When does a plan become covered by PBGC

[Guest RBlaine]

A 2008 Calendar year plan:

On the participant count date (01/01/2008), only the 100% owner is covered. On some date during the year (7/1), two other participants enter the plan. Is it a PBGC plan on 7/1/2008 or at 01/01/2009 when the determination date has more than the owner as a participant?

edited to remove incorrect terminology and date.

[Guest RBlaine]

It looks like Example 3 of the 2008 forms answers the question:

Example 3 – A professional service employer maintains a plan with a calendar plan year. If this type of plan has never had more than 25 active participants since September 2, 1974, it is not a covered plan under ERISA section 4021. On October 18, 2008, the plan, which always had 25 or fewer active participants, has 26 active participants. It is now a covered plan and will continue to be a covered plan regardless of how many active participants the plan has in the future. Note that the Premium Payment Year begins on January 1, 2008, even though the plan did not become covered until after that date. The due date for the plan’s first premium filing is April 30, 2009 (the last day of the 16th full calendar month that began on or after the first day of the Premium Payment Year).

From my scenario, it seems as if 2008 is the first premium filing year and the premium is due on 4/30/2009. However, on the determination date for the # of participants, there is only one. Assuming the plan was fully funded on that date, the total premium is $33 for the owner.

That seems silly.

Anyone disagree with either the premium due or that it is silly?

[david rigby]

Assuming the plan was fully funded on that date, the total premium is $33 for the owner.

Could it be less, under PPA section 405?

[Guest RBlaine]

Assuming the plan was fully funded on that date, the total premium is $33 for the owner.

Could it be less, under PPA section 405?

Isn't that just a cap on the VRP? I wouldn't have any VRP at this point.

[david rigby]

You are correct. It affects the VRP only.

[Andy the Actuary]

It looks like Example 3 of the 2008 forms answers the question:

Example 3 – A professional service employer maintains a plan with a calendar plan year. If this type of plan has never had more than 25 active participants since September 2, 1974, it is not a covered plan under ERISA section 4021. On October 18, 2008, the plan, which always had 25 or fewer active participants, has 26 active participants. It is now a covered plan and will continue to be a covered plan regardless of how many active participants the plan has in the future. Note that the Premium Payment Year begins on January 1, 2008, even though the plan did not become covered until after that date. The due date for the plan’s first premium filing is April 30, 2009 (the last day of the 16th full calendar month that began on or after the first day of the Premium Payment Year).

From my scenario, it seems as if 2008 is the first premium filing year and the premium is due on 4/30/2009. However, on the determination date for the # of participants, there is only one. Assuming the plan was fully funded on that date, the total premium is $33 for the owner.

That seems silly.

Anyone disagree with either the premium due or that it is silly?

Everything sounds silly these days. This instruction is inconsistent with the following from PBGC 2000 Blue Book, which is posted on www.pbgc.gov :

Question 16 of the 2000 Enrolled Actuaries Meeting Blue Book states the following:

(a) Does the payment of all benefits of non-substantial owners constitute a Title IV plan termination? If not, what (if anything) should the plan administrator do?

The elimination of non-substantial owner participants by paying out all their benefits is not a Title IV plan termination. However, to avoid needless correspondence with the PBGC, the plan administrator should notify the PBGC of this occurrence by writing to PBGC, Technical Assistance Branch, Suite 930, 1200 K Street NW, Washington, DC 20005-4026 so that the PBGC will know that the plan should be removed from the premium database.

This would suggest that if you later eliminated all of the non-substantial owners, the Plan would no longer be covered. Now, is this silly or is this silly?

[WDIK]

Never mind.