Guest GMP Posted November 25, 2009 Posted November 25, 2009 What are the penalties (DOL & PBGC) if a plan sponsor pays out lump sums while the funded percentage is less than 60%?
rcline46 Posted November 25, 2009 Posted November 25, 2009 Disqualification should be a sufficient deterrent.
AndyH Posted November 25, 2009 Posted November 25, 2009 What are the penalties (DOL & PBGC) if a plan sponsor pays out lump sums while the funded percentage is less than 60%? Death by making you read final regulations.
Guest GMP Posted November 25, 2009 Posted November 25, 2009 Disqualification should be a sufficient deterrent. Disqualification is by the IRS, not the DOL or PBGC. I have a plan that is covered under Titles I and IV of ERISA, but is not qualified under 401(a). The employer is probably going to pay out regardless of the percentage. This leads me to wonder what the DOL & PBGC will do.
Guest GMP Posted November 25, 2009 Posted November 25, 2009 I should qualify the question by saying that the owners want to pay out the employees, which is about all the trust will cover, and not themselves.
david rigby Posted November 25, 2009 Posted November 25, 2009 I should qualify the question by saying that the owners want to pay out the employees, which is about all the trust will cover, and not themselves. Is this a plan termination? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest GMP Posted November 25, 2009 Posted November 25, 2009 I should qualify the question by saying that the owners want to pay out the employees, which is about all the trust will cover, and not themselves. That's where it's headed. There are 3 owners each owning 1/3 of the stock, so none can waive their benefits in a Title IV termination. If they pay out the employees they can remove themselves from PBGC coverage, which would make it possible for them to then waive their benefits under a Title I termination.
Guest Sieve Posted November 26, 2009 Posted November 26, 2009 Is a waiver by 1/3 owners invalid under Title IV if the PBGC does not object during their termination application review process? I had occasion, a number of years ago, to be involved in a PBGC plan termination filing where each of 7 equal partners waived benefits, and we never heard from the IRS about the inappropriate waivers (included with the filing). Do you suspect that the PBGC police are on my tail as we speak?
Blinky the 3-eyed Fish Posted November 30, 2009 Posted November 30, 2009 GMP, they can't pay out the employees without it being a plan termination (unless all are at normal retirement age). You can't have the termination without the waiver. So your idea to pay the employees out to avoid PBGC coverage won't work. You know that options to buy shares consitutes ownership? Have they thought of going that angle so that all of them are now majority owners? Call it a scheme or not, but it's far better than simply paying out anyone irresponsibly. If they don't want to go the options route, at least try to get the PBGC to buy off on a waiver by a 1/3 owner before doing anything. They should disclose it openly though since the PBGC submission doesn't ask for specific information on waivers. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
WDIK Posted November 30, 2009 Posted November 30, 2009 Is this a valid waiver? I don't think so. It appears that the extension was completed inappropriately. ...but then again, What Do I Know?
Guest GMP Posted December 1, 2009 Posted December 1, 2009 The 3 owners sold the assets of the corporation, but kept the stock. After the sale all employees were terminated.
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