CPC CPC Plan Termination & Mergers

Question 1

When a single-employer defined benefit plan terminates in a standard termination, what must the plan administrator certify before terminating?

Accepted Answer

Plan assets are sufficient to satisfy all benefit liabilities

Answer

In a standard termination, the plan administrator must certify to the PBGC that plan assets are sufficient to cover all benefit liabilities before the termination is final.

Question 2

What is a 'distress termination' of a defined benefit plan?

Accepted Answer

A voluntary termination where the employer is in financial distress and cannot fund all benefit liabilities

Answer

A distress termination is a voluntary termination initiated by an employer in financial distress (e.g., bankruptcy) that cannot satisfy all plan liabilities; the PBGC steps in as trustee if liabilities exceed assets.

Question 3

In a defined contribution plan termination, what happens to unvested employer contributions?

Accepted Answer

Participants become 100% vested in all accrued benefits upon plan termination

Answer

ERISA requires that all participants become fully (100%) vested in their accrued benefits upon plan termination, regardless of their prior vesting schedule.

Question 4

A plan merger must not decrease the accrued benefits of any participant. Which ERISA section governs this requirement?

Accepted Answer

ERISA Section 208

Answer

ERISA Section 208 requires that no plan merger, consolidation, or transfer of assets reduce any participant's accrued benefits below what they would have received had the plan terminated on the merger date.

Question 5

What PBGC form must be filed to initiate a standard termination of a single-employer defined benefit plan?

Accepted Answer

PBGC Form 500

Answer

PBGC Form 500 (Standard Termination Notice) is filed with the PBGC to begin the standard termination process for a single-employer defined benefit plan.

(CPC) Certified Pension Consultant Practice Test

(CPC) Certified Pension Consultant Practice Test

CPC CPC Plan Termination & Mergers