Application of Balances After Plan Termination?

[Pension RC]

I am doing a 1/1/2012 valuation for a calendar year plan that terminated 12/31/2012. There is a small minimum required contribution. Is it permissible for the plan sponsor to elect to apply the prefunding balance toward the minimum if, at this point, all the distributions have been made and there are no assets left?

Thanks!

[My 2 cents]

I am trying to imagine a scenario involving a small positive minimum required contribution for the year of plan termination but no additional funds being needed to complete the benefit distributions. Isn't it always the case these days that the Funding Target would be smaller than the assets needed to either pay lump sums or buy annuities? Was there a really big prefunding balance? If part or all of the balance had been timely waived, would the minimum contribution have been eliminated?

Assuming that the 2011 FTAP was at least 80%, why wouldn't the sponsor be able to elect to use prefunding balance to satisfy the 2012 minimum required contribution? If the plan terminated in 2012 and was able to complete a standard termination, of what future use would the prefunding balance be?

On the odd chance that this involves a waiver of benefits by a majority owner, do beware! The only instance I have ever known of the IRS actually imposing the 100% excise tax on a funding deficiency was when the final required contribution was not paid in full and the owner waived some benefits (including benefits that would have been funded by the minimum contribution had it been paid). As there was then no mechanism for eliminating the deficiency, they became subject to the 100% excise tax. I cannot recall whether there were also individual tax issues with respect to what should have been distributed to the owner but which was not because of the missed contribution.

[Andy the Actuary]

Minimum funding standards apply for 2012. If the 2012 5500 whatever has not been filed, then an election can be made to offset the MRC with the PFB.

Alternatively, a contribution can be made and an additional distribution made in 2013, or the SB can show a funding deficiency, or you can fail to file the 5500 whatever, or you can jump off the Staten Island Ferry into the East River.