Splitting a DB Plan into 2 Plans

[Mister Met]

What is the rationale for taking an existing DB plan and splitting it up in 2 separate plans - 1 for actives and 1 for inactives? I know that this leads to additional administrative costs (two 5500's, plan documents, etc.) but what is the advantage?

[Andy the Actuary]

What is the rationale for taking an existing DB plan and splitting it up in 2 separate plans - 1 for actives and 1 for inactives? I know that this leads to additional administrative costs (two 5500's, plan documents, etc.) but what is the advantage?

This could be a first step towards terminating one of the Plans to recapture the excess assets or a move to facilitate selling off a company or division. When all else fails, ask.

[david rigby]

It could also be an attempt to avoid an audit, if the split takes the two separate plans below the 100 participant level.

[Draper55]

if you wanted to immunize a portion of the liability

by a bond portfolio or even through an annuity purchase

it is much easier to do this for a short duration retire group

than for active lives...

[frizzyguy]

What about the effect on accounting? I can't think of anything but that is an area I could see the effect making sense. They might also want to buy deferred annuities for the inactives and terminate the plan and file for a d letter to make sure that half is handled properly.

Is there an attorney involved?