PBGC GRAB Bag

Question 1

What are the 6 priority categories?

Answer 1

1. Voluntary Contribs
2. Mandatory Contribs
3. Benefits payable 3 years ago with worst benefits in effect in past 5 years (current age is used for PV factors)
4. Guaranteed Benefits
5. Vested Benefits
6. Non-vested Benefits

Question 2

How are assets allocated between category 1, 2 & 3?

Answer 2

Allocated based on priority level (1, 2 then 3)

If the assets run out in a level, the rest is paid pro-rata to the level in which assets run out

Question 3

How are assets allocated in priority category 4?

Answer 3

1. Pay guaranteed benefits pro-rata

2. Then pay to guaranteed benefits treating the majority owners as non-majority owners

Question 4

How are assets allocated in priority category 5?

Answer 4

First to vested benefit using plan provisions from 5 years ago, then next plan amendment, then next…

Question 5

T/F Sub classes can be created in priority classes 3,4,5,6 but not 1 and 2.

Answer 5

True - can create classes so people with longer service get paid out first

Question 6

For missing participants, you must conduct a “diligent search” within X months of filing MP-100. What is X?

Answer 6

9

Question 7

What is a diligent search for missing participants? What is max cost you should expend?

Answer 7

NRB <= $50 month - can search company and public databases

NRB > $50 month - must use a commercial locator

In no case should the cost of searching exceed the benefit.

Question 8

Which section of assumptions do you use to value the liability of missing participants? Which does the PBGC use when adjusting benefit?

Answer 8

4044

4022

Question 9

Who is a “missing participant”?

Answer 9

1. PTP cannot be located after diligent search

2. Due a mandatory cash out, but do not return the paperwork.

Question 10

How much needs to be transferred to the PBGC for a missing PTP? (assume ptp is before NRD)

Answer 10

(1) Calculate LS under plan assumptions
(2) Calculate most valuable annuity under missing ptp assumptions.

If (1) < mandatory cashout then (1). Else take the larger of (1), if available, and (2).

Question 11

For a ptp after NRD that has not commenced their benefit, how is the benefit transfer amount for a missing ptp adjusted?

Answer 11

Value is increased by the missed payments assuming an SLA started at NRD.

Question 12

For a ptp after NRD that HAS commenced their benefit, how is the benefit transfer amount for a missing ptp adjusted?

Answer 12

Value is increased by the missed payments

Question 13

When does the MP-100 form need to be filed?

Answer 13

30 days after the last distribution date (i.e. same timeline for sending a Post-Distribution Certification)

Question 14

What is admin fee charged by the PBGC if you transfer a missing participants’ liability to the PBGC? if you buy an annuity from an IC?

Answer 14

$35 if benefit transfer amount is > $250

$0 if buy an annuity from IC

Question 15

What are the two options for dealing with missing participants?

Answer 15

1. Buy them an insurance contract

2. Transfer benefit amount to PBGC

Question 16

When does a “substantial cessation of operations occur”?

Answer 16

1. 15% of employees that were eligible for either a DB or DC plan have a permanent cessation of employment

Question 17

What are the exceptions to a “substantial cessation of operations liability” in 4062(e)?

Answer 17

1. Less than 100 ptps w/ accrued benefit in current plan year
2. MVA/PBGC FT >= 90%

Question 18

If a contribution is triggered because of cessation of operations, what is the contribution amt?

Answer 18

Unfunded plan termination liability * (eligible employees that left) / (total eligible employees in the controlled group)

Question 19

What is the alternative 7 year charge for the cessation of operations contribution amt?

Answer 19

UVB for prior plan year * (eligible employees that left) / (total eligible employees in the controlled group). Then Divide by 7 and pay over 7 years.

Question 20

What is the cap on the 7 year alternative charge for the cessation of operations?

Answer 20

25% * UVB - MRC

If prior year’s MVA exceeds 90% of PBGC FT, then no payment needed

Question 21

What is a Standard Termination?

Answer 21

Assets are sufficient to cover the termination liability.

Question 22

T/F a plan does not have sufficient assets to cover liability, but a MO waives their benefit so there is enough assets. This is a Standard Termination

Answer 22

True

Question 23

T/F a plan does not have sufficient assets to cover liability, but employer makes written commitment to contribute the necessary amount. This is a standard term.

Answer 23

True

Question 24

What is a distress termination

Answer 24

Assets are not sufficient to cover the liabilities and plan sponsor wants to terminate the plan.

Question 25

How do you determine if a new definition of compensation is discriminatory?

Answer 25

Find the average of the comp used to total comp for the HCE and NHCE group. HCE group cannot exceed NHCE by undefined de minimus amount

Question 26

Who is excluded when testing 414(s)

Answer 26

Anyone who would be excluded under 410(a) statutory reasons.

Question 27

If you fail to make a minimum required contribution or a required quarterly, under what circumstances do you have to file form 200 with the PBGC?

Answer 27

1. Unpaid balance is over $1M (including interest) | 2. FTAP < 100%

Question 28

If you have to file Form 200 with PBGC, when is it due?

Answer 28

10 days after the payment is missed

Question 29

If you miss a quarterly of 100000, EIR is 5% and then you miss another quarterly of 100000 a year later, what is the total outstanding amount (if never paid off)?

Answer 29

100000*10% + 100000 | 210000