Distributing Assets during plan termination process

[dmb]

If a plan sponsor initiates (either with PBGC or with both IRS and PBGC) the termination of a DB plan, can it purchase annuities or pay lump sums (at least to non-active participants) at any time? Or must it wait until the 60 day window has closed (in the case of PBGC only)or it receives a determination letter? Thanks.

[david rigby]

Could be some apples and oranges. The PBGC "no action" period of 60 days means no actions related to plan termination. However, any normal plan operation should continue without variation, including initiating new retirements (for example). Think of it this way: during the 60-day review period (or later if extended), there is no plan termination.

[dmb]

We're more concerned with the period wating on an IRS DL and the possibility of a partial buyout during that period, maybe if purchase rates spike and opportunity is there to payout on a higher interest rate.

[david rigby]

The time it takes for the IRS review serves to extend the completion deadline for the entire termination process; it has no bearing on the PBGC 60-day period. Therefore, if the 60-day period has expired (without action), the sponsor can proceed with the process of buying annuities, paying lump sums, etc.

Important caveat: sponsor might want to wait for D-letter, or might be required by plan document to wait for D-letter. Also, don't think you have to do everything at once. For example, buying annuities for existing retirees might be permissible under the plan at any time, so it might be helpful to get that out of the way.

[dmb]

Thanks. Meant to include in prior post that the partial buyout woud be for current retirees and maybe eligible TVs. Thanks again.

[ScottR]

The PBGC is fairly flexible on this. I don't think they would have a problem with an accelerated payout to a participant in the event of an emergency. Otherwise, we generally wait the 60 days for all participants.

... Scott