How to Terminate a Pension Plan

by Cindy Quarters

A pension plan is any program designed to provide benefits for workers after they retire. The plan is normally sponsored by an employer and administered by a trustee. In many plans, such as the 401k, employees pay into the program over a period of time. Other pension plans are completely paid for by the employer. The funds are paid out to the employees once they retire, usually as equal or nearly equal annuity payments. In order to dissolve a pension plan, there are a series of steps the employer must take.

1. Choose the ending date for the pension plan. Send out a notice of intent to terminate to all affected parties. The notice should be sent out a minimum of 60 days, but no more than 90 days, prior to the termination date.

2. Provide each person affected by the plan a notice of Plan Benefits (NOPB). This should be sent not only to current employees, but also to retirees drawing benefits and beneficiaries receiving payments from the pension plan.

3. File notice with the Pension Benefit Guaranty Corporation (PBGC), an agency of the U.S. government that works to assure the safety of pensions. You will need to submit Form 500 to notify the PBCG of your intent. The form should be sent out at the same time or just after the NOPB.

4. Give anyone who might receive benefits as an annuity a notice of annuity information a minimum of 45 days prior to the date of distribution. This includes workers with a vested interest in the pension plan, retirees and beneficiaries of deceased employees.

5. Complete the distribution of plan assets by the distribution deadline, usually 180 days after the PBGC review period ends. Part of the distribution process is typically the purchase of an annuity for each plan member in the amount he would have received had the plan continued.


  • Let your employees know that the pension plan guaranty is only valid for basic benefits, up to the legal limit, and for benefits earned prior to plan termination.


  • If you don’t have enough money to pay all participants in the pension plan, you won’t be able to use the standard termination procedure. Contact the Pension Benefit Guaranty Corporation for specific details on how to terminate the pension plan based on your specific circumstances. Each non-standard termination must be handled individually.

Items you will need

  • Standard termination instructions and forms package from the Pension Benefit Guaranty Corporation

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