when does pbgc coverage end

[SheilaD]

I have a small organization (not proessional service) - just 2 owners (husband and wife each own 50%) and 1 participant. The plan is PBGC covered. The only participant who is not an owner terminates in 2010 and is due a benefit. He is finally paid out in February, 2012. Technically the plan is no longer a PBGC insured plan effective march 1, 2012. For a portion of 2012 the plan is PBGC covered so do you think I can still get the 25% of pay maximum PSP for 2012? I know I can't for 2013. (presume DB cost is far over the 25%.)

Followup question - the company is incorporated and I am pretty sure that each spouse own's 50%. But if one spouse own's 100% and the other only owe's through attribution - then the plan remains PBGC insured? I might talk to them about changing the ownership in that case.

thank you.

[Hojo]

I have a small organization (not proessional service) - just 2 owners (husband and wife each own 50%) and 1 participant. The plan is PBGC covered. The only participant who is not an owner terminates in 2010 and is due a benefit. He is finally paid out in February, 2012. Technically the plan is no longer a PBGC insured plan effective march 1, 2012. For a portion of 2012 the plan is PBGC covered so do you think I can still get the 25% of pay maximum PSP for 2012? I know I can't for 2013. (presume DB cost is far over the 25%.)

Followup question - the company is incorporated and I am pretty sure that each spouse own's 50%. But if one spouse own's 100% and the other only owe's through attribution - then the plan remains PBGC insured? I might talk to them about changing the ownership in that case.

thank you.

Once covered, always covered.

[SheilaD]

I have a small organization (not proessional service) - just 2 owners (husband and wife each own 50%) and 1 participant. The plan is PBGC covered. The only participant who is not an owner terminates in 2010 and is due a benefit. He is finally paid out in February, 2012. Technically the plan is no longer a PBGC insured plan effective march 1, 2012. For a portion of 2012 the plan is PBGC covered so do you think I can still get the 25% of pay maximum PSP for 2012? I know I can't for 2013. (presume DB cost is far over the 25%.)

Followup question - the company is incorporated and I am pretty sure that each spouse own's 50%. But if one spouse own's 100% and the other only owe's through attribution - then the plan remains PBGC insured? I might talk to them about changing the ownership in that case.

thank you.

Once covered, always covered.

But under PBGC regs about premiums it specifically refers to a situation where the coverage ceases but not due to plan termination (noting that there is no pro-rata reduction in premium). I love it if they are still covered -- can you point me in the direction of where this is in the reg's?

thanks.

[rcline46]

We have successfully removed many plans from PBGC coverage once all employees have been paid.

[Hojo]

The once covered always covered may only apply to professional service providers (missed that part in your initial post)....I'll look to see if I can find something.

[tymesup]

We've also removed plans from PBGC covered status. It would be risky to go over the deduction limit if there was a possibility the plan is not covered.

Once a professional employer is covered because it goes over 25, it remains covered even if it goes under 25 at a later date. Not sure off the shelf whether it's exactly 25 or not, or whether it's employees or participants.

[SheilaD]

Since we will remove the plan from coverage for 2013 (as no pro-rata premium allowed for 2012) - it is POSSIBLE that they can take the 25% for 2012. I lean towards it being OK.

Would you agree that if unincorporated and we change all ownership to one of the two spouses it is a PBGC insured plan? (I said it wrong in my first post).

[Calavera]

Generally a sole-proprietorship or LLC that is owned by one spouse and pays W2-wages to other spouse is covered by PBGC.

I am not sure if restructuring the business will help you since the plan, which is established and maintained exclusively for substantial owners is not covered by PBGC, and you look for the substantial ownership at any time during the 60-month period ending on the date the determination is being made.

You also may explore with your ERISA counsel the idea of “once covered, always covered” until the coverage removed by PBGC. I don't think you can just mark your filing as the last year filing and remove the coverage. You need to apply to PBGC and request to remove the coverage. So, what if you will not apply and continue to pay PBGC premium.

[ScottR]

I've had success in emailing the PBGC about coverage questions such as this. They are very responsive, and promptly follow up with questions, and later, a letter stating their position.

FWIW, I think your plan ceased to be covered when the last non-owner was paid out. But you'll probably have to pay a full PBGC premium for 2012, and for deduction limit purposes, you should treat the DBP as covered for 2012.

Don't think it matters which spouse owns the company. They're both substantial owners by attribution.

Best!

Scott