Notice of Annuity - Single Premium Group Annuity Ongoing Plan

[SRM]

When a single premium group annuity is purchased to settle benefit liabilites for a PBGC covered terminating plan, there is a requirement to provide a Notice of Annuity Information and Notice of Annuity Contracts.

Does this requirement apply to an ongoing PBGC covered plan that is settling liabilities for a group of retirees through a single premium group annuity but is not terminating?

[SoCalActuary]

You should read the instructions on PBGC Form 10, where reportable events are disclosed to PBGC.

Your proposed action might be reportable, unless it is a small purchase, for a small well-funded plan, or a sufficient plan.

[AndyH]

When a single premium group annuity is purchased to settle benefit liabilites for a PBGC covered terminating plan, there is a requirement to provide a Notice of Annuity Information and Notice of Annuity Contracts.

Does this requirement apply to an ongoing PBGC covered plan that is settling liabilities for a group of retirees through a single premium group annuity but is not terminating?

No.

[SoCalActuary]

So you believe this is not a reportable event? I see it as covered under the PBGC Form 10 as a transfer of liabilities.

[mwyatt]

What are the circumstances (ie, plan size, funding level, etc.) WRT the plan in question? Presumably a grossly underfunded plan wouldn't be blithely purchasing retiree annuity contracts.

[SRM]

The facts are:

Plan has roughly 50 terminated vested participants, 30 retirees, and a handful of active participants.

Plan is about 500K short of being funded at 100% of benefit liabilities (i.e. lump sum for term vested and actives and annuity purchase for retirees).

Plan Sponsor will fund the shortfall at about the same time as potential annuity purchase so that plan is around 100% funded at time of purchase.

Goal is to purchase annuity in late 2007 or early 2008 and then pay lump sums in 2008 to terminated vested participants (plan presently doesn't have lump sums or benefit payments before normal retirement age but will be amended to provide for such).

Plan would then continue for a period of time until remaining active participants retire.

[AndyH]

I certainly don't disagree with the suggestion of checking to see if a reportable event is involved (I don't happen to think it meets the transfer definition). I am also not suggesting that the purchase is a good idea. I'm just answering the question. I think the answer is no.