a more complicated issue, since it clearly is not required to make the PBGC termination complete.