Schedule SB in Year of Plan Termination

[Pension RC]

The SB instructions state that "minimum funding standards apply until the end of the plan year that includes the termination date." Is this true for a plan that terminates on the first of the year, where, clearly, the minimum funding requirement will be $0?

Any help would be appreciated!

[david rigby]

IMHO, yes, the minimum funding standards apply for 2014 (for example), if your DOPT is 01/01/2014 (for example).

(Zero minimum is not the same as "funding standards don't apply".)

[frizzyguy]

Can I ask a dumb question? (Too bad, I'm doing it anyway.) Why is it "clear" that the minimum is going to be zero? I am saying this because I agree with David (not that my opinion really means a whole lot but I trust Mr. Rigby) and you should definitely make sure the required funding is actually $0.

I think you could make the argument that the intention was for the client to not have required funding limits apply if the amendment was created and signed in 2013 but if that's the case you should have used a 12/31 termination date. The safe answer though, is of course, that they apply.

[Hojo]

Can I ask a dumb question? (Too bad, I'm doing it anyway.) Why is it "clear" that the minimum is going to be zero? I am saying this because I agree with David (not that my opinion really means a whole lot but I trust Mr. Rigby) and you should definitely make sure the required funding is actually $0.

I think you could make the argument that the intention was for the client to not have required funding limits apply if the amendment was created and signed in 2013 but if that's the case you should have used a 12/31 termination date. The safe answer though, is of course, that they apply.

My guess (and it's only a guess) is that the plan is already frozen so no normal cost and the plan is obviously overfunded on a funding basis so you know that there will be excess assets for valuation purposes (even if they are not overfunded when it comes to paying out lump sums) thus no minimum funding. I have many clients in this situation.

[frizzyguy]

I totally agree Hojo, I guess I was just trying to prove a point rather than just saying what I was thinking. I just wanted to be clear that if you have to file an SB, you should probably do a valuation. That's all.

[Effen]

I think I am coming around with Frizzy, why does RC say,"where, clearly, the minimum funding requirement will be $0?s", and Hojo say, "the plan is obviously over funded on a funding basis so you know that there will be excess assets for valuation purposes".

Just because it terminated doesn't mean it is over funded. The plan could be underfunded, in which case you could have a required contribution for the one day the plan year, couldn't it?

[Rball4]

My main question is why are they terminating on the first day of the year, when they could have just done it one day prior (the last day of the prior plan year)?

[Effen]

Well, ya, but I just assumed it was some broker type who just didn't know any better did that.

[Hojo]

I think I am coming around with Frizzy, why does RC say,"where, clearly, the minimum funding requirement will be $0?s", and Hojo say, "the plan is obviously over funded on a funding basis so you know that there will be excess assets for valuation purposes".

Just because it terminated doesn't mean it is over funded. The plan could be underfunded, in which case you could have a required contribution for the one day the plan year, couldn't it?

Of course it COULD be underfunded. I was just saying that based on the OP's statement that it was probably well overfunded and no minimum was going to apply. Didn't want to make it more difficult than it needed to be.