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II. STANDARD TERMINATION PROCESS
To terminate a plan in a standard termination, the plan administrator, within specified timeframes, must notify participants
of the proposed termination; provide participants detailed information on their plan benefits; file certain information,
including actuarial information, with PBGC; and, if PBGC does not issue a notice of noncompliance, distribute plan assets
to satisfy all plan benefits under the plan.
Failure to Comply. Failure to comply with the standard termination requirements or failure to meet the deadlines may
cause the proposed termination to be nullified. To avoid inadvertently missing deadlines, the plan administrator should, early
in the termination process, review the rules for computing due dates (see section II.A) and begin collecting the data necessary
to complete a standard termination (e.g., participant and beneficiary information, including current addresses, and the location
and value of plan assets).
Note: PBGC may extend certain deadlines as discussed in section II.J (see 29 CFR § 4041.30).
Consequence of Nullification. If the termination is nullified, the plan administrator may not make a final distribution of
assets and the plan is an ongoing plan for all purposes. If the plan administrator still intends to terminate the plan, he or she
will have to start the process again, beginning with issuance of a new NOIT establishing a new proposed termination date for
the plan.
Effect of Failure to Provide Required Information. If a plan administrator fails to provide any required information
within the specified time limit, PBGC may assess a penalty under ERISA section 4071. Under PBGC’s penalty policy, the
penalty rate is generally $25 per day for the first 90 days and $50 per day thereafter, with lower rates for small plans. PBGC
may also pursue any other equitable or legal remedies available to it under the law, including, if appropriate, the issuance of
a Notice of Noncompliance (NONC). See 29 CFR § 4041.6.
Post-Termination Amendments. The plan administrator may take into account a plan amendment that is adopted after
a plan’s termination date only if certain conditions are met (see section II.H.3).
Conversion to a Defined Contribution (DC) Plan. Converting a defined benefit plan to a defined contribution plan is
a voluntary termination of the defined benefit plan and is subject to all rules and requirements governing such terminations.
Cessation of Accruals. For plans with 100 or more participants, ERISA section 204(h) and Treas. Reg. § 54.4980F-1
generally provide that a plan may not be amended to provide for a significant reduction in the rate of future benefit accrual
unless, at least 45 days before the effective date of the plan amendment, the plan administrator provides a written notice
setting forth the plan amendment and its effective date to participants, alternate payees, and employee organizations
representing participants. For plans with fewer than 100 participants, substitute “15 days” for “45 days.” If the plan terminates
in accordance with Title IV of ERISA, section 204(h) is deemed to be satisfied as of the termination date. ( See Treas. Reg.
§ 54.4980F- I, Q&A-17(b).)
Note: A NOIT must include a statement concerning the cessation of accruals under the plan (see 29 CFR § 4041.23(b)
(4) and section II. C of these instructions). If the termination is not successfully completed, a NOIT does not serve as an
ERISA section 204(h) notice unless the NOIT meets all section 204(h) requirements.
Making Plans Sufficient. To facilitate the termination of a plan and the distribution of assets in a standard termination, a
contributing sponsor or controlled group member may make a commitment in writing to the plan to contribute, by the
distribution date, the amount necessary to make the plan sufficient for all plan benefits (see the specific instructions to item
6, Schedule EA-S). In addition, majority owners (see Appendix A, Glossary of Terms, for definition) may agree to forgo
receipt of all or part of their plan benefits until the benefits of all other plan participants have been satisfied (see the specific
instructions to item 7, Schedule EA-S).
Benefit Restrictions. For participants who deferred receipt of a portion of their benefits when they terminated
employment or retired because of a restriction on prohibited payments under the Internal Revenue Code § 436(d), 26
U.S.C. § 436(d) (see Note at beginning of section II.H on benefit restrictions), the remainder of the benefit must be
distributed at plan termination.
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