Waiver/Forfeit by Owner of Benefits on Plan TM

[Guest Pete Joachim]

A DB Plan sponsored by law firm is terminated. The multiple owners each own less than 50% of the partnership. Full benefits paid to non-owner rank/file employees. The owners wish to waive all or a portion of their benefits due under plan (it meets the funding requirements but the Plan is not fully funded to pay all benefits to owners).

Plan being reviewed by PBGC now. PBGC generally accepts these "waivers" but only if the owner is a majority owner (more than 50%). PBGC willing to accept these waivers if the owners have the ability to possibly become a majority owner such as if the Firm allows owners to buyout other owners. However, the firm does not allow owners to purchase other owners interest in the firm when they leave, rather their interest goes back to the general partnership - which as I understand - is the more common scenario.

Has anyone been faced with this issue and have they been able to get the PBGC to accept the "waivers" regardless of the majority ownership issue?

I realize there are IRS issues as well - but right now dealing with the PBGC.

Thanks

[Lou S.]

It has been a few years but in the past we have had success with the PBGC approving waivers of non-majority owners, with spousal consent of course.

However, I would note in those cases the business was generally closing and the alternative to the waivers was more likely that the plan would have gone into a distress termination because the company (or individuals) did not have the funds availabe to fully fund owner benefits without significant hardship. So the PBGC decided accepting the waives was in their (and the Plan's) best interest I guess, especially since rank and file ees were getting full pay out.

If the owners did have cash to fund the plan, as is often (though not always) the case with lawyers, they might have had a different view.