Terminating DC plan with J&S

[Brenda Wren]

I don't do DB/CB work and don't normally have to deal with J & S rules.  However, I have a terminating DC plan with J & S in it.  If a participant is unresponsive or the spouse refuses to sign, it appears that we have no other choice other than go to the marketplace and buy an annuity for them.  Is there any other option?  Penchecks says they will handle funds over $7,000 for terminating plans but if the participant doesn't respond, they don't buy the annuity....they move them to an IRA and thereby ultimately are bypassing the spousal consent rules.  Since the plan isn't covered by the PBGC, we can't move the funds there.  Any other options?  

[david rigby]

1.  Review the document to determine if it helps with your question.

2.  Hire a pension actuary to assist you, especially one that has done several plan terminations. 

That actuary has probably seen similar situations and might recommend some solutions.  One solution might include "creative" communication to encourage the participant and/or spouse to sign.  For example, many years ago, I had an unresponsive participant with a LS of around $4000 (the LS limit at the time was $3500).  We advised the participant that, if there was no response by X date, the plan would be required to purchase an immediate J&S annuity (because we already knew that no insurer was willing to sell a deferred J&S), and the approximate benefit would be about $20 per month.  BTW, it worked and the participant completed the form for LS payout.

[Brenda Wren]

Thank you, David.  The only reason the J&S rules are in the plan is because the old MPP was merged back in 2002.  They did not limit it to only old MPP in the previous restatements because they just thought it would be easier!  Well, it's not easier now that we are terminating!  The recordkeeping has separated the money types so it's very clear who has old MPP money and who doesn't.  I'm thinking that we can amend the plan to remove the J&S rules at least to the extent of non-MPP money.  That may reduce and will certainly limit the problem.  As I recall, we are permitted to do that without notice.  Thoughts on that idea?

[david rigby]

Sure, explore that process.  But get review by the plan's ERISA attorney.  Also, consider whether you need review by your own attorney also.

[Peter Gulia]

A reminder that a service provider might have purposes and interests not perfectly aligned with a plan’s sponsor’s or administrator’s purposes and interests.

[LauraH]

You can use the PBGC program for missing participants in DC plans.  Plan does not have to be "covered by the PBGC."  
 

Link for more info:
https://www.pbgc.gov/sites/default/files/form-mp200-instructions.pdf