Prepay withdrawal liability

[Guest JBeck]

ERISA 4219©(4) permits an employer to prepay withdrawal liability, but it doesn't say anything about discounting the stream of payments to arrive at a lump sum factor. Interest is only referenced in terms of a defaulted amount or overpayment. Can a withdrawing employer apply an interest factor to arrive at a lump sum amount.

[Kirk Maldonado]

I think that your question can be answered by posing a question for you.

What do you think the plan's response would be if the employer decided to use a 48% interest rate in determining the amount of the discount to its prepayment of its withdrawal liability amount?

There may be direct authority answering your question, but I can't believe that there's a plan in the country that would let the employer determine the interest rate for this purpose.

[Guest JBeck]

Everyone is reasonable and no one is suggesting anyting like 48 percent.

[Guest latwz]

Is this Jonathan? If so this is Laurel formerly from CHG.

[WDIK]

Is this Jonathan? If so this is Laurel formerly from CHG.

Who is it otherwise?

[Guest latwz]

I wanted to say Hi to JBeck.

[JanetM]

I almost felt the rush of air as the plane flew over that one.

[Kirk Maldonado]

JBeck:

Your response made me realize that I did an exceedingly poor job of making my point.

The concept that I was trying to get across is that I can't imagine that the plan wants to let each employer pick the interest rate it wants or even to bargain with each employer about what discount rate it can use. My guess is that they will pick a rate that every employer must use, to avoid wasting a lot of time negotiating this issue every time it comes up.

But I'm just speculating, based on what I would tell the plan if they were my client. You should contact the plan to find out what their position is on the issue.

Of course, it probably doesn't arise that frequently. Your client must be fortunate in that it can afford to pay it in a lump sum. That hasn't happened to any of my clients yet. The smallest withdrawal liability case that I've been involved in was $750,000 and that was over 20 years ago. One hotly contested case over a decade ago involved a demand for $57,000,000.

[J2D2]

I must be missing something. I thought that withdrawal liability was calculated as a lump sum amount. If the employer chose (as most do) to pay over time, rather than in a lump sum, an interest factor was added in order to make the stream of payments actuarially equivalent to the lump sum amount. This question seems to be putting the cart before the horse (probably a bad analogy, but what the heck).

[Guest JBeck]

I wanted to say Hi to JBeck.

Yes laurel it is I. I tried to send you an e-mail with my work number. Did you get it?

[Guest latwz]

JBeck,

Yes, I got it this morning. I do not have distance phone service available at work, so could you send me your e-mail! I have a lot to catch you up on.

[Effen]

this is Laurel formerly from CHG.

Laurel from CHG? is that in CLE? Were you also at NA in RR many yrs ago?

[Erik Read]

YIKES - what the .... okay back on topic-----

I thought it was calced as a total - then the plan/trust determines the payment schedule - correct? Ours uses a 20 year payback on a quarterly schedule and yes, they do make it actuarily equiv. payments ( I think)

Curiosly - The TH/MEPP newb.

[Guest latwz]

Again, sorry for the interuption, To Effen: The answer to your question is Yes to both.

[Effen]

COOL! I think I knew you when...

- we can take this off-line now so that we don't waste Ereads or Harwoods time anymore.

[Erik Read]

No problem