Terminating a Target Benefit Plan

[Guest Thornton]

We've just taken over as TPA for a company with target benefit and 401(k) plans. They want to restate the 401(k) and terminate the target immediately. The company and plans are on a 9/30 fiscal.

Question: Can the target be terminated at this point in the plan year? The plan requires 1,000 hours and last day employment to accrue a benefit, so I believe it can be since no one has accrued a benefit. One of my associates disagrees, claiming that anyone with over 1,000 hours has already accrued a benefit and a contribution must be made for the partial year.

I know I'm right (LOL), but can't find a citation. Can you help? Thanks.

[AndyH]

Yes, you are right. A target works just the same way as a simple MP plan in this manner. I don't know a source document cite off hand, but any reference guide (ERISA outline book for example) will have examples of the allocation rules for MP plans and a target is an MP and no different in this respect.