PEO and Plan Termination

[Guest kgsingletary]

An employer teminates it's service agreement with a PEO who co-sponsors a multiple employer plan. The employer no longer wishes to provide a 401k for it's employees.

Can the assets be distributed to employees like single employer plan terminations or is there a special rule for multiple employer plans?

I have read REV PROC 2002-21 and many Who's the Employer Q & A and can't find an answer specific to my situation.

[alanm]

Usually the mulitple employer plan is written to say the leaving of a client is a "discontinuance of participation" not considered a termination by the client. Discontinuance triggers 100% vesting but not the right to take distributions until the employee terminates at the client.

[Ron Snyder]

If the PEO plan is terminated then it can be handled like a single-employer plan termination. However, each adopting employer has the ability and the right to set up and aponsor a successor plan into which its share of assets can be transferred.

If the PEO plan is amended and restated or merged into a true multiple-employer plan, there is no plan termination to deal with. This would make the most sense to me for most PEOs.