Coverage testing - how to handle acquiring employer's promise to make contributions 4 or 5 years from now?

[fiona1]

Testing coverage for 12/31/2002 plan year. There was a partial plan termination in the 2002 year. All locations were sold off and only 2 ee's remain. The companies that bought out each location have agreed to pay the remaining profit sharing contribution owed to the employees as part of the buyout. They were given 4 to 5 years to make this contribution. Since these contributions will be paid so far in the future - how will that effect the 12/31/02 coverage testing? Thanks for your help.

[david rigby]

Doubtful that any plan sponsor has "4 to 5 years" to make any contribution. Perhaps that is a commitment to reimburse the seller for the contribution.

[GBurns]

Your use of the term "remaining" implies that some portion of the required contribution was made by the original employer, leaving an outstanding balance. Is that correct?

Is this PS contribution allocable to a particular year or period? If it is for plan year 2002 How can it be delayed "4 to 5 years"?

What is a "partial plan termination"?

[fiona1]

Thanks for the replies.

The plan sponsor is going through a bankruptcy. They've paid a portion of the 2002 PS contribution. The companies buying the other locations have agreed to pay the rest, and are being given 4-5 years to do so in the agreement.

As for the term partial plan termination, I guess that's just my way of saying that a plan event is occuring that results in disbursements beyond the natural operation of the plan.