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Yes, that's exactly what that means. And no, that doesn't make any sense. And yes, you need to restore the forfeitures (plus earnings). The IRS believes that employees who terminate during the applicable period must be 100% vested, even if that termination was voluntary. They state the following in their online FAQ (linked below): "An affected employee in a partial termination is generally anyone who left employment for any reason during the plan year in which the partial termination occurred and who still has an account balance under the plan." https://www.irs.gov/retirement-plans/retirement-plan-faqs-regarding-partial-plan-termination It doesn't make sense that voluntarily terminated employees would have to be fully vested due to a partial plan termination. That seems at odds with the intent of the partial plan termination rules, especially since you don't count such employees to determine whether there has been a partial plan termination in the first place (see the following, excerpted from the exact same IRS FAQ linked above): "Do employees who voluntarily quit count for purposes of determining a partial termination? Generally, voluntary terminations do not count in determining whether a partial termination has occurred as they do for determining who must vest after partial termination. However, in some cases employees who appear to terminate employment voluntarily have been found to have terminated involuntarily under a constructive discharge theory. The employer's intent, working conditions and the reasonably foreseeable impact of the employer's conduct on the employees are factors in evaluating a constructive discharge." IRS Revenue Ruling 2007-43 states, "If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a severance from employment during the period must be fully vested in their accrued benefits, to the extent funded on that date, or in the amounts credited to their accounts." The IRS is actively enforcing this position. See the 2016-11 issue of Employee Plans News (linked below) describing the EPCU project that contacted over 2,000 Form 5500 filers asking questions about potential partial plan terminations: "In almost 10% of the cases, it was determined during the compliance check that a partial termination had occurred and affected participants had not been fully vested. In most of these cases forfeitures were reinstated. In a few of these cases, it was not necessary to reinstate the forfeitures for some or all of the affected employees because no distributions had as yet been made. In these cases the vesting percentages were corrected. The amount of forfeitures plus interest that was reinstated for cases with forfeitures totaled $2,208,678." https://www.irs.gov/retirement-plans/employee-plans-compliance-unit-epcu-completed-projects-with-summary-reports-partial-termination-partial-vesting

Under the correction, you're proposing to retroactively amend the document to be sponsored by the correct employer and have it treated under the same procedure as the non-amender. I've never thought about what you call it, but have made this type of correction on several occasions. Good Luck!

As an aside, note that DOL has an initiative to make sure that plans are commencing benefits timely - i.e., that deferred vesteds are given opportunity to commence at normal retirement date, so waiting to try to locate missing participants when their RBD rolls around may not fly as a valid excuse in the future. This seems more of a DBP issue, but paying out accounts at NRD unless the participant defers is also a DCP issue. Personal opinion, since all ERISA plans are required to distribute annual notices of some sort to ALL participants, there is no reason that missing participants cannot be identified in a timely fashion and then search methods undertaken so that benefits can be paid when due.

Has the plan consulted an ERISA attorney to see what might be done? Has someone called the DoL to see what they have to say about it?

To the OP: is it worth it to try to find a new auditor who would file a "provisional" audit and amend once everything is corrected? The current auditor is holding the plan hostage, causing (potentially) thousands of dollars in fines. Don't the auditors know that a VCP filing takes a long time to complete?

if this is contemplated to be offered as a fund in which rank and file participants can invest then I would raise the fiduciary red flag. If this is an owner only plan, go for it, I've seen worse over the years.

You mean some lawmakers think that the possibility of dialing the wrong number on a fax is more secure then mail getting delivered to the wrong person? That has always been the reason I hate faxing anything with SSNs. I can get an e-mail address confirmed correct before I send it by calling the person and asking did they receive the e -mail and demanding they send an e -mail back. Now I know it is in my e-mail address book correct. Every time you dial a phone number you have the possibility to make a typo. This person can't go into the office or go out to the TPA's office every now and then? I think I would think about digging my heels in as this can be sensitive data and the IRS does pay mileage for its field auditors (or at least it did back in the '80s when I was a field auditor for them.). This person seems like they are demanding the taxpayers allow them to be comfortable and I am not sure the taxpayer owes them that duty.

I would be leary of an actual investment in Bitcoins - being that fulfilling the part about being subject to the jurisdiction of U.S. Courts would be difficult to achieve (where exactly are "virtual" currencies held?) But the OTC traded trust fits the "ERISA requirement - so, why not (other than it's speculative, not regulated nor consistently priced, speculative, fairly new without a track record, or really even a track, speculative, and generally "speculative" (did I mention that before). And one should not construe any of the above as "investment" advice because 1) I don't give investment advice; and 2) I don't consider crap shoots as an investment....

You mean something actually can be deleted from the interweb - PERMANENTLY? Doesn't that go against a fundamental law of nature?