pbgc coverage

[Gary]

A professional sve employer has

8 active employees with an accrued benefit and

11 terminated vested employees with an accrued benefit

the plan has not had any accruals (not explicitly frozen, bit formula expired some years ago so no new accruals) for several years.

There are 19 additional employees who meet the plan's eligibility requirement, but of course have an accd ben of $0.

So the question is how many "active participants" are there?

Of course the PBGC premium filing instructions provide that a participant is someone that has a benefit liability (whether active or inactive).

So on that basis there would be 8 active participants and 11 inactive participants.

But is that the proper definition for "active participant" when determining number of active participants in order to determine if a plan is covered by pbgc.

Any comments supported with a cite of course

thanks

[david rigby]

...not explicitly frozen, bit formula expired some years ago so no new accruals

I'm not familiar with "expired". Can you provide some more information?

[Gary]

the formula was 5% of compensation for the 2007 and 2008 plan years only.

So after 2008 there is no "active" formula.

I don't want to go off on a tangent.

For practical purposes the formula is frozen but the plan does not explicitly provide that new participants cannot enter plan; albeit they will have no accrual.

thanks.

[Guest Quagmire]

the formula was 5% of compensation for the 2007 and 2008 plan years only.

So after 2008 there is no "active" formula.

I don't want to go off on a tangent.

For practical purposes the formula is frozen but the plan does not explicitly provide that new participants cannot enter plan; albeit they will have no accrual.

thanks.

See § 4006.6. As per the instructions, I'd interpret this to mean that a per-participant premium is not owed for anyone with an accrued benefit of $0. I didn't read through the Examples and they're probably not relevant to your question, but you should read them to be sure.

See also § 4001.2 Benefit liabilities.

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[Hojo]

Has anyone had any recent experience with this? We have a plan with 10 participants who are $0 benefitting and 20 with >$0 benefitting, but want to be covered by the PBGC.

[figure 8]

On 11/19/2013 at 10:56 AM, Hojo said:

Has anyone had any recent experience with this? We have a plan with 10 participants who are $0 benefitting and 20 with >$0 benefitting, but want to be covered by the PBGC.

My understanding is that your example would trigger PBGC coverage. I believe they consider a participant (for determining coverage) to be anyone who is accruing benefit service. Whether they actually accrue a benefit is irrelevant.

If you think about it this way, it makes more sense - someone who enters at January 1 (who will be benefiting >$0) is considered a participant at January 1 for counting purposes for determining coverage. They haven't accrued anything yet, but they are still counted. So this seems to make it clear that the amount they will benefit (whether $0 or more) doesn't matter.

Regardless, laws are not always logical and consistent, so I'd be curious if anyone has any direct experience that either confirms or denies my understanding.

Thanks in advance.