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Showing results for tags 'partial termination'.
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Today’s Consolidated Appropriations Act, 2021 treats a situation in 2020 as not a partial termination “if the number of active participants covered by the plan on March 31, 2021 is at least 80 percent of the number of active participants covered by the plan on March 13, 2020.” Temporary rule preventing partial plan termination.pdf
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Rev. Rul. 2007-43 seems to me to provide some reasonable clarity for determining when a partial termination has occurred. You divide the number of "employer initiated" active participant terminations during the period in question (e.g., plan year) by the number of active participants you had at the beginning of the plan year, and, depending on how much the resulting percentage is over or under 20%, you determine whether you had a partial termination. 20% or over, you probably did, under 20%, you may not have, and other facts and circumstances can also be brought into the analysis if you're close. All this seems reasonable, to me, and as far as I can tell is rationally related to the case law. But Rev. Rul. 2007-43 also seems to assume, as far as I can tell without any basis in regulations or case law, and possibly, in my opinion, contrary to the plain meaning of the statute (IRC sec. 411(d)(3)), to say that if you determine you had a partial termination, then everyone who terminated without full vesting during the period in question, including voluntary terminations, is deemed to have been "affected" by the partial termination and therefore is required to be fully vested. Below is the relevant paragraph from Rev. Rul. 2077-43: "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." Does anyone besides me think that this may be baseless and lacking common sense? Am I missing something that makes Rev. Rul. 2007-43's conclusion regarding the definition of "affected participant" correct?
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We have a partial plan termination of a pooled profit sharing plan where 69 our of 76 participants have balances under $5,000. 13 of them have less than $200. Our office uses a popular distribution company that charges $35 per person to prepare a distribution and they do the 1099-R at the end of the year. We also charge a fee on a sliding scale for processing distributions, although for balances under $200, we usually do not charge. In this case, we may need to charge something if we have to invest a lot of time in hunting missing people. That issue aside, for 8 of the 13 people, there isn't even enough money to pay the processor's $35 fee. My question is this: are these little balances considered "de minimis" amounts and can they simply be forfeited? Or must the employer pay the $35 per person so the distribution company can cut a check for as little as $4.26 up to $179.02? Any advice based upon what you and your firm do in such circumstances will be greatly appreciated. Thank you!