What Happens if a Sponsor of a Defined Benefit Plan Fails to Meet its Minimum Funding Requirement?
Failure to make a required contribution which, together with all other unpaid contributions, exceeds $1 million will result in the imposition of a statutory lien in favor of the defined benefit plan for the required installment. The lien attaches to all assets of the plan sponsor and all members of the sponsor’s controlled group. An initial excise tax of 10 percent is levied upon an unpaid funding deficiency, which may be ratcheted up to 100 percent of the liability after notice from the Internal Revenue Service (IRS). The IRS may waive the 100 percent penalty upon a showing of hardship. The PBGC has asserted that a lien arising from failure to make a required contribution should be treated as a federal tax priority claim in bankruptcy, but courts have rejected this position. The failure to satisfy a minimum funding payment can be asserted as either (i) a statutory claim, by a plan participant, beneficiary, trustee or the PBGC or (ii) a contract claim, held by the union and the employe
Related Questions
- What happens if an employer fails to make the required contribution to a Defined Benefit plan on a timely basis?
- What Happens if a Sponsor of a Defined Benefit Plan Fails to Meet its Minimum Funding Requirement?
- What exactly is the role of a taxpayer in funding a defined benefit plan for public employees?
