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RBG, see the last line of this: http://www.napa-net.org/news/technical-competence/regulatory-agencies/change-vcp-fee-structure-bumps-fees-smaller-plans/?mqsc=E3929209&utm_source=WhatCountsEmail&utm_medium=NAPA_Net_ListNapa-Net Daily&utm_campaign=2018-01-08_eNewsNAPA_Mon

If the plan is terminated and the shares are worth something in 6 months, you will have a lawsuit (probably under state law, not ERISA, depending on the plan's terms), most likely. You will, of course, want releases. Even with releases, outcome unclear, for a number of reasons. As for the 409A issue, seems like the regs don't provide a clear answer. It would seem to me that there is an argument that without a payout the termination regs don't apply, i.e. because it is a forfeiture, not plan termination. The regs don't deal clearly with forfeiture issues. And hey, if you don't actually have a payout of any sort for 3 years, and don't start a new NQDC plan, you've complied anyway. (I'm assuming the employer does not currently have an NQDC plan of the same type that it is not terminating.) If, however, any benefit were provided within 3 years of the termination that arguably looked like compensation or a "substitute" for the lost stock plan benefit, the IRS (if it discovered the facts) should argue that 409A is violated.

Huh? The facts are that there are no accelerated distributions. I would call it a "freeze" rather than a termination, but whatever you call it the termination provisions in the regs are relevant only as exceptions to the anti-acceleration rule, so if you aren't accelerating those provisions can be ignored.

I get it, but you still have to make sure any new plan that would be aggregated with the terminating plan is not implemented prior to 3 years from the date the company took steps to terminate and liquidate the plan. Worst case scenario - in 6 months the company has a value realizing event and those phantom shares are worth something.

Why? The facts are that there would be no acceleration of distributions.

Yes, you would be subject to the 409A voluntary termination rules.