I have a client terminating a Profit Sharing plan. I know that at termination, all participants are 100% vested - does this also apply to participants that already terminated employment in previous plan years with vesting less than 100%. This plan includes 3 employees who terminated in 1995 or 1996 (last valuation was PYE 1/31/98) and were 20% or 40% vested, but they have never taken distribution on their money. Upon termination of the plan, do they retain that 20% or 40%, or become 100% vested?

They become 100% vested, because a "forfeitable event" hasn't happened. Your plan doc should spell out when a forfeiture occurs. Usually, once paid, the non-vested portion is forfeited. Otherwise, five years, or years of service, if LONGER, applies.

Something tricky to watch out for.... There is a reg out there (sorry, I'm home, no cites) that says when a plan is terminated, any 0% vested participant with a seperation date less than 5 years ago becomes 100% vested. This has been overcome by plan document language stating that any terminee that's 0% vested is DEEMED to have received a distribution of $0 (the deemed cash-out rule).

If your doc doesn't have this provision, oh oh.