Small Plan PBGC Termination Question

Haven't come across this one before but just trying to get the timing right with the PBGC and required participant notification-

Small Cash Balance Plan fewer than 10 current and former participants with balance, owner died last year, his widow inherited the shares (she is now the 100% owner and the Plan Trustee she also has a pending death benefit as beneficiary) and the business has been running under a prior contract but that contact is running out so all employees remaining employees were given notice and end of June will be the last payroll.

The company is staying in business through the end of the year at least to wrap any loose ends and such and for compliance reasons terminating effective December 31 might make the most sense from a compliance and testing standpoint. The plan allows for distributions upon termination of employment so what happens if we pay out all the participants before we go through a formal PBGC termination?

The plan is well funded all PBGC premiums are up to date and there is a small surplus that will be allocated to participants per the document. I've never done a PBGC termination after all participants are paid out, assuming they can get all terminated employees paid out relatively quickly. Is that going to be a problem with the PBGC?

I know you are not suppose to payout active employees during the PBGC review and termination process but these will all be terminated vested as of 6/30/24. So it seems we could pay them all out.

Consider thinking through your question from another direction:

What provision in the plan’s governing document (or ERISA-mandated) would empower the plan’s administrator to deny or delay a benefit the plan provides?

Generally, getting participants paid out (or annuity purchase) before your plan termination date is a good idea.  It simplifies many things and reduces the paperwork.   Suppose you do all this during 2024, and then a formal termination date at 12/31/24, you should also be prepared to file a 2025 PBGC premium filing, with all zeros, and the "final filing" check box.  

This process may not work well if you are allocating excess assets, so think creatively with this process.

Maybe try for a PBGC coverage determination after there's nobody left? 

22 hours ago, Lou S. said:

there is a small surplus

Consider using to pay final plan expenses to use up and not have to deal with allocating the excess which might push you into a 2025 filing if those have to be determined after a PPTD of 12/31/2024.

39 minutes ago, CuseFan said:

Consider using to pay final plan expenses to use up and not have to deal with allocating the excess which might push you into a 2025 filing if those have to be determined after a PPTD of 12/31/2024.

The surplus isn't that small. We'll know YTD payroll in a couple weeks and and can compare Plan assets to hypothetical balances and can do a Plan amendment to eat up most if not all of the surplus in a nondiscriminatory 2024 pay credit. The pay credits were frozen as 12/31/23 with this potential in mind. But judging by the responses so far I think we'll make a push to get the participants paid out in Q3 and then terminate the Plan.  

23 hours ago, Lou S. said:

nondiscriminatory 2024 pay credit

If you can do that with the excess and don't need to aggregate with a DCP for 2024 testing, then yes, no need to wait to terminate 12/31 to have a matching plan year.