We administer a 12 participant DB that has benefit liabilities that exceed assets by about $600K. The plan is covered by PBGC. The owners (stockholders) would be happy to waive a portion of their benefits to terminate as a standard termination. The majority owners are brothers. One has 50% of the stock, the other has 30% and his daughter owns 20%.

Clearly the one who owns 50% can waive his benefits, but it is less clear as to whether the 30% and 20% family members can waive their benefits.

Although the constructive ownership rules of code section 318 appear to aggregate family members, resulting in two 50% owners, PBGC reg 4041.21(b)(2) references the constructive distribution rules of IRC sections 414(b) and © when defining a majority owner. 414(b) and © deal with controlled groups, which we do not have here.

Anyone have any thoughts as to whether the family members can waive their benefits?

Thanks.

The attribution rules under 1563 govern ownership for PBGC purposes. So, whether or not the brother who owns 30% is attributed his daughter's shares depends if the daughter is age 21 or not. If she's over 21, then the shares are not attributed to her father, he is not a majority owner and only the 50% owner can waive benefits.