Lay-Off or Termination?

[KateSmithPA]

Is there any difference between a lay-off and a termination? This concerns a potential client who has an existing 401k plan. Some of his employees have recently joined a union and will be covered under a union plan. These employees have account balances in his existing plan. It is my opinion that joining a union is not a distributable event even though he will now be excluding members of the union from the existing plan.

If someone is laid-off for a very short period of time - say days, not weeks - can they say they are terminated and request a distribution? What if they request a distribution but go back to work before the distribution has been processed? Is there some standard of time to consider?

I appreciate any help you might be able to give me.

[Guest b2kates]

I agree that joining the union and moving to an excluded class, does not constitute a termination-- distributable event. However if too many change category the plan may have had a partial termination; causing everyone to vest.

[david rigby]

Probably look to the terms of the plan for answers to both questions.

w/r/t the union status, it appears that the employment status has not changed. Why would anyone think that union representation changes employment status? The presence of the union may or may not change whether the employees are eligible for future accruals.

w/r/t the layoff vs. termination, it's a good question. Ideally, the plan should address it, but we should not be surprised if it does not. Then might look to other personnel practices for help in being consistent. As always,precedence can be mighty useful.