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Employer wants to change mind on plan termination


Santo Gold

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The employer terminated a calendar year 401(k) plan, effective 12/31/14. They signed plan termination amendments, distributed plan termination notices to employees and stopped all EE and ER contributions so that no new contributions were made to the plan in 2015. No one has been paid out yet due to the plan termination.

Over the past few months, the participants complained and now the employer is reconsideriong the plan termination and may want to restart the plan and forget about all that plan termination "stuff".

Can the plan be restarted and if so, what issues are involved? It does not seem too difficult to restate the plan document to remove the plan termination amendment and its impact. And no one has been paid out which is good. But is a do-over really acceptable for this? How would we prepare year-end 2015 ADP testing if the participant did not have the opportunity to make contributions for 4-5 months out of the year (use only 7-8 months worth of compensation)?

The plan is neiither top heavy nor a safe harbor and the ER does not want to put any ER dollars into the plan, so ER allocations basis is not an issue.

Any thoughts, comments or ideas are appreciated.

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You might have some vesting issues if you 100% vested anyone at the time of termination. I suspect based on prior posts that you would not be able to take the 100% vesting away for the ER balances that currently exist.

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