pension reversion

Pension reversion

Termination of an overfunded defined benefit pension plan and replacement of it with a life insurance company-sponsored fixed annuity plan.

Pension Reversion

The act of a company canceling an over-funded pension plan in order to recover the amount by which it is over-funded. In addition, pension reversion usually also involves replacing the canceled plan with a less expensive, fixed annuity plan using funds recovered from the former plan. The amount by which funds from the former plan exceed the cost of the new plan is paid to the company or employer.

pension reversion

Termination of a pension plan by an employer that wishes to capture the amount by which the plan is overfunded. Pension reversions are generally accomplished by using funds in the plan to purchase a fixed annuity from an insurance company. Excess funds beyond the cost of the annuity revert to the company.
References in periodicals archive ?
Section 420, initially a temporary Code provision currently extended through the year 2013, allows an employer to make a transfer of excess pension assets to a Section 401(h) account without the employer having to pay either regular income tax or the pension reversion excise tax on the amount transferred.
The IRS apparently views this withdrawal as a "pension reversion" to the employer, which is fully income taxable to the employer and is also subject to the 20% pension reversion penalty tax under Code Section 4980.
The ATB held that the distribution of pension reversion income from a subsidiary to its parent was excludible from state taxable income, because the subsidiary was being liquidated.(30) The ATB also ruled that the parent's share of such income should not be included in the denominator of its state apportionment factor, because it represented "gross receipts from the disposition of securities."
A court of appeal held that a taxpayer's pension reversion income was not includible in business income under either a transactional or functional test.(10) Under the functional test of Rev.
They cover installing an ESOP, loans, business structures (including C and S corporations), ESOPs in S corporations, valuations and appraisers, repurchase obligations, participation and vesting, allocations, contributions, distributions, dividends and diversification, accounting rules, reporting requirements, redress of grievances, voting, trustees, fiduciaries, prohibited transactions, Code Section 1042 rollovers, multi-investor leverages ESOPs, securities laws and corporate governance, 401(k) plans and employee ownership, labor laws and unions, plan termination and freezes, bankruptcies, pension reversions, and alternative ways to get equity to employees.
Petersen, M., 1992, Pension Reversions and Worker-Stockholder Wealth Transfers, Quarterly Journal of Economics, 107: 1033-1056.
First, firms can avoid pension reversions and instead obtain excess assets by reducing future pension contributions.
Bowers, Christea, and Mittelstaedt (1994) and Pontiff, Shleifer, and Weisbach (1990) also attempt to measure wealth transfers from labor to shareholders by examining the relation between pension reversions and acquisition premiums.
Petersen, Mitchell A., 1992, Pension Reversions and Worker-Stockholder Wealth Transfers, Quarterly Journal of Economics, 107: 1033-1056.
These results regarding the relation between pension reversions and wealth transfers are consistent with the evidence concerning wage concessions in general.