OLR Report 2012-R-0200 explains how a private sector pension plan can be terminated.
According to the federal Pension Benefit Guaranty Corporation (PBGC), private sector defined benefit pension plans can be terminated through (1) standard termination, if the pension plan has enough money to pay all benefits owed to participants, (2) distress termination, if the employer is in financial distress, or (3) involuntary termination, if the PBGC must intervene to protect plan benefits.
The PBGC was created by the federal Employee Retirement Income Security Act of 1974 (ERISA) to protect the pensions of participants in private defined benefit pension plans. ERISA sets minimum standards for private pension plans, including standards for participation, vesting, benefit accrual, funding, and pension management responsibility. Under ERISA, most private defined benefit pension plans are required to obtain pension benefit insurance through PBGC. Additional information on pension plan termination can be found at http://www.pbgc.gov/prac/terminations.html
For more details, read the full report.
