Partial Plan Termination--Follow Up Questions

[Guest NPWA]

Thanks for the responses to my previous thread. The next question is when exactly the partial plan termination is deemed to have occurred. This profit-sharing plan had a steady loss of participants over the course of a year, first crossing the threshold of 20% in March of the year in which the most layoffs occurred--by the end of the year, the overall reduction was over 50%.

Section 411(d)(3) provides that you vest the accrued beneift as of the date of the partial plan termination. Where do you set that date? At the date the reduction first exceeds 20%? At the end of year? If it's not at the end of the year, it seems like there could be subsequent partial terminations?

All insights are very much appreciated.

[david rigby]

Again, facts and circumstances.

Based on your description, it is probably prudent to analyze the reason for the "steady loss" of participants. If, for example, it was thru a series of small layoffs, it could be that the beginning of that action is the beginning of the partial termination.

[MGB]

Again, there have been court cases addressing this. It depends on the reason for each layoff. If a court thinks that all of the layoffs were associated with the same "event" (e.g., company losing money) then all of them are included in the effected participants. Court cases have aggregated layoffs over many years into one partial termination.

The date is associated with each affected participant. If some affected participants were affected early in the year, that is when they became vested. If others are affected later in the year (or even across multiple years), then that is when they are vested.