Partial plan termination - participant count?

[Richard Anderson]

A plan has 3 month eligibility for deferrals and 12 month for employer contribution. There has been a number of terminations during the 2001 plan year.

In counting the number of participants, in order to determine if there has been a partial termination, do I count only those that are participants in the employer portion of the plan (met 12 month eligibility)? Or, must I also count those that are eligible for deferrals, but not eligible for the employer portion of the plan?

[actuarysmith]

The individuals who have only 3 months service are in fact participants and are benefitting under the plan. Sure the employer did not have to be that generous and allow them in. But they did. Therefore, they are paricipants for determining a partial plan term.

[Guest stryan]

Since determining if a partial plan termination has occured is a facts and circumstances test, I believe you need to look beyond just the number of impacted plan particpants. That is, if a significant number of employees were impacted by a RIF or ?, but only a small number of them were plan particpants, they may still be considered as being subject to partial plan termination rules. The reverse may also be true.

This tends to be a gray area and the courts have provided only general guidance, so everybody gets to draw their on line in the sand and then defend it.

Often times the amount of dollars in non-vested benefits will give you a clue as to the significance of the "partial" plan term issue and what is at stake.