Partial Termination

[jkharvey]

The employer is a govt. contractor and over the last several years the contracts have dwindled. This has meant that in each of the last few years employees (plan participants) have been terminated. Some years the numbers that have terminated have been sufficient to warrant partial termination. In this last year, however, the number was just below the 20% guideline for partial termination. Would it be correct to say that since the ER has history of "partial terminations" that even though the 2001 standing by itself doesn't look like a partial termination, it actually is? I want to play it safe and tell the ER this is a partial term. and vest the affected participants. The ER, however, doesn't want to do this if it isn't absolutely necessary.

[Kirk Maldonado]

Would the employer consider paying the cost to get a determination letter from the IRS on this issue? That way you get a definitive answer.

[david rigby]

In many examples I have seen, the cost of giving the 100% vesting has been pretty low, so the employer just does it. The recommended procedure is a formal plan amendment that does not use the phrase "partial termination".

Also, compare the cost of giving 100% vesting to cost of PLR and associated legal/auditor/consultant fees.

[Kirk Maldonado]

You don't need a PLR, just a determination letter.

Full vesting can be more of an emotional than a monetary issue to clients.