PBG Audit

[RLR]

We have a small plan that terminated and is now being audited by the PBGC. The plan terminated in late 2010. A valuation was run 1/1/11 to get the current interest rates. The valuation system uses age near. The document defines Age as age near but there is no reference to Age for LS calculations. PVAB is defined in the doc as "the AE LS amt. of a Participant's AB at date of valuation". In practice, when a participant terminates we calculate the PV of the AB at the age near retirement age and discount that to the current age using yrs. and mos. There is no pre-ret mortality. We indicated on the PBGC checklist that the age for LS calcs was "Near". There was a large excess in the plan which was allocated to the participants based on the PVABs from the 1/1/11 valuation. The distributions were made beginning 4/1/11 - most were made in May 2011 and the last piece of the owner's benefit was paid in August 2011. The auditor wants us to recalcuate the PVAB as of the date of distribution since some particpipants age near would have changed which would have in turn changed the basis for allocating the excess. We feel that this is unreasonable given that everyone received more than the value of their benefit. If we follow his guidance, everyone would have to be paid twice. The first time for just the PVAB of the AB at the date of THEIR distribution and and a second time for their share of the excess. That would be an administrative nightmare. I've searched this forum, but have not found anything helpful. I would appreciate any comments or guidance as the auditor is wanting to submit the case for review - whatever that means.

[AndyH]

Did you see this one, Effen's comment in particular?

http://benefitslink.com/boards/index.php?showtopic=51169

[RLR]

Did you see this one, Effen's comment in particular?

http://benefitslink.com/boards/index.php?showtopic=51169

Yes, I have a hard time understanding how administratively you can pay everyone on the same day in a plan termination. You can provide the numbers to the employer but there may be reasons or not why the checks are not issued all on the same day. Just seems that there should be some administrative grace period or something to complete the distributions. I would think that since ther was an excess allocated, that that would have some bearing on this particular case as well.

[Mike Preston]

Deep breath time. The PBGC is (should be?) concerned only that the terms of the plan as of its terminated date are followed and that each and every participant receives at least the amount promised by the plan document.

In your case, I would just assert that each participant has received the amount promised by the plan document as of the plan's termination date and then some and trust that the reviewer's manager will understand that to be the case.

Do not fear submitting the case for review. The reviewers, while quite strict to the dictum that the plan's terms as of the plan's termination date be followed, are quick to understand that excess assets can be allocated in just about any way that the plan sponsor wants them to be.

[Effen]

excess assets can be allocated in just about any way that the plan sponsor wants them to be.

Only assuming the sponsor wants them to be allocated in a way they can demonstrate to be nondiscriminatory and in a way that complies with their plan document.

[david rigby]

... in a way that complies with their plan document.

You did verify that the plan document provides for an allocation of assets?

(I'm skeptical, because I've seen it done without proper documentation.)

[AndyH]

The last responses are all dictums (my new word of the week - thanks Mike). Or is that dicti?

[RLR]

... in a way that complies with their plan document.

You did verify that the plan document provides for an allocation of assets?

(I'm skeptical, because I've seen it done without proper documentation.)

Yes, it's an option in the AA to have an excess revert to the employer or allocated to the participants. The BPD states that the excess, if so elected, will be allocated based on PVAB unless integrated and then on a nondiscriminatory basis.

[RLR]

Thank you everyone for your comments. We're still negotiating with the auditor - it may very well end up in "review".