Unterminating DB - PBGC covered

[Jakyasar]

Hi

Another new one for me.

PBGC covered plan, terminated 12/31/2022

500 is not yet done/filed with PBGC.

Sponsor changed their mind, wants to continue.

Can a simple notice to the participants stating "we decided not to terminate the plan" would be sufficient?

I will amend the plan later to unfreeze the benefits.

When terminated all became 100% vested (plan was only 3 years old and all would have been only 40% vested if not terminated). I cannot find any written document of making everyone 40% again with the reversal of termination. Anyone knows if possible?

Thank you

[CuseFan]

Not terminating and unfreezing are two different actions. There should have been a resolution adopted to terminate the plan, so now a resolution to rescind the termination should be adopted. If the intent is to also unfreeze the plan then that should also be stated in the resolution - and if unfreezing applies to participation and benefits or just benefits. As you noted, that will require an amendment.

If there was a plan amendment for the termination that made everyone 100% vested then I doubt if you can go back to 40% (unless specifically contingent upon plan termination) - but you can definitely go back to the vesting schedule for future accruals. If everyone was simply made 100% under plan terms pursuant to plan termination and the plan does not terminate, then maybe that is cause to revert to the vesting schedule. 

Was there an event or expectation thereof that gave rise to terminating the plan after only three years (potential red flag) that either didn't occur or was otherwise accommodated? Doesn't matter at this point but maybe an ongoing situation to monitor?

[Bri]

Did everyone get their NOIT and NOPB yet? 

Wondering if they can hide behind "we didn't do it right, so it doesn't count anyway."

[Jakyasar]

All termination was done according to PBGC rules so no questions on that.

I simply want to unterminate first and then think about unfreezing later.

1 hour ago, CuseFan said:

Not terminating and unfreezing are two different actions. There should have been a resolution adopted to terminate the plan, so now a resolution to rescind the termination should be adopted. If the intent is to also unfreeze the plan then that should also be stated in the resolution - and if unfreezing applies to participation and benefits or just benefits. As you noted, that will require an amendment.

If there was a plan amendment for the termination that made everyone 100% vested then I doubt if you can go back to 40% (unless specifically contingent upon plan termination) - but you can definitely go back to the vesting schedule for future accruals. If everyone was simply made 100% under plan terms pursuant to plan termination and the plan does not terminate, then maybe that is cause to revert to the vesting schedule. 

Was there an event or expectation thereof that gave rise to terminating the plan after only three years (potential red flag) that either didn't occur or was otherwise accommodated? Doesn't matter at this point but maybe an ongoing situation to monitor?

Lost 50% of biz due to war in Ukraine, that is a good reason for terminating the plan. Well documented.

[Jakyasar]

40 minutes ago, Bri said:

Did everyone get their NOIT and NOPB yet? 

Wondering if they can hide behind "we didn't do it right, so it doesn't count anyway."

Yeah, not really. I have a signed certification stating all notices (204h+NOIT) were provided and timely. I am not going to question this. 

[Jakyasar]

All I need is to unfreeze at this time, will worry about unfreezing later. Any suggestions on what to write on the notice?

I do not see any other way of reducing the vesting to 40%. 100% it is.

[Paul I]

I just had a plan that went through the entire plan termination process with the PBGC up to the point where annuities were purchased for all terminated participants and the plan was negotiating the purchase of annuities for the remaining actives.  All filings were made timely.  A week before the final PBGC filing was due, the company decided that it could not afford the contribution needed to complete the annuity purchases.  The PBGC said as long as no distributions were made that relied on the termination as the distributable event and everyone who was sent an NOIT was given a notice was called off, the PBGC would acknowledge the withdrawal of the termination and the plan is back to business as usual. 

The plan was frozen so everyone already was fully vested, and we recommended an amendment to withdraw the termination to complete the documentation.

Frankly, it was surprisingly simple.

[Jakyasar]

Hi Paul

I have not yet submitted to PBGC. Just looking for some wording on a notice to be provided to the plan participants about rescinding the termination.

It is a good story though

[Paul I]

Here literally is the sanitized notice that was sent out to everyone who received the NOIT.  The language was adapted from the letter received from the PBGC.  We added the second paragraph because individuals had made elections for their form of payment to be made as a result of the plan termination. 

Notice of Withdrawal of the Plan Termination

of the Retirement Plan

 

The Corporation has withdrawn the plan termination of the Retirement Plan.  The Plan is an on-going plan.  The Plan did not terminate as of the proposed termination date stated in the Notice of Intent to Terminate that was distributed when the process began.  You will be notified in advance of any further effort to terminate the Plan.

 

Under 29 CFR section 4041.28(b), the plan administrator may not make any distributions of assets unless a participant has a distributable event such as retirement, death, disability or other separation from employment, and is eligible to commence benefit payments.

 

[Jakyasar]

Thank you so much for sharing.

[Hojo]

Not to speak for Jakyasar, but that was exceedingly helpful Paul.