Missed Quarterly Contribution Cure

[Andy the Actuary]

A plan has missed it's July 15 contribution of $25,000. To cure this at once, my understanding is that sponsor should contribute $25,000 now. He would not have to contribute a greater amount now that reflects the 5% penalty and extended discount. However, before the year's contributions are completed, the sponsor will have to contributed enough so that the discounted contributions, including penalties, at least equals the plan minimum.

Does anyone belief that in curing the missed quarterly, that the delay and penalty would have to be recognized at that time the curing contribution is made? E.g., contribute $25,437.

[tymesup]

I'm assuming there is no funding balance available to satisfy the required installment.

Agreed 25K is sufficient.

They may have to notify the PBGC.

They do have to notify the participants, if any.

[Andy the Actuary]

No credit balances. Will notify Participants in the 2012 AFN if applicable. Don't know how to notify PBGC yet because depending upon whether or not IRS nukes the "annuity substitution" rule, quarterly contribution may not have been missed ! Thanks for replying.

[Craig Jacobs]

Isn't the notice to plan participants due sooner than the mailing of the AFN?

[emmetttrudy]

Definitely do not have to contribute higher than the $25,000 now. I believe PBGC has to be notified of a missed quarterly within 60 days. And this can be done through a form email. I also agree, I think the participants need to be notified prior to the distribution of the AFN.

[Andy the Actuary]

Definitely do not have to contribute higher than the $25,000 now. I believe PBGC has to be notified of a missed quarterly within 60 days. And this can be done through a form email. I also agree, I think the participants need to be notified prior to the distribution of the AFN.

Agree, must notify participants within 60 days. Unsure if notification of participants is still required if cured within 60 days.

[Effen]

I don't think there is any guidance on that. I generally let the client decide. Obviously safe answer is to notify, however most of my clients choose not to.

[Calavera]

If you make the contribution within 60 days, you do not have to notify participants. If you didn't make a contribution within 60 days you have to notify participants. There is nothing about when you need to notify them. Old rule was that you can notify them with a SAR. I say using the AFN for the notification is perfectly acceptable.

If you didn't make a contribution within 30 days, you have to notify PBGC. The notice must be filed within 30 days after a plan administrator or contributing sponsor knows or has reason to know that a reportable event has occurred.

[Andy the Actuary]

New situation. Calendar year DB plan. Insurance company under state receivership, who may or may not make contributions. They may not make authorize futher contributions. Plan has previously been reported to PBGC but PBGC has not yet stepped in.

4/15/2014 quarterly has not been made. Large contribution for 2013 still due by 9/15/2014.

I (and legal counsel) need to outline all the bad things that can happen. Not looking for detail just cateorgies because frankly my clients over the past 25 years have been well-behaved.

1. Notify Plan Participants

2. Notify PBGC

3. Penalty interest on late contributions

4. Excise tax if 9/15 contribution not made up to 100% if not cured. Presume this may be ongoing?

5. Presume must continue valuations until Plan is terminate or taken over by PBGC?

6. Any IRS disqualification issues?

7. Any DOL issues?

I will speak with counsel about getting the PBGC to get pro-active to take over this plan.