How does a plan sponsor terminate an underfunded DB plan? Can it even be done?

The procedure for terminating an underfunded DB plan depends on whether the plan is covered by the PBGC or not. If it is not, then it is as simple as following the plan document on how to handle the allocation of assets. If it is covered by the PBGC, then there are many criteria involved. What is your situation?

Most of us have terminated underfunded plans, but we need more information to respond to your question. To start:

Is the plan subject to PBGC coverage?

Does the plan sponsor have substantial (50% or more) owners?

How big is the underfunding problem both in absolute dollars and as a percentage of plan assets?

Is the sponsor willing and/or able to make contributions to eliminate the underfunding?

Please get this information and I'll try to help if I can.