Plan Termination - Late Distribution

[Dougsbpc]

A small non-pbgc db plan terminated December 31, 2007

The plan sponsor initially did not want to get a D letter but we finally convinced them to.

If the submission is done now, we may not get the letter for up to eight months and they would prefer not to pay benefits until they receive the favorable letter.

1) If benefits are not paid until after 12/31/2008, are they in danger of the plan not being considered terminated because more than a year has gone by?

2) Since the plan terminated in 2007, PPA segment rates are not used for 417(e) purposes. Instead, the old stability period, look back month and 30 year treasury rate is used. What would happen if we drifted well into 2009 before benefits were paid? I guess the 30 year treasury rates will still be published.

[ScottR]

A small non-pbgc db plan terminated December 31, 2007

The plan sponsor initially did not want to get a D letter but we finally convinced them to.

If the submission is done now, we may not get the letter for up to eight months and they would prefer not to pay benefits until they receive the favorable letter.

1) If benefits are not paid until after 12/31/2008, are they in danger of the plan not being considered terminated because more than a year has gone by?

-> I doubt it, given that the reason for the delay is waiting for FDL.

2) Since the plan terminated in 2007, PPA segment rates are not used for 417(e) purposes. Instead, the old stability period, look back month and 30 year treasury rate is used. What would happen if we drifted well into 2009 before benefits were paid? I guess the 30 year treasury rates will still be published.

-> I could be wrong, but I think you should use PPA rates for any payouts after 2007, regardless of the effective date of plan termination. Anyone see it differently?

[Andy the Actuary]

Two actuaries, three opinions. If the Plan termination date remains 12/31/2007, then PPA does not apply and use the '94GAR/Treasury rates to compute lump sums.

If a participant terminates employment prior to the final distribution date but after 12/31/2007, then what is done? Proposed (1) Still use '94GAR/Treasury rates and (2) 436 does not apply.

The interesting situation would be if you followed this path and then the termination date was revoked (I've witnessed the PBGC do this because of delay in filing with the PBGC). So, the Plan did not terminate but you treated it as if it did. Ouch!