Plan Termination Submitted To PBGC As a Standard Termination, Now Insufficient. What happens now?

[Guest merlin]

Plan termination submitted to PBGC as a standard termination based on sponsor's representation that he would make up the shortfall, calc'd at that time to be approx. $500k. PBGC did not isssue a Notice of Noncompliance. Sponsor subsequentlycontributed 300k of the 500k shortfall, and benefit payments were to commence upon deposit of the remaining amount of the shortfall (now 300k due to lower 417e rates). Sponsor is now bankrupt. At the very least PBGC must be notified of the change in status. What happens then? Must the participants be notified?

[david rigby]

Have not looked recently, but recall that the instructions (or perhaps the PBGC regs) deal with this issue, and the Standard Termination can become something else, such as a Distress Term.

A bankruptcy is just about the biggest red flag there is. Not sure if bankruptcy must be reported to participants, but a change in the termination process must be.

[david rigby]

Bankruptcy is a Reportable Event (that is, to the PBGC), with very limited waiver. See Form 10 and instructions. http://www.pbgc.gov/plan_admin/REPEVENA.htm

[Guest merlin]

I misspoke slightly. The sponsor is not yet in bankruptcy, so the Form 10 filing is n/a. But I have spoken to a PBGC rep, who gave me the name of the approporiate person at the agency to write to. The PBGC has now commenced proceedings to take over the plan. So at the end of the day the plan ends up at the same place - in the lap of the PBGC.

[david rigby]

Maybe.

First, look at the instructions for the Form 10 Advance (at above link), especially the definition of who is required to use it (non-public companies).

Second, this sponsor needs legal reprensentation by someone who is familiar with both ERISA and bankruptcy.