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It was determined (after year-end) that a large traditional 401(k) plan had a partial plan termination in 2018. The plan operates on the calendar year. Additional match contributions (plus earnings) were calculated and deposited to the plan in late 2019 as a correction for the 2018 partial termination. The plan administrator had originally calculated refunds to HCEs for failed ADP/ACP. Now the PA is saying that the plan had to be re-tested for the 2018 plan year after the correction for the partial plan termination, and additional refunds are due to the HCEs. Should the compliance testing for 2018 be re-run as a result of the corrective actions taken for the partial plan termination? Thanks!

Employer ABC sponsors a 401k plan. There are 3 participants. ABC sells practice location #1 of 2 to an employee Z (Non-HCE). The new owner Z does not continue the ABC Plan as a result of buying the practice location #1. Is this a partial plan termination and should Z's account in ABC 401k be 100% vested?

Employer filed a Form 5310 to terminate its 401(k) plan effective September 2014. Form 5310 was filed April 2015. During the review process, IRS agent analyzed the data in question 16 (6 year turnover rate / non vested participants). Agent now takes the position that there was a partial plan termination in 2009 and 2010 and is requesting that all partially vested, terminated participants in those years be retroactively fully vested. Assuming agent is correct that there was a partial plan termination in 2009 and 2010, would asserting a statute of limitations defense be viable? The 2009 and 2010 Form 5500s were both filed more than 3 years before the Form 5310 application. There is no question on the Form 5500-SFs that were filed asking about partial plan termination (i.e., the returns are accurate as filed).

I am trying to get a better handle on the contours of partial plan termination and required actions by the plan sponsor/administrator. I have read all the forum topics I could on this issue, but some of my issues seem to be unresolved. I greatly appreciate any answers any of you can provide. 1. What, if any, requirements are there for distributions upon partial plan termination? I have seen two people in these forums say that partial plan terminations are not distributable events. From my own research, however, I am little skeptical of this. Looking at Revenue Ruling 89-87, I think that a plan administrator must distribute assets as soon as is administratively feasible. Although this ruling is not directly on point as it deals with voluntary terminations, I don't see any reason why it shouldn't be applied to partial plan terminations. In its analysis, the ruling establishes: (a) a plan will only terminate at the selected date when all benefits under the plan are determined with respect to the termination date an all plan assets are distributed to satisfy said benefits as soon as is administratively feasible; (b) A plan is not considered terminated if the above requirements are not met “regardless of whether the plan is treated as terminated under other federal law ….”; © A plan which has not distributed its assets as soon as administratively feasible is considered an ongoing plan and must meet the requirements of § 401(a) in order to continue its qualified status. I can't identify language in the revenue ruling, or a policy reason, that would prevent these rules from applying to partial terminations. I also cannot find any contrary authority stating partial terminations do not require distributions (I understand that the only mentions of partial terminations in the IRC relates to vesting). Has anyone been able to test this issue or have any additional authority to answer the question? 2. How can a plan sponsor/administrator go about establishing the date of partial plan termination for purposes of vesting? Are there many dates based on the termination of each individual affected employee? Is it a single date at the beginning/end of the termination event? Is it dependent on the facts and circumstances? 3. Related to #2, can anyone clarify the determination letter process for me? By my reading, it seems that a plan administrator could filed a Form 5300 to get a determination letter regarding whether partial termination has occurred. The plan could rely upon the letter process and treat the plan as qualified until they receive a determination. The plan could then retroactively vest the affected employees with benefits as of the time of partial plan termination. My problem is I can't seem to find any express authority providing this safe harbor period. The closest I got was Internal Revenu Manual 7.12.1.14, which states: "Upon plan termination, all plan assets must be distributed as soon as administratively feasible (generally within one year following the date of plan termination). Generally, an outstanding determination letter will extend this date; however, an IRS EP Examination does not extend this date." Does this encompass 5300 letters or just 5301? If it does, is this the safest way to handle a plan termination? If a plan sponsor was fairly certain that a partial termination is occurring or had occurred, is amending the plan an even safer route? Thank you in advance to any and all help.