Waiver of Benefits under a DB Plan

[Guest EMM118]

A client and his wife are the only participants in a DB plan that is sponsored by Company A. Company A is owned by an irrevocable trust. The client owns 100% of LLC B that also employs 10 employees. LLC B pays Company A certain amounts for non-management services provided. Becuase of the existence of the irrevocable trust, Company A and LLC B are not required to be aggregated.

Of course now the client wants to sell Company A to an unrelated purchaser and retire. The client also wants to terminate the DB plan. The client and his wife are considered NHCEs and, as such, I thought that they were not able to effectively waive benefits under the DB plan. Am I missing something?

Is there a way for client and his wife to effectively waive benefits? If the DB plan were terminated, client would need to fund approximately $190,000. Of course they can freeze the DB plan, but that doesn't change the fact that they wouuld have to make up the shortfall anyway.

Thanks in advance.

Ed

[SoCalActuary]

Interesting issue - who benefits under the trust? If he and she are the beneficial owners of profit interests in the trust, then I don't like your analysis.

How does the client have authority to liquidate Company A without being the beneficial owners?

If Company A is sold, does this provide the assets to complete the db funding required?