Plan Termination-Ongoing Duty?

[Randy Watson]

A defined benefit plan was terminated. The plan sponsor conducted a diligent search for the safest available annuity (actually engaged an expert to assist in the search). The sponsor narrowed the candidates down to 3 finalists and made a selection based on the factors in Interpretive Bulletin 95-1. The entire process was well documented.

Once the assets are out and individual annuity certificates are issued, what ongoing obligations, if any, does the plan sponsor have? Are they completely discharged off all liability going forward or is there a duty to at least monitor the annuity provider to make sure payments are made in accordance with the contract?

[david rigby]

Yes and No, in that order. How would a sponsor (who may now be out of business) "monitor" an insurance company anyway?

[mbozek]

A defined benefit plan was terminated. The plan sponsor conducted a diligent search for the safest available annuity (actually engaged an expert to assist in the search). The sponsor narrowed the candidates down to 3 finalists and made a selection based on the factors in Interpretive Bulletin 95-1. The entire process was well documented.

Once the assets are out and individual annuity certificates are issued, what ongoing obligations, if any, does the plan sponsor have? Are they completely discharged off all liability going forward or is there a duty to at least monitor the annuity provider to make sure payments are made in accordance with the contract?

I dont understand the question. Once the the plan is terminated and the insurance company accepts the obligation to pay the benefits under the annuity contract the insurer is solely liable for paying the benefits because the plan has ceased to exist. Participant's contractual obligation is with the insurance company to pay the benefits promised. After the plan has ceased to exist how can plan sponsor monitor the obligation between the participant and insurer?

[jpod]

I guess I would want to make sure that per the annuity contract the plan sponsor/trustee has no residual authority to enforce the contract (highly unlikely I admit).

[david rigby]

Right jpod. Of course, the (well-informed) sponsor would not purchase any annuity contract with that condition.