Format Employer Letter to Open Bank Account

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Format Employer Letter to Open Bank Account Powered By Docstoc
					                               Alan R. Ross
                            Stoel Rives, LLP
ASPPA Annual Conference – November 3, 2009
   Reasons for voluntary plan terminations
   Alternatives to plan termination
   The plan termination process
    ◦ DB plans
    ◦ DC plans
   Multiemployer plan terminations
   Distress terminations
   Orphan plans
   Business hardship/bankruptcy
   Winding up business
   Transactions
   Change in philosophy
   Demographic changes in workforce
   Reduction in administrative costs/complexity
   Receive reversion
   Asset transaction
    ◦ Buyer accepts plan
    ◦ Plan remains with seller
   Stock transaction
    ◦ Buyer accepts ongoing plan
    ◦ Eve of close termination
   Problems suspected or identified with plan of
    company to be acquired
   Buyer secures indemnification from seller
   Protects buyer and its plan(s)
   Termination is deemed to have occurred
    when seller terminates plan, even if
    distributions occur after transaction closes
   Buyer still responsible for winding up plan
   Freeze contributions and participation –
    maintain frozen plan
    ◦ Advantages...
    ◦ Disadvantages...
   Merge plan into another plan
    ◦ Advantages...
    ◦ Disadvantages...
   Adopt resolutions freezing and terminating
    plan as of termination date
    ◦ Select termination date
    ◦ Important to expressly both freeze and terminate
    ◦ Plan must be amended to comply with law as of
      termination date
    ◦ All participants must be fully vested as of
      termination date
   Distribute Notice of Intent to Terminate
    ◦ At least 60 days, and not more than 90 days prior
      to proposed termination date
    ◦ To participants, beneficiaries of deceased
      participants, alternate payees under QDROs, and
      unions
    ◦ PBGC provides model notice
   Distribute 204(h) notice
    ◦ Relatively simple notice for terminations
    ◦ Generally 45 days before termination date (15 days
      for small plans or transaction-related terminations)
    ◦ To affected participants and alternate payees
   Notice of Plan Benefits
    ◦ To participants, beneficiaries of deceased
      participants, and alternate payees under QDROs
    ◦ No later than date Standard Termination Notice is
      filed
    ◦ Three categories of recipients with different
      requirements
      In pay status
      Valid elections on file or eligible for lump sum
      All others
   Distribute Notice to Interested Parties
    ◦ To present employees with accrued benefits, former
      employees with vested benefits, and beneficiaries
      of deceased participants currently receiving
      benefits
    ◦ 10 to 24 days prior to date Form 5310 is filed
    ◦ Format in Rev. Proc. 2009-6
   File IRS Form 5310
    ◦ For favorable determination
    ◦ Voluntary but advisable
    ◦ No later than date PBGC Form 500 is filed, in order
      to preserve right to defer distribution to 120 days
      after favorable determination
   Ensure plan assets are sufficient
    ◦ Fully fund, or
    ◦ Employer executes irrevocable commitment to
      make plan sufficient for plan benefits (PBGC
      provides model), or
    ◦ Majority owners may agree to forgo receipt of all or
      part of their benefits until benefits for all other
      participants are satisfied
   File Standard Termination Notice
    ◦ PBGC Form 500 and Form EA-S
    ◦ PBGC must notify within 60 days if not approved
    ◦ 60-day period may be extended if PBGC notifies
      plan administrator that additional information is
      required
   Provide Notice of Annuity Information
    ◦ To each affected party entitled to plan benefits
      except those that will receive a lump sum
    ◦ Name and address of each insurer
    ◦ Statement concerning state guaranty association
      coverage
    ◦ May be provided in Notice of Intent to Terminate
    ◦ If not, must be provided 45 days prior to
      distribution
   Provide payment election forms
    ◦ At least 30 and not more than 180 days prior to
      distribution
    ◦ Allow rollover of eligible rollover distributions
    ◦ Require spouse consent for non-QJSA distribution
   Distribute plan assets
    ◦ by later of
      180 days after expiration of PBGC’s 60-day review
       period
      120 days after favorable IRS determination
    ◦ Either actually distribute benefit (lump sums) or
      purchase annuities
   Provide annuity contracts
    ◦ Either plan administrator or insurer must provide
      annuity contract or certificate
      Must be provided within 30 days after it is available
      If not provided by Form 501 due date, plan
       administrator must provide notice including name,
       address and telephone number designated by
       insurance company to address questions
   File post-distribution certification (PBGC Form
    501)
    ◦ Deadline 30 days after last distribution date
    ◦ No penalty if filed not more than 90 days after
      distribution deadline
    ◦ Advantages to filing as early as possible
   Missing participants
    ◦ Must conduct diligent search
    ◦ If not found, must purchase annuity or forward
      benefit to PBGC
    ◦ File Schedule MP with Form 501
   Resolutions terminating plan
   Amend plan for changes in the law
   Fully vest all participants
   204(h) notice (for pension plans only)
   File Form 5310
   Distribute payment election forms
   Distribute lump sums or annuity contracts (if
    applicable)
   Special rules if employer maintains another
    DC plan
    ◦ Must allow transfer to other DC plan
    ◦ Not applicable if other plan is an ESOP
   Lost participants (FAB 2004-2)
    ◦ Must take all of the following actions
        Certified mail to the last known address
        Check related plan records
        Check with designated beneficiary
        Use IRS or SSA letter forwarding service
    ◦ If still not found
      Open IRA
      Establish interest-bearing federally insured bank
       account
      Escheat to the state
      Transfer to PBGC (when final regulations are issued)
   Any amounts remaining may revert to
    employer
    ◦ Excess assets in DB plan
    ◦ 415 excess in suspense account in DC plan
   Taxable income to employer
   Subject to 50% excise tax (20% if certain
    requirements are met)
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