In 2006, all employees of the employer, including the employer, terminated on May 1st (calendar year plan). Plan has not been terminated (not sure why). There was no contribution for 2006, however, a former participant was paid out and forfeited $8,500. Forfeitures are added to ER contributions.

Plan has a 1000 hour/last day rule. Since no one was there on last day, should we use the fail safe provisions and allocate first to those with 1000 hours and then those with the next highest hours? There are 4 NHCEs and 1 HCE. 2 of the NHCEs worked 1000 hours, 2 worked less than 1000 hours but more than 500. The HCE worked 1000 hours. Could we allocate to the HCE and 3 NHCEs to pass coverage?

Thank you.

At some point, when all employees were terminated, there was at least a partial termination. Partial Terminations still result in 100% vesting. I recall there was an old ruling that anyone who forfeited inthe 5 year look back period would vest the forfeited amount in their account, anything else would be part of plan earnings and allocated among the participants.