pbgc substantial owner question

[k man]

i know there are quite a few threads but we have some confusion in my office. in the case of a family plan. 4 employees, two parents and two adult kids. the kids have no ownership interest. would there be attribution of the parents stock to them or not? they clearly do not meet the 10% substantial owner test without attribution.

is this a pbgc plan? my answer is yes but some around me do not agree.

[Belgarath]

I agree with you based upon the information posted.

Since for these purposes you use 1563 attribution, and since the adult children have zero ownership, then there is no ownership attributed from parents to children. So the "substantial owner" exclusion doesn't apply, and it is a PBGC plan unless some other exclusion from Title IV coverage applies.

[rcline46]

Execute an option to buy for the children for at least 10% of the stock. Then you escape PBGC coverage.

[Rball4]

So constructive ownership does not apply here?

[rcline46]

Not under the code section they use for ownership. That is why the plan is covered by the PBGC

[Rball4]

What if it was just husband and wife where the wife owned 100% and the husband owned 0%? PBGC plan?

[david rigby]

Let's be careful here. ERISA section 4021(b) defines the exemptions.

Subsection (9) is "substantial owners". But don't overlook the possible application of subsection (13): "professional service employer".

[Rball4]

Certainly, but if they are not a professional service employer, are they still exempt from PBGC premiums?