Governmental plans are Exempt from PBGC coverage

Governmental plans are exempt from PBGC coverage under the ERISA. Opinion letter 96-3 gives guidelines from the ERISA section (4021)(b)(2) for determining if an organization is a government employer. [Read more…]

Investment Banker as a Professional Employer

In 2010, there was an interesting PBGC Appeal Board decision regarding the definition of professional employer. An appeal was brought by a participant of the Compass Capital Partners, Ltd Defined Benefit Retirement Plan (the ‘Plan’) because the PBGC had determined that the Plan was not covered by the PBGC, and thus the participant was not eligible for benefits from the PBGC. [Read more…]

Surveyor Versus Surveying Consultant

Although ERISA Section 4021(c)(2) defines the professional service employer, and ERISA Section 4021(c)(2)(B) provides a non-exclusive list of professionals, PBGC coverage status for a defined benefit plan or cash balance plan might still be unclear.
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Professional Service Employer Defined

Professional employer

Unless a defined benefit plan (including a cash balance plan) qualifies for an exemption under ERISA, the plan is subject to PBGC coverage. ERISA provides an exemption from PBGC coverage for certain professional service employer plans. Remember that an employer cannot opt into PBGC coverage. Therefore, a company that meets the professional service employer exemption cannot opt into PBGC coverage.
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PBGC Coverage FAQs

Here are some FAQs to review which plans are covered by the PBGC and the owner-only exemption.  The next article in our series will address the professional employer exemption.

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Owner Only Exemption from PBGC Coverage

All defined benefit plans (including cash balance plans) are covered by the PBGC unless the plan qualifies for a statutory exemption from PBGC coverage.Nova 401(k) PBGC Articles

There is an exemption for plans that cover only substantial owners.  If a defined benefit plan covers even one employee who is not a substantial owner, then the plan does not qualify for this exemption.   [Read more…]

Plans Covered by the PBGC

The general rule is that all defined benefit plans are covered by the PBGC unless, the defined benefit plan qualifies for a statutory PBGC coverage exemption. These statutory exemptions are covered in ERISA Section 4021(b).

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Introduction to the PBGC

PBGC NewsThe Pension Benefit Guaranty Corporation (PBGC) is a federal agency that guarantees the payment of pension benefits when private company pension plans are unable to pay all promised benefits. [Read more…]