Controlled Group Partial Plan Termination

[PFranckowiak]

I have a controlled group of 11 companies. Two of the companies are closing due to economic conditions.

1. If we are under the 20% Partial Plan termination and we don't 100% vest. What happens to the forfeiture that originally went to reduce the contribution for that particiular ER?

2. If they are under 20% and the client wants to 100% vest the people affected what discrimination issues are we dealing with. (There aren't that many nonvested EE's) Client thinks this would be easier than trying to determine the 20% threshold.

Any suggestions are appreciated.

Pat

[rcline46]

Since client is agreeable, 100% vest all participants in the affected divisions. This is not discriminatory and avoids may complications.

[Guest Sieve]

On what basis can you 100% vest participants who, pursuant to the document, are not fully vested (especially if forfeitures are allocated as an additional contribution)?

[TPAMan]

The Corbel VS documents have language that allow for 100% vesting for affected participants in a partial plan termination.

I view the "20% threshold" as the point where 100% vesting may be required, but in the instance where a distinct operating entity closes down, regardless of the percent of impacted particiapnts, 100% vesting should be allowable, if not the preferred course of action.

[Guest Sieve]

I don't agree that you can just willy-nilly decide that a separate operating unit's closure, if not a partial termination, can result in 100% vesting--unless the Plan so provides. To do so would be to cause the Plan not to be administered in compliance with its terms--and might be discriminatory if the full vesting went to a disproportionate number of HCEs, and might even be a cutback if it changed the forfeiture allocation formula that specified forfeitures as an additional contribution/match/whatever. You could, of course, file a Form 5500 and request a determination that a partial termination has occurred, and give your arguments why having <20% involuntary terminations nevertheless should be treated as a partial termination in this specific instance.

But, as long as the Plan does not provide that forfeitures are to be used as an additional benefit to other participants, then a Plan amendment to fully vest that operating unit at its closure ought to be ok.