DB still covered under Title IV?

[Young Curmudgeon]

My calendar year defined benefit plan had both common law participants terminate in 2012 and they were paid out lump sums in June 2013. For, the 2013 year, for purposes of applying the combined limits (there is a 401(k) also), is the plan still considered to covered under Title IV? The DB contribution is way over 25% of compensation and I would rather not limit the profit sharing to 6% of compensation.

[Effen]

In what year did you deduct the DB contribution that was way over 25% of comp? if you took the deduction in 2013, then you have to comply with the 2013 combined plan deduction rules.

Is the plan covered by PBGC? If so, than the combined plan deduction rules do not apply.

[Young Curmudgeon]

It was covered by PBGC but the two participants for which PBGC coverage was required were paid out in June 12, 2013. On June 13, 2013 only owner benefits remain. So is the plan still considered "covered" and subject to title IV for 2013?

[chc93]

You will need to call PBGC. I don't think you can make the non-coverage determination yourself without PBGC blessing.

[Belgarath]

Just a thought - IMHO it seems to me that the plan would still be "covered" for 2013. The PBGC premium filing instructions state that PBGC premiums must be made "through and including" the plan year in which the plan ceases to be a covered plan under ERISA 4021. I'd interpret this to mean that until the year following when the participants are paid out, the plan is "covered" under PBGC. In addition, under ERISA 4021(a), coverage applies for a "plan year" unless one of the exceptions under 4021(b) applies. Again, it seems to me that since it is not maintained exclusively for substantial owners until the plan year beginning in 2014, it is subject to ERISA 4021 for 2013, and therefore the combined plan limits do not apply.

However, I'm not a "DB person" so I think you'd be better off relying on the opinions of the actuarial types here on this board!

When Filing Obligation Ceases

You must continue to make premium filings and pay premiums through and including the plan year in which any of the following occurs:

 Plan assets are distributed in satisfaction of all Benefit Liabilities pursuant to the plan’s termination.

 A trustee is appointed for the plan under ERISA section 4042.

 The plan disappears by transferring all its assets and liabilities to one or more other plans in a Merger or Consolidation.

 The plan ceases to be a covered plan under ERISA section 4021.

The following examples illustrate when the filing obligation ceases:

Example 1 – A calendar-year plan terminates in a standard termination with a termination date of September 30, 2012. On April 7, 2013, assets are distributed in satisfaction of all Benefit Liabilities. The Plan Administrator must file and make the premium payments for the 2012 and 2013 plan years.

[david rigby]

Agree with Belgarath's conclusion. See the PBGC premium instructions, page 5.

http://www.pbgc.gov/Documents/2013-Premium-Payment-Instructions.pdf#page=5

[Calavera]

Plan is covered for the 2013 year (no premium proration). You will need to send email to PBGC providing EIN/PN, describing the situation, and requesting to remove the coverage effective 6/13/13. After receiving the PBGC's blessing, you mark your 2013 filing as the final filing.

[chc93]

Just a thought - IMHO it seems to me that the plan would still be "covered" for 2013. The PBGC premium filing instructions state that PBGC premiums must be made "through and including" the plan year in which the plan ceases to be a covered plan under ERISA 4021. I'd interpret this to mean that until the year following when the participants are paid out, the plan is "covered" under PBGC. In addition, under ERISA 4021(a), coverage applies for a "plan year" unless one of the exceptions under 4021(b) applies. Again, it seems to me that since it is not maintained exclusively for substantial owners until the plan year beginning in 2014, it is subject to ERISA 4021 for 2013, and therefore the combined plan limits do not apply.

However, I'm not a "DB person" so I think you'd be better off relying on the opinions of the actuarial types here on this board!

When Filing Obligation Ceases

You must continue to make premium filings and pay premiums through and including the plan year in which any of the following occurs:

 Plan assets are distributed in satisfaction of all Benefit Liabilities pursuant to the plan’s termination.

 A trustee is appointed for the plan under ERISA section 4042.

 The plan disappears by transferring all its assets and liabilities to one or more other plans in a Merger or Consolidation.

 The plan ceases to be a covered plan under ERISA section 4021.

The following examples illustrate when the filing obligation ceases:

Example 1 – A calendar-year plan terminates in a standard termination with a termination date of September 30, 2012. On April 7, 2013, assets are distributed in satisfaction of all Benefit Liabilities. The Plan Administrator must file and make the premium payments for the 2012 and 2013 plan years.

However, note that for a plan termination and all assets have been distributed (April 7, 2013 in the example), the plan is eligible for a pro-rated premium for 2013 for Jan-Apr. We were told by the PBGC that the pro-rated premium is up to the month in which the Form 501 is signed and received by the PBGC... so this is what we did. After filing and paying the pro-rated premium, a premium refund of 1 month was returned to the plan sponsir, since all assets were distributed in the month prior to filing the Form 501. (note that this was in 2011) Don't have experience with non-coverage during a plan year.