Merger/Termination of Money Purchase Plans

[Guest dhoefer]

When terminating a money purchase plan, will previously TERMINATED employees who have not had their vested portions distributed become fully vested in a terminated plan, even though they are already terminated? Or since they are terminated, is their non-vested portion already forfeited and allocated among remaining active participants as of the last day of the plan year during which they terminated (assuming forfeitures can be used to offset future contributions in the plan document).

Thanks.

[Guest Sehrl]

I believe when a plan is terminated, all participants with vested account balances become 100% vested at date of termination, regardless of if they are active employees or terminated. However, you would make sure that any former participant that has incurred a five year break in service has their unvested balance removed prior to the plan's date of termination.

[Guest dhoefer]

Thanks for the response! Just to clarify, based on your message if a participant has been terminated for at least 5 years, their unvested balance can be removed from their account prior to plan termiantion. So, for participants within the 5 year break in service, they would become fully vested?

Thanks again!

[Guest Sehrl]

That sounds about right. The existing plan document should have a provision that calls for the removal/forfeiture of unvested balances after a five year break in service. I believe that is fairly standard.