Participation

[ombskid]

Sponsor terminating a db plan wants to spin off participants who chose a monthly benefit (vs most who chose lump sum) into new plan. Old plan was already frozen, this one would have no new benefits.

Is minimum participation requirement met when none accrues an additional benefit?

[Effen]

why? what would be the point?

[ombskid]

Sponsor wants to pay out monthly benefits for 3-5 years in hopes that annuity rates come down (interest rates go up).

Annuity quiotes came in 60% higher than lump sums.

[Effen]

No, I mean why would he want to create a new plan that looks identical to the old plan. But I think I understand now, you can't pay lump sums to the actives unless you terminate the plan, right? Ok, now I get it.

So if he thinks interest rates will rise and annuities will be cheaper in the future, why not wait to pay the lump sums as well. They will be cheaper in the future also (assuming the plan is not using some non-417(e) actuarial equivalent).

Anyway, to answer your question, I don't think there would be anything wrong with a plan that only contains retired participants. You would probably just do a spinoff to create the new plan.

[ombskid]

There are also currently employed participants who chose an annuity.