Guest pjz1234 Posted April 4, 2014 Report Share Posted April 4, 2014 I am trying to get a better handle on the contours of partial plan termination and required actions by the plan sponsor/administrator. I have read all the forum topics I could on this issue, but some of my issues seem to be unresolved. I greatly appreciate any answers any of you can provide. 1. What, if any, requirements are there for distributions upon partial plan termination? I have seen two people in these forums say that partial plan terminations are not distributable events. From my own research, however, I am little skeptical of this. Looking at Revenue Ruling 89-87, I think that a plan administrator must distribute assets as soon as is administratively feasible. Although this ruling is not directly on point as it deals with voluntary terminations, I don't see any reason why it shouldn't be applied to partial plan terminations. In its analysis, the ruling establishes: (a) a plan will only terminate at the selected date when all benefits under the plan are determined with respect to the termination date an all plan assets are distributed to satisfy said benefits as soon as is administratively feasible; (b) A plan is not considered terminated if the above requirements are not met “regardless of whether the plan is treated as terminated under other federal law ….”; © A plan which has not distributed its assets as soon as administratively feasible is considered an ongoing plan and must meet the requirements of § 401(a) in order to continue its qualified status. I can't identify language in the revenue ruling, or a policy reason, that would prevent these rules from applying to partial terminations. I also cannot find any contrary authority stating partial terminations do not require distributions (I understand that the only mentions of partial terminations in the IRC relates to vesting). Has anyone been able to test this issue or have any additional authority to answer the question? 2. How can a plan sponsor/administrator go about establishing the date of partial plan termination for purposes of vesting? Are there many dates based on the termination of each individual affected employee? Is it a single date at the beginning/end of the termination event? Is it dependent on the facts and circumstances? 3. Related to #2, can anyone clarify the determination letter process for me? By my reading, it seems that a plan administrator could filed a Form 5300 to get a determination letter regarding whether partial termination has occurred. The plan could rely upon the letter process and treat the plan as qualified until they receive a determination. The plan could then retroactively vest the affected employees with benefits as of the time of partial plan termination. My problem is I can't seem to find any express authority providing this safe harbor period. The closest I got was Internal Revenu Manual 220.127.116.11, which states: "Upon plan termination, all plan assets must be distributed as soon as administratively feasible (generally within one year following the date of plan termination). Generally, an outstanding determination letter will extend this date; however, an IRS EP Examination does not extend this date." Does this encompass 5300 letters or just 5301? If it does, is this the safest way to handle a plan termination? If a plan sponsor was fairly certain that a partial termination is occurring or had occurred, is amending the plan an even safer route? Thank you in advance to any and all help. Link to comment Share on other sites More sharing options...
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