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Terminated Participants Prior to Plan Termination


Coleboy1

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Plan is terminating. There are a few participants that terminated and have a 5 year break in service but were never paid out. Do these people also become 100% vested due to the plan terminating? Or are we able to pay them out based on their vested amount at the time they left the company.

 

Thank you!

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I'd be worried that if one suggests they only get the vested portion, that would hint at perhaps the plan didn't do something with the forfeitures earlier, when it perhaps should have by now.

But the plan document can confirm that - the timing of, and directed use of nonvested amounts.

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If they have already forfeited under the terms of the plan, whether by distribution of the vested balance or incurring five consecutive one-year breaks, then you do not restore/fully vest. If they have not yet forfeited under the terms of the plan, then they must be fully vested.

The key here is "the terms of the plan" as that governs what needs to be done. If people have been gone for longer than five-years breaks but have not yet been forfeited, then you have an operational compliance issue to fix that is different/independent from your question, such as allocating amounts retroactively to applicable years based on entitlement in those years.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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  • david rigby changed the title to Terminated Participants Prior to Plan Termination

I third the prior two suggestions (Bri and CuseFan).  Follow the terms of the plan document.  As an aside, my advice is to always start with the plan document.  Read it.  Do what is says.  If not clear, go to the drafter for commentary and then have the proper plan administrator make a formal interpretative determination.  All of this while keeping in mind the law and regulations.  If the plan document appears to require something that you believe may be illegal, consult a lawyer.  So many, many questions can be answered by reading the plan document.  After all, that's one of the things it's there for . . . to tell you what to do.

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