Termination of DB Plan Insufficient Assets

[LIBERTYKID]

A company is going out of business. It has a DB plan and owes 1M if terminated. The company has 500K in assets and does not mind giving the PBGC what it has. Because it will not formally file for bankruptcy, how do I get the PBGC to take over this plan? It does not meet the criteria for a distress termatation. However, the PBGC can take over a plan if it feels assets will be lost. Any help in how to get the PBGC to take over this plan is appreciated.

[SoCalActuary]

Here's my suggestion:

1. Contribute as much of the $500k to the plan as possible, unless the business owner has a substantial portion of the underfunding.

2. Write to the PBGC, enclosing a form 10, to describing your problem.

3. Terminate the plan as a deficiency plan.

But, the business owner might be commiting tax suicide, because they are converting cost basis in the business to taxable income from pension.

This also needs to be checked carefully.

[Effen]

I suggest you give Kristina Archeval of the PBGC a call. She will explain your options and work with you and your client. You don't have to give the clients name until they are ready, but I have found her to be very helpful.