PBGC phase-in

[tymesup]

Participant turned 70.5 in 1997, the same year 401(a)(9) was changed so that deferred retirees got actuarial increases and continued accruals. The plan was amended accordingly in 2003, retroactive to 1997, within the remedial amendment period.

The plan was terminated by the PBGC in 2004. The PBGC determined that this was a benefit increase and that it was 0% phased in because it was adopted less than a year before the termination.

Anybody run into this situation or have any thoughts?

Thanks.

[mwyatt]

Good luck. PBGC has their own way of interpreting things (and if it means lessening their liability given a huge deficit, so much the better - might give anyone out on this board pause who champions the "public option" as a more humane way to go with health care). Just argue your point - not sure that actuarial equivalence should be viewed as a "benefit increase" given the whole concept. For history, consider all the way back to the late 70s when you had plans in the transition of pre-ERISA vesting schedules; operationally, these plans were in compliance with the ERISA vesting, but the restatement process took place in '78. PBGC (who were taking over their plans) went on the attack to actually use the pre-ERISA schedules post ERISA because the outcome would be more favorable to their balance sheet, never mind screwing the participants. Not a particularly proud moment for the PBGC, nor is your example. Hanging their hat on GUST restatement implementation is kind of shabby treatment for their interpretation of phase in.

[tymesup]

Rettig v PBGC appears to have required PBGC to recognize the ERISA mandated vesting provisions as fully phased in:

http://openjurist.org/744/f2d/133/rettig-v...nty-corporation

Page/Collins, in 1995, refers to Rettig and Piech, so it appears PBGC did not trump the appeals court's decision in Rettig:

http://www.lostpension.net/PAGE.PDF

[SoCalActuary]

The PBGC will argue for lower liability. While it is expensive to do so, you need to appeal and claim that this was a mandatory legal change, not a voluntary election.