PBGC

[Randy Watson]

If a plan was subject to Title IV will it always be subject to Title IV even if it happens to meet one of the exceptions in Section 4021 in later years? For example, what if the number of active participants in a plan maintained by a professional service employer falls below 25?

[SoCalActuary]

If a plan was subject to Title IV will it always be subject to Title IV even if it happens to meet one of the exceptions in Section 4021 in later years? For example, what if the number of active participants in a plan maintained by a professional service employer falls below 25?

Just read the rules....No, you don't drop out of coverage under 25, but yes if there are no non-owners with benefits under the plan.

[Andy the Actuary]

If a plan was subject to Title IV will it always be subject to Title IV even if it happens to meet one of the exceptions in Section 4021 in later years? For example, what if the number of active participants in a plan maintained by a professional service employer falls below 25?

Just read the rules....No, you don't drop out of coverage under 25, but yes if there are no non-owners with benefits under the plan.

While you may want to believe that "just read the rules" gives you the answer, it is not always clear on the PBGC's interpretation of the rules. For example, the PBGC has posted on their website that the Plan is no longer subject to Title IV if it ceases to cover any non-owner employees. However, we are in the process of witnessing them "redefine" this rule when it came to a collectively bargained plan where the union employees were terminated and all that remained were owner employees. So, generally if a plan winds down to cover only non-owner employees, it will no longer be the PBGC's concern. But, the actuarial answer might apply: It depends.

[Lou S.]

Were the non-owner terms paid out? If not I would think you are still PBGC but once the last non-owner has been paid whether by lump-sum or annuity purchase, our experience is the PBGC is very good about giving a "no longer covered letter."

On a related question we have a plan that has always covered just 2 substantial owners. One of the owners, brothers not that that really matters, has just bought out the other but both are still working. When does this plan become PBGC covered? Is the guy who sold out considered a substantial owner for a period of time after the stock sale? I seem to recall a 5-year look back. Am I dreaming or is this plan immediatley PBGC?

If no one knows off hand I guess we'll request coverage determination from the PBGC.

[Randy Watson]

If a plan was subject to Title IV will it always be subject to Title IV even if it happens to meet one of the exceptions in Section 4021 in later years? For example, what if the number of active participants in a plan maintained by a professional service employer falls below 25?

Just read the rules....No, you don't drop out of coverage under 25, but yes if there are no non-owners with benefits under the plan.

So if the plan had over 25 active participants (and was subject to Title IV) and the only remaining participant is the sole owner then the plan is no longer covered?

[rcline46]

Once covered, always covered until you apply for and get a PBGC letter saying not covered. It is much easier to write the request than to just stop filing and have to deal with the situation after the fact.