PBGC Premium Refunds

[nancy]

I have a client that terminated their DB plan in 2007. They have been approached by a consulting firm claiming they have a strategy to recover portions of past PBGC premiums. Has anyone else run into this and know what the strategy might be ? Of course, they take a percentage of the recovered premiums. This also seems a little strange to me.

[David MacLennan]

I have no direct knowledge, but I recall seeing this on a website some time back. I think it is probably legit. I sense that in general TPA's would not always check both the General Rule Method and the Alternative Calculation Method to see which gave the smallest premium. Or, in the year of a termination forget to apply for a refund due to a proration of the premium. For a large plan there can be significant dollars involved.

[Effen]

I had a client who recevied a similar letter for an existing db plan. The letter promised they had overpaid by $14,000 and they could help them get the money back. I checked their records, checked with the PBGC and found no overpayments. I told the client my findings and suggested that they contact the person, get it in writting that they could recover the "excess" and go for it. They contacted the company who told them the statute of limitations had passed and they could not recover the excess payments.

Moral - it's probably a sham. You (or the client) can get a complete history from the PBGC that details their payments. I have had several clients receive these letters and so far none have been legit.

[AndyH]

I ran into this a while ago for an active plan, and it was not a sham, it was a sales pitch but it was valid. It had to do with the availability of the FFL exemption (pre-PPA) or something like that. So the actuary said that by changing the method the premium could be reduced, and it was shortly before the period expired for amending that particular filing. Somehow they got access to PBGC filings, presumably with a Freedom of Information Act filing. Nothing better to do it seemed.

So, nancy, I'd suggest that you reexamine that filing and see if any alternative method is available, perhaps the <25 person exemption for example? Or maybe a prorated short year refund, something like that.

[Effen]

Andy, did they actually recover any money? How are they able to change the premium filing method once the form has been filed?

[AndyH]

My recollection is that an amended filing was done (not by the cold callers) and there was time before the permissable amended filing period expired. That is how they targetted them, they looked at the amendment period - I want to say it was 3 years. This goes back a few years and it was a takeover that I was only peripherally involved in so I don't recall all of the details. But I did check it out and it was legitimate. My guess is that the approach descriibed by nancy is similar but the details different. I bet a lot of people overlook the 25 participant rule and the standard termination examption, for example.

But these may be different people because in the one I ran into they were looking to take over future valuation work. This one seems motivated differently since the plan was being terminated. Same idea, though, must be an FOIA filing to get the data to develop the call list.

[nancy]

I actually gave the client of their premium payments along with the calculation we had done for both the alternative and general methods. We had done both methods and because it was a frozen plan they saved $50,000 in premiums. They were satsified and did not contact the company.