PBGC covered or not?

a small independent pharmacy.  Is it a subject to Title IV or not?

ERISA 4021(c)(2) defines

Quote

2)For purposes of this paragraph and for purposes of subsection (b)(13)—

(A)the term “professional service employer” means any proprietorship, partnership, corporation, or other association or organization (i) owned or controlled by professional individuals or by executors or administrators of professional individuals, (ii) the principal business of which is the performance of professional services, and

(B)the term “professional individuals” includes but is not limited to, physicians, dentists, chiropractors, osteopaths, optometrists, other licensed practitioners of the healing arts, attorneys at law, public accountants, public engineers, architects, draftsmen, actuaries, psychologists, social or physical scientists, and performing artists.

Question 1: is the business owned by a professional individual? A pharmacist certainly needs an advanced course of study and to me, would fall under the category "other licensed practitioners of the healing arts." So I would say yes.

Question 2: is the principal business the performance of professional services? I would say probably no. A pharmacy's primary business is retail.

So my feeling is that they are not exempt and would be covered. But the best way to know for sure is to submit a coverage determination request.

I've done a coverage determination for a small pharmacy - they asked for an approximate revenue breakdown between health and non-health (lottery tickets, etc) revenue.  About 95% was health-based, and the PBGC said they were exempt.

5 minutes ago, Bri said:

I've done a coverage determination for a small pharmacy - they asked for an approximate revenue breakdown between health and non-health (lottery tickets, etc) revenue.  About 95% was health-based, and the PBGC said they were exempt.

How long did it take the PBGC to make the determination?

We had a client (fund manger) submit a request to PBGC for a coverage determination on 5/15/2024. They've had a little back and forth for more info (and it got re-assigned along the way) but as of now (9 months later) there is still no determination. Maybe this one is more gray but based on what is happening in DC these days I would only expect turnaround timing to get worse, not better.

What this client did was assume covered by PBGC and pay premiums, only two participants so not a lot, but then also limit ER DC to 6% of eligible payroll to preserve full CB deduction if they were found to be exempt. Hedging bets to be safe regardless of the determination.

2 hours ago, truphao said:

How long did it take the PBGC to make the determination?

It took about six weeks last fall, AND since this was a prior plan that never had done the determination filing, we were able to get a few years of past premiums refunded.  Of course the plan terminated a few weeks ago and the whole point of the coverage request was to say, "Wait, is the PBGC really supposed to be involved here?" and luckily no year's DB/DC combo amounts exceeded 31%, either.

Check out the following article

https://ferenczylaw.com/article-defined-benefit-plans-determining-professional-status-of-plan-sponsors-for-pbgc-coverage/

Section  RULINGS WHERE THE PBGC FOUND THAT THE OWNER WAS A PROFESSIONAL

We spoke to a PBGC “higher up”, I believe a supervisor at the time, who initially balked at the question, and when we pushed for an answer, mentioned that a pharmacy where sundries were sold, more than 40% of the business revenue must be “phamacy related” in order not to be covered.

Applying for a PBGC coverage determination is a long and expensive process and we have seen responses of up to 6-8 months.

Of course the supervisor has now retired.

Hope this helps.

On 3/8/2025 at 8:35 AM, thepensionmaven said:

Applying for a PBGC coverage determination is a long and expensive process

A TPA, actuary, or other service provider assisting the sponsor with their submission should naturally charge a reasonable fee for their time. However the PBGC does not charge a fee for a coverage determination.