Majority Owner Wants to Dump Stock Now

[Dougsbpc]

We administer a small PBGC covered DB plan that will have benefit liabilities that exceed assets. The current 100% shareholder of the plan sponsor will waive a portion of her benefits so the plan can terminate as a standard termination.

Of course it may take a year before we get a DL from IRS and benefits are distributed.

The 100% shareholder had a deal with one of the employees that she would sell her stock to him by July 31, 2008.

I believe she must be the 100% shareholder at the time benefits are distributed NOT just at the time the amendment to waive benefits is executed. Does anyone disagree with this?

Thanks much.

[Mike Preston]

I do, but my disagreement (or agreement for that matter) shouldn't matter. When you are dealing with questions like this, the simple solution is to call or email the PBGC and ask them the question. They are remarkably responsive. The most responsive governmental agency I have ever worked with. You may not like their answer and they may not be terribly flexible in providing you with an alternative if you don't like their answer, but answer they will and in short order, if history is any guide.

[Dougsbpc]

Thanks Mike

I will contact the PBGC and post their response, which may be helpful to anyone else who may run into this.

[John Feldt ERPA CPC QPA]

If I remember right, somewhere near the end of the PBGC Form 1 instructions, it indicates what the PBGC regs also say: Majority owners are determined as of the date of plan termination, and therefore will need to forego receipt of benefits on or before the date of plan termination. If I find the cite, I'll come back and add it later.

added later on edit: I was not quite right in memory, see page 21 of the pdf file, left column, after explaining the election to forego receipt of benefits, it says: "Note: Majority owner status is determined at the time of the election." I believe that means the election to forego receipt.

http://www.pbgc.gov/docs/500_instructions.pdf

[Dougsbpc]

I am impressed!

The PBGC got back to me within a day.

It is as J4FKBC mentioned. The owner must be a majority owner at the time the elction is executed and not necessarily when benefits are later distributed.

[Mike Preston]

Not that he was incorrect, but he wasn't the first.