No Longer a Participating Employer

[Guest JEP]

My firm has a company with multiple participating employers on a prototype nonstandardized document. The employer no longer wishes to allow one participating employer to be part of the plan. As of some date in the near future, the participating employer will no longer be able to participate in the plan.

We have several issues we are dealing with. Can these former participants continue to new loans, hardships, and other in-service withdrawals available under the plan? My thoughts are no as they are no longer participants. IF this holds, then can they take a distribution of their plan assets when the participation agreement ends? Again, they haven't really obtained a distributable event.

I then thought about a partial plan termination, but am not sure if this meets that criteria. They don't intend to spin the plan off, it seems as if they simply want to freeze those assets. However, if no longer participating in the plan, but still employed by the sponsor (via subsidiary) they have no access to this money.

Does anyone have any thoughts on this? It would be appreciated.

[Guest Bob K]

It sounds like all that has occurred is that the employees of the company that is no longer in favored status have moved from an eligible category to a ineligible category.

They are still included for coverage testing purposes.

They are still participants (however, they can no longer accrue benefits).

You would have to check the terms of the document to see if they are eligible for hardships, in-service or loans.

However, this change in status is not a distributable event.

Hope this helps.