Skip to main content

Practitioners

Standard Terminations

      Standard termination

    • Q: What is a standard termination?

      A: A pension plan may be 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 another form (such as a lump sum).

      Filing a standard termination

    • Q: What do I have to do to terminate my plan in a standard termination?

      A: PBGC's regulation Part 4041 sets out the various notices and filing requirements for effecting a standard termination. The standard termination forms and instructions are provided below.

    • Q: May I file my signed standard termination forms electronically or by fax?

      A: No. A valid standard termination filing requires original signatures by the plan administrator on the Forms 500 (Standard Termination Notice) and 501 (the Post-Distribution Certification) and by the enrolled actuary on the Schedule EA-S (the Standard Termination Certification of Sufficiency). See GENERAL INSTRUCTIONS FOR FORM 500 AND 501 under the Standard Termination Filing Instructions for more information.

    • Q: Where should filings for standard terminations be sent?

      A: Plan termination filings, standard-termination–related inquiries and coverage requests should be sent to:

      Pension Benefit Guaranty Corporation
      Standard Termination Compliance Division
      Processing and Technical Assistance Branch
      1200 K Street NW
      Washington, DC 20005-4026

    • Q: What happens if the plan administrator decides not to terminate the plan after a filing has been made with PBGC?

      A: The plan administrator should 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. Correspondence should be addressed to:

      Pension Benefit Guaranty Corporation
      Technical Assistance Branch
      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.

    • Q: What notices are required in completing a standard termination?

      A: A Notice of Intent to Terminate (NOIT) must be issued to affected parties (other than the PBGC) at least 60 days and not more than 90 days before the proposed termination date. Affected parties include participants, beneficiaries of deceased participants, alternate payees under qualified domestic relations orders, and employee organizations representing participants. (See 29 CFR 4041.23) A model NOIT is provided in Appendix B of the standard termination filing instructions.

      A Notice of Plan Benefits must be issued to participants, beneficiaries of deceased participants, and alternate payees no later than the time the plan administrator files the Standard Termination Notice (PBGC Form 500) with the PBGC. (See 29 CFR 4041.24)

      A Standard Termination Notice (PBGC Form 500, including the Schedule EA-S) must be filed with the PBGC on or before the 180th day after the proposed termination date. (See 29 CFR 4041.25) Note:The PBGC has 60 days after receiving a complete Form 500 to review the termination for compliance with the law and regulations. (See 29 CFR 4041.26)

      A Notice of Annuity Information must be provided to affected parties other than the PBGC no later than 45 days before the distribution date if benefits may be distributed in an annuity form. (See 29 CFR 4041.23 (b)(5) and 4041.27)

      A Schedule MP and the applicable attachment(s) must be sent to the PBGC if the plan has missing participants. (See 29 CFR Part 4050)

      A Notice of Annuity Contract must be provided to participants receiving their plan benefits in the form of an annuity no later than 30 days after the contract is available. (See 29 CFR 4041.28 (d))

      A Post-Distribution Certification (PBGC Form 501) must be filed with the PBGC no later than 30 days after all plan benefits are distributed. The PBGC will assess a penalty for late filings only to the extent the certification is filed more than 90 days after the distribution deadline (See 29 CFR 4041.29)

      Distribution of benefits

    • Q: 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?

      A: 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.

    • Q: Do plan administrators have to provide the notice of identity of insurers to participants expected to elect lump sums?

      A: 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.

    • Q: Is there a deadline for distributing assets from a terminating plan?

      A: Yes, there is a deadline for distributing assets to provide for all benefits under the plan, either by paying lump sums (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.)

    • Q: How do I distribute benefits for participants who cannot be located?

      A: 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.

    • Q: Should I wait to file the Post-Distribution Certification (PDC) until all assets, including excess assets, have been distributed?

      A: 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. PBGC will not assess a penalty if the PDC is filed within 90 days after the deadline for completing the distribution.

    • Q: Has PBGC provided guidance on calculation of minimum lump sums values under the requirements of the Pension Protection Act of 2006 ("PPA 2006")?

      A: PBGC has provided guidance in Technical Updates 07-3 and 08-4:

      • Technical Update 07-3 provides guidance where the plan's termination date is before the effective date of the PPA 2006 changes to the interest rate and mortality table used in calculating minimum lump sum values. In these cases, the PPA 2006 changes do not apply. Minimum lump sums are determined by pre-PPA 2006 rules regardless of when the lump sum is paid.
      • Technical Update 08-4 provides guidance where the plan's termination date is on or after the effective date of the PPA 2006 changes to the interest rate and mortality table used in calculating minimum lump sum values. In these cases, assuming the plan was amended to reflect the PPA 2006 changes before termination, the interest rate basis and mortality assumption are tied to the plan year in which the payment was made, not the plan year in which the plan terminated. For example, assume a calendar year plan is amended in 2008 to reflect PPA 2006 minimum lump sum assumptions and terminates on July 1, 2009. Also assume that the plan has a one-year stability period and a two-month lookback. Therefore, a lump sum paid in 2010 is calculated using the following assumptions:
        • Interest-based on the phase-in percentage for the plan year beginning in 2010 and the November 2009 rates. Accordingly, a lump sum paid in 2010 would be determined using a blended rate based on a 60 percent weighting of the November 2009 segment rates and a 40 percent weighting of the November 2009 30-year Treasury rate.
        • Mortality-based on the RP-2000 unisex mortality table project, in accordance with IRS rules, for annuity starting dates in 2010.

    Contact Us

    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 in the Washington DC area. For TTY/ASCII users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to
    1-800-736-2444.

    Write:

    Pension Benefit Guaranty Corporation

    Technical Assistance Branch

    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/ASCII users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to (202) 326-4136. 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

Related Information: