Defined Benefit Plan Termination

Are you looking for guidance related to defined benefit plan termination?

Whether your company faces the uncertainty of bankruptcy, or an organizational restructuring that changes the rules and methods by which the company operates, the various pension plans that your company sponsors will be affected.

With that being the case, you need to understand that there are certain rules that govern how benefit plans are terminated.

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In an ideal termination scenario, the process would be carried out quickly and with as little trouble as possible so that your company can continue with mission critical operations and the participants receive the benefits that they are entitled to.

As the sponsoring company, it is in your best interest to conduct a defined benefit plan termination that is in full compliance with the law. The task is daunting, but necessary. With the right guidance, however, you can be sure that the process will be administered efficiently and to the best possible benefit of everyone involved.

Defined Benefit Plans and Your Company

In offering an employee a defined benefit pension plan, you promise to provide the employee a monthly monetary benefit once they retire from service.

This is different from many other types of retirement plans that employers offer. With plans like a 401k, employee stock ownership, or profit-sharing plan, the employee is not promised a specific amount and contributions may be required on their part.

If you decide to implement a defined benefit plan for employees in your company, you do so with the understanding that you have the choice to either offer a set amount at retirement (such as $1000 a month for life), or an amount that is determined via a formula that can include factors such as age, years of service, position and salary, among others. 

Regardless of the method that your company uses to determine how much money recipients will see, the law states that this type of benefit plan is to be protected in the case of a defined benefit plan termination.  

As the employer, you are solely responsible for employee benefits under this type of plan. None of the risk is held by the employee. With that in mind, know that it is your duty to see to it that eligible employees receive their benefits in the event that you terminate the plan for whatever reason.

Laws Regarding Plan Termination  

There are many reasons that you may be undergoing a defined benefit plan termination. Besides bankruptcy and closure of the company, a plan termination may be undertaken if your company merges with, or is sold to another entity.

Whatever the reason for the plan’s cancelation may be, clear communication between sponsor and participant is an important part of carrying out an effective plan termination.

The laws that govern termination of a plan state that you, as the plan sponsor, must pay the present-day value of the employee’s benefits. This even applies if any applicable interest rates have changed in the time prior to termination of the plan.

It is because of that scenario that you need to recognize the importance of timing in a defined benefit plan termination.

It is also important that sponsors who terminate this type of plan are in contact with the Pension Benefit Guaranty Corporation (PBGC) as part of full ERISA compliance.

During the termination, the PBGC, an independent agency of the federal government, has the final say regarding the approval of a plan’s termination.

This is under the assumption that the plan is adequately funded in order to pay eligible recipients the money that they are entitled to under law.

Taking the Steps toward Successful Plan Termination 

If you have decided to terminate your company’s defined benefit plan, one of the first and most important steps that you must take involves finding eligible participants to make sure that they receive their benefits.

This includes participants who may be missing for one reason or another.

In defined benefit plan termination, or the termination of any other type of retirement plan, finding the people who are eligible for benefits can be a long, daunting task, but it must be done in order for the process to continue.

There are a number of reasons why companies have difficulty locating plan participants when the need to notify them of a plan termination arises.

From change of address, to death and the need to notify beneficiaries, the single step of finding former employees who have since retired can be just as involved as the overall process of terminating the plan.

With the right expertise handling the task of locating those participants, however, you can be sure that your defined benefit plan termination can be carried out as quickly as possible so that your company can implement a new plan, reorganize its corporate structure, continue with closure proceedings, or do whatever else led to the need for terminating the plan.

By working with Risk Compliance Performance Solutions, you will have that expertise.

Successful Plan Termination with the Help of RCP Solutions   

If you are looking for a firm that can help you locate missing participants as part of your company’s defined benefit plan termination then you need the experts of RCP Solutions.

Regardless of what kind of plan your company is terminating, it takes valuable time, resources, and manpower to locate the employees and former employees who are entitled to their contributions.  

Since making sure that eligible employees receive their full entitlement is an important part of the termination process, finding them is not a step that you can afford to overlook during a defined benefit plan termination.

Doing so could mean that you’ll have to maintain the burden of open pension accounts longer than you should .

In order to accelerate the progress of your company’s plan termination, hire experts who can make sure that all participants are found and their funds given to them.

Hire RCP Solutions.

With us working for you, the benefit of being able to carry on your normal operations and making sure that your company is on the right track will be yours.

We will do what we do best and take care of finding your participants.

Contact Us Today

Do you want to speak with one our representatives and let us know just what we can do for you and your company today?

If so, then you can contact us by clicking here or calling us at 267.607.4169.

We can begin working on strategies to find missing participants as part of your defined benefit plan termination so that your company can continue on its path as soon as possible.

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