Following are answers to questions frequently asked by employers and pension professionals relating to termination of defined benefit pension plans insured by the Pension Benefit Guaranty Corporation. If you do not find the answer to your particular question, please contact our customer service representatives for assistance at the addresses and telephone numbers listed below.

1. What types of plans are insured by PBGC?
   
   
2. Does PBGC cover plans that only cover self-employed individuals?
   
   
3. If my plan, in the normal course of administration,pays out all benefits of all participants except substantial owners of the sponsoring company, is the plan still covered by PBGC? What do I need to do?
   
   
4. What is a plan termination?
   
   
5. What do I have to do to terminate my plan in a standard termination?
   
   
6. May I file my signed standard termination forms by fax?
   
   
7. What happens if the plan administrator decides not to terminate the plan after a filing has been made with PBGC?
   
   
8. Do I have to give spousal election forms to participants whose distributions exceed the plan's de minimis cash-out level if the participants are just rolling over their distributions to another employer-sponsored plan or an individual retirement account?
   
   
9. Do plan administrators have to provide the notice of identity of insurers to participants expected to elect lump sums?
   
   
10. Is there a deadline for distributing assets from a terminating plan?
    
    
11. Should I wait to file the Post-Distribution Certification (PDC) until all assets, including excess assets, have been distributed?
    
    
12. What are the premium payment rules regarding terminating plans and why are payment notices sometimes sent to terminated plans?
    
    
13. Why do I continue to receive premium filing booklets for my terminated plan, and how do I stop this mailing?
    
    
14. How does PBGC decide which standard terminations to audit?
    
    
15. Does PBGC nullify the termination if it finds a distribution error during the standard termination audit?
    
    
16. How do I close out my plan if I can't locate every participant and beneficiary?
    
    
17. My plan isn't terminating but I have a number of "missing participants." May I turn their benefits over to PBGC?
    
    
18. Is a "diligent search" required if an annuity is purchased for a missing participant?
    
    
19. What requirements must be met for a "diligent search" before money can be paid to PBGC?
    
    
20. When must a "diligent search" be made?
    
    
21. May I use PBGC's Missing Participants Program for a participant whose whereabouts are known but who refuses to return the election forms?
    
    
22. Does 20% tax withholding apply to the transfer of the value of a missing participant's benefit to PBGC, or to purchase of an annuity for the missing participant, under the Missing Participants Program?
    
    
23. If a plan pays the Internal Revenue Service 20% tax withholding on a distribution to a participant who turns out to be a missing participant and does not receive the distribution, may the plan administrator reduce the amount paid to PBGC by the amount of tax withheld? If the administrator buys an annuity for the missing participant, may the administrator purchase the annuity based on the reduction for the tax withholding?
    
    
24. How can a plan recover from the IRS an amount erroneously withheld for a missing participant?
    
    
25. If a PBGC audit finds that additional amounts are due participants after I have completed benefit distributions to all participants in a standard termination, what are the tax consequences of the subsequent supplemental distributions?
    
    
26. When replacing a defined benefit plan with a defined contribution plan, may the assets in the defined benefit plan be merged or transferred directly into the defined contribution plan without participant and spousal consent?
    
    
27. Where should checks and filings for standard and distress terminations be sent to PBGC?
    
    
28. Where should inquiries be directed?
    

1. What types of plans are insured by PBGC?
   
   PBGC insures most private-sector defined benefit pension plans. This is the type of plan that promises to pay a specified monthly benefit at retirement, usually based on salary or a stated dollar amount and years of service. PBGC does not insure certain types of defined benefit plans, such as government retirement plans or plans of professional service employers (such as doctors and attorneys) with 25 or fewer active participants. PBGC also does not insure defined contribution plans, (i.e., plans in which benefits are based solely on the assets in the participant's individual account, such as profit-sharing, 401(k), and target benefit plans).
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2. Does PBGC cover plans that only cover self-employed individuals?
   
   Plans covering only self-employed individuals are not automatically exempt from PBGC coverage. However, PBGC does not cover a plan that covers only self-employed individuals if all participants and beneficiaries are substantial owners (i.e., each participant or beneficiary owns more than 10% of the business). A plan that covers a self-employed person who is not a substantial owner (e.g., a partner who owns 10% or less of the partnership) is covered by PBGC unless the plan is exempt for another reason (such as the exemption for plans maintained by professional service employers that at all times since September 1974 have had 25 or fewer active participants).
   
   (For purposes of PBGC coverage of a defined benefit pension plan, a substantial owner is defined to be an individual who owns the entire interest in an unincorporated trade or business or, generally, more than 10% of a partnership or corporation.)
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3. If my plan, in the normal course of administration, pays out all benefits of all participants except substantial owners of the sponsoring company, is the plan still covered by PBGC? What do I need to do?
   
