To terminate or to not terminate?

[ERISAgeek111]

A client (owner of a two-member LLC) is considering selling his business (the LLC) or transferring his interests to the other member (his brother).  The LLC maintains a defined benefit plan for the LLC's members/employees.  Does the LLC have to or should it terminate the plan? Can the plan continue in effect? Under what circumstances would it be best to terminate the plan? Should the plan be frozen regardless? 

[Lou S.]

There really is not enough information. Is the plan over funder or underfunded? Is this an asset sale or stock sale? Is the plan covered by the PBGC? Does the new business want to assume the plan? There are probably a host of other questions that should be directed to the Owner who is selling, the owner who is buying and the Plan Actuary.

[ERISAgeek111]

Lou S.  Aren't all defined benefit plans covered by PBGC? The plan is over funded.  Is a difference between the treatment of the DB plan in an asset sale vs a stock sale? I don't know if the business will assume the plan -- they want me to just give them various options, i,e. whether they should terminate or continue, and the pros and cons of each.  i was just wondering whether they really should terminate the plan.  

[Hojo]

27 minutes ago, ERISAgeek111 said:

Lou S.  Aren't all defined benefit plans covered by PBGC? The plan is over funded.  Is a difference between the treatment of the DB plan in an asset sale vs a stock sale? I don't know if the business will assume the plan -- they want me to just give them various options, i,e. whether they should terminate or continue, and the pros and cons of each.  i was just wondering whether they really should terminate the plan.  

Based on the questions you're asking, I think you need to speak to the plan's actuary to get an expert opinion on this particular case.

[Lou S.]

I agree with Hojo 100% on this.