Residual Liabilities Following Plan Termination: Is the Plan Really Gone?

Bloomberg BNA Compensation Planning Journal


In this article, Elizabeth Drake and Anthony Provenzano discuss the residual liabilities following plan terminations. "Some speculate that many plan sponsors may soon wish to eliminate their defined benefit plans completely," the authors said. "But what may not be apparent is that a plan termination is a complicated process, and exposure to liability may begin early in the process and may not end with the final distribution of benefits."

The authors highlight where post-termination exposure lies, including within an employer's right to terminate a plan, compliance procedures and actions brought by the PBGC, participants and beneficiaries and under ERISA, as well as the limitation period on post-termination liability. The authors conclude that, "the decision to terminate a plan does not necessarily mean that all potential liabilities will be extinguished soon thereafter …. Plan sponsors and fiduciaries alike will be well-served if they consider potential future liabilities and proceed carefully before, during, and after plan termination."