PBGC Plan Termination

[David]

The plan sponsor of a frozen PBGC covered DB plan called and wants to terminate the plan. They are not going to file with the IRS. Since the plan was long ago frozen for all benefits and participation I don't think there is a 204(h) notice required (please correct me if I'm wrong). There is the PBGC Notice of Intent to Terminate required between 60 and 90 days before the Proposed Termination Date. I seem to recall the Proposed Termination Date for PBGC purposes does not have to be the same date as the actual plan termination date on the board resolution to terminate the plan. Is that correct? It would be nice to use an actual plan termination date of 12/31/08 to save the sponsor the need for a 2009 actuarial valuation and then use some later date as the PBGC Proposed Termination Date in order to get the NOIT issued in a timely manner. Problems?

[Andy the Actuary]

The PBGC does refer to the "proposed" termination date because they are empowered to nullify it. Otherwise, there is "a" plan termination date -- not one for IRS and another for PBGC purposes. If the PBGC nullifies the termination date (I've seen this happen), then the Plan stays open for funding purposes. Would be interested to hear if this is not the case. Unfortunately, it appears 12/31/2008 is no longer a viable plan-termination date because you can't comply with the participant notice requirements.

[Guest Sieve]

If the 204(h) notice was given for the freeze date (and the proper Plan amendment was signed to freeze benefit accruals), then a subsequent plan termination does not require another 204(h) notice because the termination action does not cease benefit accruals (since they ceased at the freeze date, when notice was given and the amendment made).

If the plan is then terminated after the freeze date, and you miss the Notice of Intent to Terminate deadline, you have a new proposed termination date and another Notice of Intent to Terminate to give. But, there will be no benefit accruals during the interim, since you have given the 204(h) Notice and have amended the plan to freeze benefit accruals. If you never made an amendment to the Plan, the 204(h) notice stops nothing--but, if you did both, then you have no new 204(h) notice requirement on subsequent plan termination and no benefit accrualos after a missed Notice of Intent to Terminate deadline.

If you miss the Notice of Intent to Terminate, do you need to change the Plan's termination date by Board resolution? Best to do so, but probably not required.

But the termination date for IRS and PBGC must be the same. Either the plan terminates or it doesn't.

[Andy the Actuary]

I would lobby for all of us posters to start referring to those pre-plan-termination 204(h) notices as "Preparation H !!"

[Guest Sieve]

-- even though it is a "groaner" (which are the best kind, anyhow) . . .

[ScottR]

The plan sponsor of a frozen PBGC covered DB plan called and wants to terminate the plan. They are not going to file with the IRS. Since the plan was long ago frozen for all benefits and participation I don't think there is a 204(h) notice required (please correct me if I'm wrong). There is the PBGC Notice of Intent to Terminate required between 60 and 90 days before the Proposed Termination Date. I seem to recall the Proposed Termination Date for PBGC purposes does not have to be the same date as the actual plan termination date on the board resolution to terminate the plan. Is that correct? It would be nice to use an actual plan termination date of 12/31/08 to save the sponsor the need for a 2009 actuarial valuation and then use some later date as the PBGC Proposed Termination Date in order to get the NOIT issued in a timely manner. Problems?

Check PBGC Form 500, item 11. The plan termination date may be slightly LATER than the date published in the NOIT, but not later than the 90th day after the earliest NOIT was given, and not earlier than 60 days after the latest NOIT was given. This was intended to allow for slight delays in distributing NOITs. It's not going to allow you to use a 12/31/08 plan term date.