Furthermore, Nebraska Medicine has an
overfunded pension plan that it plans to terminate in fiscal 2019.
If the firm has net operating losses it is carrying forward and has excess pension assets (overfunded), then it is more likely to terminate than to convert, but if the firm is currently paying federal tax and has excess pension assets, termination of an
overfunded pension plan will likely involve paying substantial taxes.
An
overfunded pension plan should have allowed the Postal Service to scale back contributions, freeing funds for improved service or rate reductions.
Answer--An employer with an
overfunded pension plan can amend the plan to add postretirement health insurance as an additional incidental benefit.
The
overfunded pension plan, built in large part by employee contributions, can easily afford to pay more, say the retirees.
In IBM's case, it did have an
overfunded pension plan. In 1998, these surpluses provided approximately $450 million in credit to earnings, an amount that was expected to become a $650 million credit after conversion.
As part of the corporate restructuring, Union Carbide effected a reversion of pension plan funds from its
overfunded pension plan and used it to buy back company stock.
Consider a CPA who provides services to a client that is in difficult financial straits but that maintains an
overfunded pension plan. If the CPA agrees to accept any fees from the plan for services performed for the client, both the client and the CPA have engaged in a prohibited transaction.
As part of the corporate restructuring, Union Carbide effected a reversion of $500 million of pension plan funds from its
overfunded pension plan; the funds were used to buy the company's stock.
Under certain circumstances, an employer withdrawing funds from an
overfunded pension plan must pay a 50% penalty tax on the reverted funds, even if they are used to enhance the security of other employee benefit programs.
97-956 (9/15/98), the North Carolina Court of Appeals held that income from the return of funds from a company's
overfunded pension plan was nonbusiness income.
For example, the board of directors of a public company considering terminating an
overfunded pension plan and establishing a new one to siphon off excess plan assets needs to secure a ruling on the new plan's tax status to shield itself from employee and shareholder negligence charges.
