Liability for "Missed" Participants When Sponsors Dissolves

[Übernerd]

Plan Sponsor (PS) of a large DB plan (Plan) is in the process of dissolving--not in bankruptcy (so no PBGC trustee)--it's just going out of business. Upon dissolution, all PS's remaining assets will be transferred to charitable foundations. PS has terminated Plan and annuitized all benefits that it knows of. It was extremely careful, but Plan is huge and participants could have been missed.

Per PBGC Reg. § 4041.23(b)(9) and a 1991 PBGC opinion letter, PBGC's position is that it's not on the hook for an overlooked participant's benefit, PS is. [On the other hand, I've appended a snippet from the letter, which does appear to contemplate ultimate PBGC liability for "uncorrected" errors.] So, who's on the hook after PS dissolves? Officer, directors, and DB Plan fiduciaries want to know their exposure, as well as any exposure of the charitable foundations. My initial thoughts on potential claims against these individuals:

- Individual § 409 / §502(a)(2) fiduciary claims seem dead in the water because plaintiffs in such cases must be acting on behalf of the plan as a whole. Also, given the well-documented, extreme care with which the termination was handled, proving imprudence would be a challenge.

- § 502(a)(3) claims seem out, given the absence of an equitable remedy.

- § 502(a)(1)(B) claims seem out--even if Plan is deemed never to have terminated (because it failed to satisfy its benefit obligations), who will be forced to fund the benefit?

- ERISA § 4070 claims (civil suits re termiation of single-employer plans) seem the most likely avenue, but only equitable remedies are available, and I don't see paying a fixed sum of money flying as an equitable remedy post-Knudson & Sereboff.

Am I missing something? Thanks.

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Here's the snip from the 1991 PBGC Opinion Letter:

If a participant did not receive his or her full plan benefit, or was simply missed in the distribution of plan assets, the plan, and therefore the plan sponsor, would continue to be liable. And in the event the error remained uncorrected, the PBGC would ultimately be responsible. See ERISA S 4041(b)(4).

- May 3, 1991, Letter from Carol Connor Flowe, 18 Pens. Rep. (BNA) 850.