What date is a horizontal partial termination considered to have occur

[Dave Baker]

To back up one sec - does the money purchase plan allocate forfeitures among other employees' accounts, or apply them towards the employer's money purchase contribution?

[John A]

For purposes of this question, please assume that a DC plan can be found to have a partial termination due to a significant reduction in future benefits (a "horizontal" partial termination). Assuming a DC plan has a horizontal partial plan termination, and the plan amendment which reduced the money purchase plan contribution from 10% to 5% was adopted October 28, 1999, effective Nov. 1, 1998, which date would be used to determine who to vest - October 28, 1999 (the date the amendment was signed), Nov. 1, 1998 (the date the amendment was effective)

or October 31, 1999 (the plan year end as of which the contribution was allocated). The plan has a 1000 hour, last day rule to

receive the contribution.

If a DB plan has a horizontal partial termination, is the partial termination (and the date of required vesting) consider to have occurred on the adoption date or the effective date of the amendment (or some other date)?

[John A]

Forfeitures reduce future employer contributions.

Also, note that the following from PLR 8750061:

"Sep. 16, 1987

This letter constitutes notice that conditional waivers of the minimum funding standard have been granted for the above-named money purchase pension plan for the plan years ended June 30, 1984, June 30, 1985 and June 30, 1986.

...

The company experienced a shortage of cash and available working capital for the fiscal years ending June 30, 1984, June 30, 1985 and June 30, 1986. During the same period, the company realized a reduction in net income. The plan was amended to reduce contribution to the pension plan effective July 1, 1986. A partial plan termination occurred on June 30, 1986. At that time, all participant's accounts became non-forfeitable.

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So it appears that in this PLR, a partial termination was found to have occurred due to an amendment to a money purchase plan reducing future contributions. I'm not sure how to interpret the partial termination date being June 30, 1986, but June 30 is clearly not the effective date of the amendment. It almost appears that you would consider the partial termination to have occurred on the last day of the plan year preceding the effective date of the amendment.

Other opinions?

[Wessex]

Unresponsive to the original question, but how can a money purchase pension plan amendment be adopted on October 28, 1999, effective November 1, 1998? A money purchase pension plan is required to give a 204(h) notice if there is a significant reduction in the rate of future accruals and the notice must be given after the amendment is signed, but at least 15 days before the amendment is effective.