Employer wants to rescind DBP during first year; does not want the plan.

[Guest LMalone]

Employer adopted a DBP effective 1/1/05, executed in February. Due to financial emergencies with the Employer, it would like to either postpone the effective date or rescind the adoption of the plan entirely. The plan has not yet been submitted to the Service, nor has an SPD been distributed.

Two of 35 employees completed 1000 hours in 2005 for a year of benefit accrual. There is a component in the benefit formula that takes into consideration years of benefit accrual completed prior to effective date of plan.

Is there a way to reverse these actions and end up with no plan, or at least a deferred effective date?

[Blinky the 3-eyed Fish]

Not legitimately.

[mbozek]

two possible ideas that must be discussed with counsel:

If plan was adopted subject to approval of IRS the plan can be terminted back to incepton if no letter is issued, e.g., plan has discriminatory formula. If a disqualfying provisions is adopted then the plan can be terminated for failure to receve a determination letter. Dont know if the employees would have any right to accrued benefits but it would be expensive to sue sponsor.

Terminate plan and pay nominal amount to employees with accrued benefit, e.g., $500 in exchange for waiver of rights under ERISA.

Of course the er can terminate adoption of the plan and see if the employees ever notice that it was adopted.

Q- has the er made any contribution to the plan?

[Guest LMalone]

The Employer made a small contribution just to establish the trust.

Another possibile way out involves the board meeting and minutes. The DBP was approved months before the documents were actually finalized and sent to them for execution. The minutes said, "copies attached hereto," but, of course, no copies were attached to the minutes because the documents were still being drafted.

Are flawed Board resolutions a possible way out?

Thanks.

[could be me maybe not]

I like this comment from one of our esteemed board members (a little out of context admittedly):

This is a question of whether there is a sound if a tree falls in the forest and no one hears it fall.