   No, the plan would no longer be covered by PBGC. However, PBGC will not know to remove your plan from the premium database unless you notify us of this occurrence by writing to PBGC, Technical Assistance Branch, Suite 930, 1200 K Street NW, Washington, DC 20005-4026.
   
   A premium is due for the last plan year in which the plan had at least one participant who was not a substantial owner. If the plan subsequently terminates after it has ceased being covered by PBGC, no termination filing with PBGC would be required. If the plan continues and non-substantial-owner employees enter the plan in a subsequent plan year, the plan will become covered again and must begin paying premiums again.
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4. What is a plan termination?
   
   A pension plan is terminated only by following certain specific rules:
   
   A plan that has enough money to pay all benefits owed participants and beneficiaries may terminate in a standard termination. For each participant or beneficiary, the plan administrator either purchases an annuity from an insurance company or, if the plan permits, pays the benefit owed in a lump sum.
   
   A plan that does not have enough money to pay all benefits owed participants and beneficiaries may be terminated only if the employer and the members of the employer's "controlled group" of affiliated companies each meets one of the distress termination tests. To do so, however, the employer must prove that the controlled group is financially unable to support the plan. PBGC takes over the plan as trustee and uses its own assets and any remaining assets in the plan to make sure that current and future retirees of the plan receive their pension benefits, within the legal limits. PBGC also tries to collect plan underfunding from employers and shares a portion of its recoveries with participants and beneficiaries.
   
   Under certain conditions, PBGC may terminate a pension plan, even if a company has not filed to terminate the plan on its own initiative. PBGC will take such action if a plan does not have sufficient assets to pay benefits currently due and may do so in other cases. This is called an involuntary termination.
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5. What do I have to do to terminate my plan in a standard termination?
   
   PBGC's regulation Part 4041 sets out the various notices and filing requirements for effecting a standard termination, and the standard termination forms and instructions are provided on our website. If you need clarification about any items, contact our Technical Assistance Branch at 1-800-400-7242 or email us at standard@pbgc.gov.
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6. May I file my signed standard termination forms by fax?
   
   No. A valid standard termination filing requires original signatures by the plan administrator on the Forms 500 and 501 and by the enrolled actuary on the Schedule EA-S. See GENERAL INSTRUCTIONS FOR FORM 500 AND 501 under the Standard Termination Filing Instructions for more information. (The Form 500 is the Standard Termination Notice; the Form 501 is the Post-Distribution Certification; the Schedule EA-S is the Standard Termination Certification of Sufficiency.)
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7. What happens if the plan administrator decides not to terminate the plan after a filing has been made with PBGC?
   
   While there is no requirement that the plan administrator notify PBGC of a decision not to proceed with a termination after having filed a Form 500 (Standard Termination Notice) with the agency, PBGC will contact the plan administrator for information if the agency fails to receive all required filings for the termination. The plan administrator may therefore wish to inform PBGC of a decision not to proceed to avoid needless communications. Correspondence should be addressed to PBGC, Technical Assistance Branch, Suite 930, 1200 K Street NW, Washington, DC 20005-4026.
   
   

   In the Notice of Intent to Terminate that is provided to affected parties, the plan administrator must inform them that they will be notified if the termination is canceled. The plan administrator therefore should notify affected parties promptly after deciding not to terminate the plan. Thereafter, if a decision is made to again proceed with the termination, the process must begin with a new date of plan termination and Notice of Intent to Terminate.
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8. Do I have to give spousal election forms to participants whose distributions exceed the plan's de minimis cash-out level if the participants are just rolling over their distributions to another employer-sponsored plan or an individual retirement account?
   
   Yes. A rollover of an amount exceeding a plan's de minimis cash-out level is an optional form of distribution that, when elected by a married participant, is subject to spousal consent. The plan may have a cash-out level of up to $5,000 without spousal consent. Distributions from the plan must comply with the written terms of the plan as well as the requirements of ERISA.
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9. Do plan administrators have to provide the notice of identity of insurers to participants expected to elect lump sums?
   
   Yes. One purpose of the notice is to help participants make informed elections between lump sums and annuity benefits. Also, even a participant who has already elected a lump sum may change the election. This notice is not required in the case of a participant or beneficiary who will receive a nonconsensual de minimis cash-out.
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10. Is there a deadline for distributing assets from a terminating plan?
    
