Form 6088 - Plan Termination

[emmetttrudy]

One person plan terminated but is underfunded by about $300,000. Should the Form 6088 show the total calculated PVAB? Or should it show the PVAB to the extent funded (i.e. $300,000 less than the actual PVAB). Is there any guidance on this issue someone could point me to or has anyone experienced this before?

[Mike Preston]

Show the full benefit. Explain in an attachment that the big cheese will agree to accept a benefit smaller than otherwise entitled to. Have said cheese sign a "I agree to forgo my entire benefit" form, have it approved by the spouse and prepare to have the IRS ask for it.

If you want to try and do something other than this (like a pro-rata reduction for other participants), see an ERISA lawyer, because the IRS has recently started putting up a fight.

[SoCalActuary]

You should also consider the difference in amounts between columns g and h. We typically show on g(3) the amount net of any reduction, while h shows the grand total pvab.

[emmetttrudy]

I know the PBGC has rules allowing majority owners to forego benefits, but does the IRS? We certainly could get a letter from the owner saying he forgoes benefits, but the concern is that this is not allowed.

[Dinosaur]

I know the PBGC has rules allowing majority owners to forego benefits, but does the IRS? We certainly could get a letter from the owner saying he forgoes benefits, but the concern is that this is not allowed.

Usually the language we use on the attachment to the Form 6088 is that the participant will receive his/her benefit "to the extend funded". We haven't had a problem with this language.

[emmetttrudy]

You should also consider the difference in amounts between columns g and h. We typically show on g(3) the amount net of any reduction, while h shows the grand total pvab.

Has this approach drawn questions or an audit in the past?

[SoCalActuary]

You should also consider the difference in amounts between columns g and h. We typically show on g(3) the amount net of any reduction, while h shows the grand total pvab.

Has this approach drawn questions or an audit in the past?

Why should it? We are following instructions, including showing how much distribution each person is expected to receive.