management company - PBGC coverage?

[Belgarath]

S-corporation - management company - 4 equal 25% owner-employees. No other employees. Now, I know they are not subject to Title IV due to the exception for a plan covering only "substantial owners" under 4021(b)(9). But it got me to thinking, what if they hired an employee - does this qualify as a "professional service employer?"

This seems to get a little gray due to the "...but is not limited to..." clause in 4021©(2)(B).

The "conservative" approach would be to say PBGC coverage required. And of course we could ask the PBGC if it ever happens, which isn't likely at this point. I just wondered if anyone had encountered a similar situation, or had seen any guidance on such a situation?

As I think about it - the "conservative" approach from a PBGC coverage point of view might be considered aggressive from the IRS point of view, in that the combined plan deduction limits wouldn't apply if it is PBGC covered. So checking with the PBGC and getting an opinion from counsel would be absolutely necessary here, I think, if it ever actually came up.

[Doghouse]

For what it's worth, I had a similar situation a few years ago and spoke with the PBGC about it. Their "unofficial" answer was that a managerment company is not a professional services employer. Their rationale was that it does not require any special certification, education, etc.

[Belgarath]

Thanks.

[david rigby]

As far as I can tell, there are no regulations under ERISA sec. 4021. In 4021©(2)(B), note the phrase "... includes, but is not limited to..."

Also, some of the listed professions do not require licensing, certification, etc.

Thus, on its face, the statutory language does not exclude the situation proposed in the OP.

[Belgarath]

Thanks Dave. Yeah, I couldn't find any regs on this either. I do think that getting a PBGC ruling would be crucial in that I don't see how the IRS could challenge a full deduction to a DB and DC if the PBGC itself says the plan must be covered under PBGC. Without the PBGC ruling, then I think subject to challenge.

I don't know, obviously, but would anticipate that the PBGC "default" answer if you call would be that yes, PBGC coverage required.