    Yes, there is a deadline for distributing assets to provide for all benefits under the plan, either by paying cash (as permitted) or buying an annuity contract. The deadline is normally the later of (a) 180 days after the end of the PBGC's 60-day (or extended) review period or (b) if the plan administrator has timely submitted a valid IRS determination letter request, 120 days after receipt of a favorable determination letter. The deadline may be extended. (See the instructions for the plan termination forms booklet for more details.) (This deadline does not apply to distributions of excess assets to participants or to the plan sponsor.)
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11. Should I wait to file the Post-Distribution Certification (PDC) until all assets, including excess assets, have been distributed?
    
    No. The PDC is due 30 days after you complete distribution in satisfaction of all plan benefits. The PDC includes a plan administrator's certification that assets in excess of those needed to satisfy benefit liabilities have been or will be distributed in accordance with applicable provisions of ERISA and implementing regulations. However, under a new penalty policy adopted in March 1997 to provide penalty relief, PBGC will not assess a penalty if the PDC is filed within 90 days after the deadline for completing the distribution.
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12. What are the premium payment rules regarding terminating plans and why are payment notices sometimes sent to terminated plans?
    
    Click here for the answer, which is located within the FAQs on Premiums.
    
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13. Why do I continue to receive premium filing booklets for my terminated plan; and how do I stop this mailing?
    
    Click here for the answer, which is located within the FAQs on Premiums.
    
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14. How does PBGC decide which standard terminations to audit?
    
    Plans are randomly selected from among all terminations completed during the target period, to meet our statutory requirement of a statistically significant sample. PBGC also may audit a plan when we have reason to believe there may be a problem (for example, when we receive a complaint by plan participants or a plan practitioner).
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15. Does PBGC nullify the termination if it finds a distribution error during the standard termination audit?
    
    PBGC requires that participants and beneficiaries be made whole. For example, if participants did not receive all of the benefits to which they were entitled, the plan administrator must distribute additional benefits; or if participants were not given all of the options available to them under the plan, the plan administrator must provide those options and honor any changes requested. If the plan administrator does not cooperate in correcting errors, PBGC has the authority to nullify the termination or may ask a court to direct the additional payments to be made.
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16. How do I close out my plan if I can't locate every participant and beneficiary?
    
    PBGC's Missing Participants Program, created by the Retirement Protection Act of 1994, locates people owed benefits from PBGC-insured defined benefit pension plans closed out through a standard termination. An employer choosing to terminate a fully funded pension plan must distribute all plan benefits to participants and beneficiaries before completing the plan's termination. If someone cannot be found after a diligent search, the plan administrator must either purchase an annuity from a private insurer in that person's name and provide information on the missing person and insurer to PBGC or transfer the value of the person's benefit to PBGC's Missing Participants Program.
    
    If an annuity is purchased, it must be purchased by the same distribution deadline that applies to other benefits generally. If the value of the missing participant's benefit is paid to the PBGC, it must generally be paid when the Post-Distribution Certification is submitted. However, the PBGC will assess interest for late payment of an amount for a missing participant only to the extent the payment is made more than 90 days after the benefit distribution deadline or ask a court to direct that additional payments be made.
    
    Pension Search fact sheet on PBGC's Missing Participants Program.
    
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17. My plan isn't terminating but I have a number of "missing participants." May I turn their benefits over to PBGC?
    
    No. ERISA limits PBGC's Missing Participants Program to terminated plans. Ongoing defined benefit plans and plans that aren't covered by PBGC are not eligible for this program.
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18. Is a "diligent search" required if an annuity is purchased for a missing participant?
    
    A diligent search is required by law for any missing participant, whether you pay a benefit directly to PBGC for the participant or purchase an annuity.
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19. What requirements must be met for a "diligent search" before money can be paid to PBGC?
    
    A plan administrator frequently learns a participant or beneficiary is missing after sending the Notice of Intent to Terminate to the person's last known address. After learning that the person is missing, the plan administrator is required to conduct a diligent search. A diligent search includes seeking out any beneficiaries of the missing participant whose names and addresses are known to the plan administrator. It also includes use of a commercial locator service, such as a credit reporting firm. The participant may not be charged for the search. The plan administrator must complete the diligent search before transferring money to PBGC for the person's benefit.
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20. When must a "diligent search" be made?
    
    A diligent search must begin not more than 6 months before notices of intent to terminate are issued. It must be carried on in such a manner that if the individual is found, distribution to the individual can reasonably be expected to be made in a timely manner.
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21. May I use PBGC's Missing Participants Program for a participant whose whereabouts are known but who refuses to return the election forms?
    
