BenefitsLink logo
EmployeeBenefitsJobs logo

Subscribe to Newsletters

Search the News

Featured Jobs
Regional Vice President - Retirement Plan Sales
Retirement Plan Administrator with QKA, QPA, CPC
401k Investment Analyst/Consultant
Technology Professional
Sr. Client Services Manager
ESOP / Employee Benefits Leader
Retirement Account Administrator
External Client Manager for Pension Plan Clients
Employee Benefits Pension Consultant (Law Firm)
Search all jobs
Get the BenefitsLink app for iPhone and iPad LinkedIn

Jump to content


Formal Plan Termination

  • Please log in to reply
2 replies to this topic

#1 commishvp


    Registered User

  • Registered
  • 31 posts

Posted 31 October 2006 - 04:31 PM

The client is acquired in a stock acquisition. They have determined they want to proceed with a formal plan termination. They would like to be able to distribute the account balances of the employees who are not retaining their employment than distribute the remaining balances after the favorable letter of determination is received.

Any creative solutions?

#2 austin3515


    Registered User

  • Sitewide Moderator
  • 3,733 posts

Posted 31 October 2006 - 07:36 PM

LEt's jump back a step: Is this a 401k plan? If it is, you can't distribute the 401k account balances even under termination if the employees are covered by the acquiring companies plan (any DC plan, even it is not a 401k plan).

The only exception to this is if one Big Company acquired a wholly owned subsidiary of another Big Company. The exception says tht in this situation, the employees are treated as having a severance from employment, so the successor plan issues refered to above are irrelevant.
Austin Powers, CPA, QPA, ERPA

#3 namealreadyinuse


    Registered User

  • Registered
  • 259 posts

Posted 01 November 2006 - 11:36 AM

Plan termination is not a reason for holding up distributions that are othewise due under the plan. If people have a severance from service and the plan says they should be paid out on X date, you have to do that even if the plan is terminating. That (just following the existing plan terms) will probably allow you to do what you want to do.

The other point raised by austin is that retained employees won't be (probably) entitled to distributions. You can still terminate the plan, but you will have to spin off their accounts to the buyers plan instead of offering each retained employee a distrubiton right. No big deal really, though.