We have a 7 life case with 5 TV's and 2 active (key). There is enough $ to pay out the 5 TV's . I'm assuming we can't waive benefits to keys to satisfy minimum funding. Somehow on this takeover case the plan "misplaced" $500,000. I'm also guessing the for PGBC termination the keys can waive benefits to the extent necessary to satisfy the assets left in the plan after the TV's are paid.

For PBGC keys can only waive if 50% or more owners. For IRS paid to extent funded. Have fun with the final 5500 questions, will probably trigger an audit.

Will definitely trigger an audit!

The waivers can't be used to reduce minimum funding requirements. You can reduce accrued benefits if the DOL approves of the amendment, but I've never tried it or given it any thought.

You are probably aware you can retroactively amend the plan (412c8) with the amendment impacting 412 funding if the amendment is adopted within 2.5 months after the plan year end.

For what it's worth, the timing re avoiding an audit may be good. At the 2001 EA Mtg last month in DC that I attended, sessions were held by the heads of IRS EP examinations and EP determinations. They stated that audit activity would be reduced greatly (I think 2/3 reduction was the figure mentioned) due to auditors being shifted to review GUST determination letters for the next 2 years.

I have personally seen the IRS veto an attempt by another administrator to have the 100% owner in a small plan waive benefits in order to meet minimum funding. I would be surprised if there were any gray area in this issue.

I noticed you wrote "PBGC termination" with respect to a waiver of accrued benefits in order to make assets sufficient for termination. I don't know if you are planning on submitting the termination to the IRS for approval, but I had the experience with an IRS reviewing agent asking for a restatement of a benefit waiver eliminating any language regarding waiving benefits and instead inserting language waiving the owner/participants share of allocable assets. It accomplished the same thing but he didn't want to see anything about waiving benefits. (I will add that other times I have had "benefit" waivers go thru the IRS plan term approval process with no problem.)

I am not certain if a plan can "misplace" $500,000. If $500,000 is missing, someone has a fiduciary duty to inquire as to what happened to it, and someone may have a duty to replace it.

If the owners decided to pull $500,000 out of the plan, you don't have a funding issue.