PBGC Plan Term - Impact of Plan Term Being Revoked

[JAY21]

Has anyone had the situation where they went down the PBGC standard termination path and got about 90% done with all distributions and then the client discovered unanticipated losses on the final assets that will require some extensive time in order to come up with the money. Plan has already been on 2 extensions of time for different reasons and now the surprise losses will cause some extensive and unknown delays. What are the mechanics here ? Does the PBGC have you revoke the plan termination ? Any special rules or unique situations that arise when the plan term is revoked after 90% of the people have been paid out ?

[Andy the Actuary]

Oh, how deliciously nasty. If you revoke the plan termination, then you likely will have made unacceptable in-service distributions. If you can miraculously create a partial plan termination, then somehow you'd have to be concerned about non-discrimination. I.e., you will have paid out a group that constitutes a discriminatory group.

You've only mentioned PBGC but are there not IRS issues when liabilities have not been settled within a reasonable amount of time after receiving a D-Letter, assuming a D-Letter was applied for and received?

Sounds as if you would either (a) communicate with both PBGC and IRS about a plan or (b) ride bareback and take your chances. No doubt each agency has seen this situation though as always, the challenge will be identifying and locating the parties who have been through this.

Most important, the client has already communicated with Plan participants who no doubt have certain expectations of receiving their distribution. The last ointment fly your client needs is some irate employee running to the DOL. Given that there will be a delay, the remaining employees need to be apprised as well as given a time line.

Oh yes. There's also the standard actuarial advice: Consult with legal counsel.

[chc93]

Can the company make a loan to contribute to the plan to cover the remaining distributions... we've seen this done before.