Withdrawal Liability

[Randy Watson]

Upon withdrawal from a plan, can an employer simply make a lump sum payment to satisfy its withdrawal liability never to be bothered again or is there some catch in doing this (i.e., is the plan potentially entitled to an additional contribution later on if, for example, the plan assets decline?)?

[Effen]

Yes, one time payments are possible. If you ask, the Trustees should be able to give you a payoff number.

[Randy Watson]

Yes, one time payments are possible. If you ask, the Trustees should be able to give you a payoff number.

Is this common? Is it a given that the employer would be free and clear of any future funding problems after the single payment is made?

[J2D2]

My recollection is that withdrawal liability is calculated as a lump sum, then converted to periodic payments for those employers (most of them, in my experience) who either can't afford or don't want to pay the single sum. If the employer pays the single sum, it is done with the plan. I don't believe it is very common to pay off the withdrawal liability in a lump sum, but it is certainly contemplated by the statute.

[Effen]

They are generally free and clear after the one-time payment. The one noted exception is if there is a mass withdrawal in the near future. I believe the Trustees can come back and reasses them a higher liability based on the mass withdrawal liabilities.

[Randy Watson]

They are generally free and clear after the one-time payment. The one noted exception is if there is a mass withdrawal in the near future. I believe the Trustees can come back and reasses them a higher liability based on the mass withdrawal liabilities.

Do any of you have any experience with having the trustees execute a release of some sort if, for example, the employer agrees to pay withdrawal liability in a lump sum (assuming that you could get the trustees to sign it)? Would that release have any legal effect?

[namealreadyinuse]

I am confident that I could get some sort of "release" if I was paying off w/d liability. The liability determination is really set forth pretty specifically in the plan and statute. Once Truestes calculate a FINAL number, that is all an employer will ever have to pay (absent other circumstances). The Trustees will not sign an absolute release because, for example, they might later determine that the employer misreported demographic information. Beware though, that the initial assessment and payment schedule is usually not basedon the audited numbers for the year and very often changes.

You should be able to get a discount if you pay-off in a lump sum. If nothing else, you should get a discount for the time value of money.

[Randy Watson]

I am confident that I could get some sort of "release" if I was paying off w/d liability. The liability determination is really set forth pretty specifically in the plan and statute. Once Truestes calculate a FINAL number, that is all an employer will ever have to pay (absent other circumstances). The Trustees will not sign an absolute release because, for example, they might later determine that the employer misreported demographic information. Beware though, that the initial assessment and payment schedule is usually not basedon the audited numbers for the year and very often changes.

You should be able to get a discount if you pay-off in a lump sum. If nothing else, you should get a discount for the time value of money.

Interesting. Thanks.

By the way, if the employer withdraws and makes the installment payments for withdrawal liability, would that employer be required to participate in any PPA "rehabilitation plan" or "funding improvement plan"?