Plan Termination Notice

[Guest AdminFL]

A money purchase plan was frozen 2 years ago. Now the plan is going to be terminated. The participants were given a notice when the plan was going to be frozen. Is a notice to participants now required for the plan termination?

[KJohnson]

The termination is not ceasing or reducing benefit accruals--you've already done that so my reaction would be no. My recollection is, however, that the new EGTRRA provisions regarding 204(h) notices were effective immediately (i.e. these rules already apply). I don't think these rules changed the basic concept that it is only a reduction in accruals that you need to worry about However, you should probably verify this. There are, however, new and stiffer penalites regarding failing to send a notice.

Here is a thread that came to the same conclusion under the old rules.

http://benefitslink.com/boards/index.php?showtopic=484

[Guest AdminFL]

KJohnson,

Thank you. I read the other thread and it also says "Other employee notification is appropriate in that case." Do you know what the other employee notification is?

[david rigby]

I think I can answer that. The other notification is to tell participants the plan is being terminated. I'm not decreeing any "required" notification, just stating what I think is appropriate.

Why would you not do so?

[Guest AdminFL]

That is the funniest answer I have heard. Are you suggesting a phone call or e-mail? Of course you tell the participant the plan is terminating. I was looking for a formal written notification.

Another response I got was... the plan had to be amended to freeze and a notice was sent to participants. Now the plan has to be amended to terminate and a notice should be sent to participants. Makes sense to me. Any comments?