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Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 117391
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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ERISA Attorney specializes in Defined Benefit Plan relative

Customer Question

ERISA Attorney specializes in Defined Benefit Plan relative to PBGC (Pension Benefits Guaranty Corporation)
Single employer : Heritage Construction & Landscaping Corporation , a California (community -property state) small family enterprise, participants of which comprising 100% of family members of shareholders ( 2012 census & W-2, not attached )... has totally no common-law employees is being audited by PBGC: Will attach, given your email.
My understanding :No common-law employee, no PBGC interest.
PBGC: Relating to this matter, which department or who should I talk to ?
Submitted: 1 year ago.
Category: Legal
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
While the claim about not having common law employees has been argued to try to avoid PBGC jurisdiction in the past, the PBGC has successfully fought off that argument. The PBGC states ERISA § 4021(a) (1) extends Title IV coverage to a plan which is an employee pension benefit plan as define d in ERISA § 3(2) which meets, in practice, the applicable Internal Revenue Code ("IRC" or "Code") requirements specified in § 4021 (a)(1). However, ERISA § 4021 (a)(2) also extends Titl e IV coverage to any plan which "is, or h as been determined by the Secretary of th e Treasury to be, a plan described in [IRC § 401(a)] . . . ," regardless of whether such plan is an " employee benefit pension plan" with in the meaning of ERISA § 3(2) .
The PBGC and courts hold that ERISA § 40 21(b)(9) sets forth an exclusion of plans which are "established and maintained exclusively for ' substantial owners' as defined in section 402 2(b )(6) [now 402 2(b)(5 )]." However, ER ISA § 4022 (b)(5) defines a substantial owner as an individual who -- . . . (ii) in the case of a partnership, is a partner who owns, directly or indirectly, more than 10 percent of either the capita l interest or the profits interest s in such partnership, or (iii) in the case of a corporation, owns, directly or in directly, more than 10 percent in value of either the voting stock of that corporation or all the stock of that corporation. To interpret ERISA § 4021(a) as excluding all plans which consist entirely of partners would be to expand this exclusion beyond Congress' chosen requirement of a minimum 10 percent ownership.
So, in order to fight PBGC on their audit you have to prove that your partners have the more than 10% ownership and if you can do that, your next step if the PBGC denies your proof would be that you have to file suit in court to get the court to issue a declaratory judgment to stop the audit.