Employer Gone Bad

[Dougsbpc]

We have administered a 10 participant DB since 1996. The plan is covered by PBGC.

The business was sold in 2001, so all employees terminated at that time. The owner retained the corp for another year before terminating the plan in 2002. After 2002 he had no more income so it made no sense to have the plan.

The owner became very uncooperative after he signed the termination amendment. He has been cooperative in keeping the plan compliant (GUST, EGTRRA good faith etc.) and all filings are current. Since 2002 we have not received adequate plan asset information. In addition, we conducted a search for former employees and only turned up one.

It is clear he does not want to pay benefits even though he has the vast majority of them.

We did not file the termination with IRS or PBGC because we need more information. The worst is that we somehow lost the termination amendment and he did not keep a copy.

I dont believe SCP or VCP would allow a retroactive amendment to terminate the plan.

We think the value of plan assets has increased since 2002 so I dont think there will be any funding issues, but we probably would have to go back and file schedule B's for 2003 and 2004.

Any thoughts on this?

Thanks much.

[Guest Pensions in Paradise]

From your post it appears that you are not receiving copies of the financial statements. Are you sure the owner hasn't taken all of the money out of the plan? You need to inform the owner that he needs to terminate the plan and distribute all assets ASAP. From what you've described, your actions are as negligent as the owners.

By the way, wouldn't the original termination date be invalide since you have to file the termination with the PBGC within X days of the termination?

[Dougsbpc]

We are receiving copies of brokerage statements, and no he has not distributed the benefits to himself. The information we need involves privately held investments and their market values. He and the general partners are reluctant to get appraisals to provide market values.

Why would we be neglegent? For continuousely asking for the information? For going out of our way to find missing participants when this is generally the plan sponsors job? All assets are still in the plan and non-owner benefits represent a small fraction of the total.

We found the original termination amendment which included freezing benefit accruals. As long as plan assets have increased in value, there should not be a funding issue. Perhaps there is a schedule B filing issue even though there would have been no contribution requirement.

[Jim Norman]

We are receiving copies of brokerage statements, and no he has not distributed the benefits to himself. The information we need involves privately held investments and their market values. He and the general partners are reluctant to get appraisals to provide market values.

Sounds like the plan is frozen, but not terminated at this point. yes, there is a Sch B issue. Hopefully the corp still active so there is a plan sponsor.

Advise him of what must be done to properly terminate the plan, advise him what information you need to accomplish this and that until it is provided the plan is ongoing and must meet all operational, document and funding requirements. Set a deadline by which you need the information, followup once, then resign.