Form 6088

[Guest bjfgfg]

We are terminating a defined benefit pension plan via a standard termination. On the plan termination date plan liabilities are in excess of plan assets. The plan sponsor will fund the plan as necessary by the distribution date in order to purchase annuities. For the purpose of the 6088 is this plan an underfunded plan requiring that information on distributable benefits be provided for all individuals (not just the top 25) or can the Form 5310 include a receivable contribution as part of plan assets, such receiveable being equal to the difference between plan liabilities and plan assets?

[J. Bringhurst]

I'm not entirely clear on how the IRS views this, but the PBGC considers a commitment to sufficiency (agreement between plan sponsor and plan to make plan sufficient to satisfy benefit liabilities upon plan termination) as part of plan assets (check out Appendix D of the the following site to get a model document: http://www.pbgc.gov/docs/500_instructions.pdf). To be safe, you could always indicate that you consider the plan sufficient and drop a footnote explaining that the sponsor will be executing the commitment to sufficiency. We did this when terminating under a standard termination and the IRS did not question our application.

[John Feldt ERPA CPC QPA]

As for the IRS, whenever we include a contribution receivable on the Form 5310, we attach an explanation stating that the plan was underfunded by this amount as of the date shown on the 5310 and that the plan sponsor has made a commitment to contribute whatever amount is necessary to satisfy all plan liabilities at the time actual distributions occur, should the plan still be under funded at that time. We’ve had no problems with the IRS on that so far.