Frozen Plan and new participants

[mwyatt]

Just taken over a defined benefit pension plan that has had benefits frozen by amendment at the end of 1995. Plan was top heavy through end of 1996, and is no longer top heavy. Company is active and is just running this plan for another few years to bring funding up to an acceptable level at which point plan will terminate.

My question is about participants who have entered in 1998 forward. They have no accrued benefit and will not have any further accrued benefit as sponsor has no intention of lifting accruals. I'm assuming I can amend the plan to eliminate future entrants in 2000; any way that I can eliminate the $0 benefit participants? Thought about changing definition of eligible employee to eliminate those with no accrued benefit under the plan. Would a now excluded employee with $0 accrued benefit be able to be dropped as participant (ala a deemed distribution to a terminated non-vested participant) for PBGC premium and IRS count purposes? (Count is getting close to 100 and would like to avoid additional complexity with over 100 count).

Thanks for any input on this issue.

[david rigby]

Do you have the amendment from 1995? Does it also freeze the plan to new entrants? If not, sounds like an oversight. If so, then your problem vanishes.

If there are new entrants since 1995, then some must have gotten a (possibly only one) top-heavy allocation (or was it provided in a DC plan?).

If the plan is terminated, then a praticipant with a zero accrued benefit is just that, nothing to do. However, watch for a minimum of some type (say $50).

[mwyatt]

In response to Pax (thanks for your input):

Have amendment. Entry was not eliminated as plan was top heavy at time, must have known further accruals would continue (client had profit sharing plan but no recent history of contributions). Entrants in 1996 and 1997 had TH min accrual for prior years. Entrants 1998 and on no TH service so no benefit.

Plan is ongoing, not terminated. End game is to run about 4 more years to get underfunding to acceptable level to owner.

[John A]

Just to be sure I understand, was the conclusion that active employees who are $0 benefit participants must be included in the participant count until they either terminate employment or all assets are distributed?

[Guest JAREL]

Why not terminate the plan with respect to the group with $0 accrued benefit; then use the deemed distribution provisions to drop them out of the counts. This would only cause full vesting with respect to this group but they are at $0 anyway. I only wonder whether you would have to submit a plan termination to the PBGC with all zeroes?!