Allocation or reversion of demutualization proceeds received from a gr

[Everett Moreland]

Please comment if you have dealt with allocation or reversion of demutualization proceeds received from a group annuity contract that is used to pay retirees under a DB plan that terminated years ago

[card]

I am dealing eith a similar situation now. Were you able to come to a satisfactory conclusion? Seems there might be an argument that the Hughes case might allow the company to retain the proceeds.

Thanks-

card

[Everett Moreland]

Please email me your name and phone number and I'll call you.

[david rigby]

I wonder if the prior posters would be willing to share any conclusions.

[Everett Moreland]

My conclusion was that it depends on the facts and that under my client's facts reversion was the right answer and the 4980 reversion tax was not a signficant issue. Another attorney who contacted me said he will be publishing an article on the subject.

[KJohnson]

E. Moreland--what facts did you consider--the reversion lanugage of the prior plan document?

Did you base the reversion amount on the amount actually received or on another value--such as the possible value of a future demutualization at the time of termination?

Also, if an Employer chose to "give this" money to the annuitants, what is the source of the following warning that was in some of the documents:

"SPECIAL ISSUES.

Some Prudential group contracts were issued to fund plans that were at one time subject to ERISA but are now terminated. These contracts include termination annuities. Because it is not clear under the relevant authorities how demutualization

compensation attributable to a terminated plan’s annuity contract should be treated, you may incur less risk of a challenge if you treat the compensation as a ‘‘ plan asset’’ and use it to provide enhanced benefits to the plan’s former participants whose benefits are provided under an annuity

[Everett Moreland]

The reversion language in the prior plan document was one of the relevant facts.

I based the reversion amount on the value of the membership rights at the time they reverted to the employer.

I'm not sure I understand your last question, and I'm not sure I agree with the caution in that statement. It seems to me that you first need to determine who owns the demutualization proceeds. If they belong to the employer, deciding to give them to the employees instead avoids no problems and raises new ones.