    No. The Missing Participants Program is only for unlocatable participants. The plan administrator should purchase an annuity to provide benefits if the participant fails to make an election.
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22. Does 20% tax withholding apply to the transfer of the value of a missing participant's benefit to PBGC, or to purchase of an annuity for the missing participant, under the Missing Participants Program?
    
    No. The Internal Revenue Service confirmed to the PBGC in an information letter (dated February, 26, 1997) that 20% tax withholding does not apply to a transfer from a terminating plan to the PBGC, or to the purchase of an annuity, under the Missing Participants Program. (If your plan withheld amounts for a missing participant, see Question 23 and Question 24 below.) The PBGC, or the insurer that provides an annuity, will withhold taxes when benefits are paid to the participant.
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23. If a plan pays the Internal Revenue Service 20% tax withholding on a distribution to a participant who turns out to be a missing participant and does not receive the distribution, may the plan administrator reduce the amount paid to PBGC by the amount of tax withheld? If the administrator buys an annuity for the missing participant, may the administrator purchase the annuity based on the reduction for the tax withholding?
    
    No. The plan administrator must pay the total value of the missing participant's benefit, without any reduction for the 20% tax withholding, to the PBGC's Missing Participants Program. Similarly, an annuity purchased for a missing participant must be based on the participant's total benefit without any reduction for the 20% tax withholding.
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24. How can a plan recover from the IRS an amount erroneously withheld for a missing participant?
    
    The Internal Revenue Service advised PBGC in an information letter (dated May 15, 2003) of the procedures that a plan must follow to get a refund of Federal income tax it erroneously withheld. (Generally, the plan must act within 3 years of the withholding return due date or the date the return was filed, whichever is later.) See Question 22 above for information on how to determine the value of the benefit that must be paid to PBGC or the amount of an annuity purchased under the Missing Participant Program.
    
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25. If a PBGC audit finds that additional amounts are due participants after I have completed benefit distributions to all participants in a standard termination, what are the tax consequences of the subsequent supplemental distributions?
    
    While PBGC makes the determination whether additional amounts are owed to participants, the income tax consequences for the plan sponsor, plan, and plan participants would be determined by Internal Revenue Code rules and regulations. You may wish to ask the IRS or your tax advisor(s) for specific guidance.
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26. When replacing a defined benefit plan with a defined contribution plan, may the assets in the defined benefit plan be merged or transferred directly into the defined contribution plan without participant and spousal consent?
    
    Conversion of a defined benefit plan into a defined contribution plan (whether a target benefit, profit-sharing, 401(k), or other type of defined contribution plan) is a voluntary termination of the defined benefit plan and is subject to all the rules and requirements governing terminations of defined benefit plans. This includes all notices to participants and beneficiaries and filings with PBGC. Benefit elections and spousal consents are governed by the applicable provisions of the Internal Revenue Code and the implementing regulations.
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27. Where should checks and filings for standard and distress terminations be sent to PBGC?
    
    It is very important that the correct mailing address be used, in particular for the submission of checks and forms, as there are different addresses for different situations. If you are unsure of whether you have the correct address, please contact PBGC first for clarification.
    
    Plan terminations and coverage requests should be sent to:
    

    Pension Benefit Guaranty Corporation
    Technical Assistance Branch, Suite 930
    1200 K Street NW
    Washington, DC 20005-4026

    Missing participant program payments and vouchers should be sent to:
    

    Pension Benefit Guaranty Corporation
    P.O. Box 64523
    Baltimore, MD 21264-4523
    

    The mailing address for premium checks and filings may be found in PBGC's FAQs on Premiums.
    
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28. Where should inquiries be directed?
    
    For plan termination and coverage inquiries and requests (e.g., requests for plan termination-related forms and booklets, questions about the missing participants program) or other plan-related questions (e.g., participant notice requirements):
    
    Call: 1-800-736-2444 (or 202-326-4242 if you are in the local Washington, DC area). For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to the appropriate number in the preceding sentence.
    
    Write:
    

    Pension Benefit Guaranty Corporation
    Technical Assistance Branch, Suite 930
    1200 K Street NW
    Washington, DC 20005-4026

    If you still need assistance after calling one of these numbers or if you have a complaint about the service you received, please contact the Problem Resolution Officer (Practitioners) at 202-326-4136 or via e-mail at "practitioner.pro@pbgc.gov." For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to the appropriate number in the preceding sentence. If you prefer to write, send your letter to:
    

    Pension Benefit Guaranty Corporation
    Problem Resolution Officer (Practitioners), Suite 610
    1200 K Street NW
    Washington, DC 20005-4026

    See PBGC's FAQs on Premiums for the appropriate telephone number and address for premium-related inquiries and requests.
    
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