How about another Partial Term reading?

[mwyatt]

Just looking at a new (to us) plan established in 2001.

Facts and circumstances are as follows:

Plan established in 2001 with immediate eligibility; sources include employee deferrals and an employer match on deferrals.

Plan amended beginning of 2002 to get rid of match.

Our population available to us solely focused on people with account balances as of 12/31/2003 (calendar year plan).

Based on this population (which I think makes the circumstances WORSE), there were 53 participants hired in 2002 and earlier; there were 34 participants terminated in 2002, mainly on two specific termination dates.

Thanks to the large payroll company previously doing admin, reallocated forfeitures on the 2001 match were identified as a separate source in their accounting (presumably reallocated in future years based on current year comp); these totalled around $104,000 by end of 2004.

Looks to me like a partial termination occurred given 34 out of 53. Any comments?

[david rigby]

I think you are being hasty to reach any conclusion. Recall that partial terminations arise from involuntary severance of employment. Where there is a possible partial termination, the IRS presumes all are involuntary, but then the sponsor has the ability to demonstrate otherwise. It cannot be stated too strongly: facts and circumstances.

A recent discussion: http://benefitslink.com/boards/index.php?showtopic=30273

Another concern is: how much? That is, will it cost more to analyze the issue than to provide the 100% vesting?

[mwyatt]

Pax:

Of these 34, all but 2 terminated on two distinct dates during the 2002 year. Potential cost of monies forfeited due to this population: $104,000.

From the face of it, something happened on these two dates. Wondering if the liberal eligibility and vesting might mitigate circumstances?

BTW, also in review said national payroll company seemed to be very inconsistent with vesting percentages used in distributions during 2004 (lower percentages @ 3q '04 than shown on their same report for 4q '03). Not exactly brimming with confidence of the prior TPA's ability to recognize a partial termination in progress...

[david rigby]

Potential cost of monies forfeited due to this population: $104,000.

So you are saying that is "enough" to encourage further investigation. OK.

From the face of it, something happened on these two dates.

A very good clue, at least to get someone asking more questions, such as "what happened on those two dates?"

Wondering if the liberal eligibility and vesting might mitigate circumstances?

IMHO, no.

...inconsistent with vesting percentages used in distributions during 2004...

While someone is asking about the relevant facts and circumstances, someone should also be reviewing prior inconsistencies. In other words, find out what is the correct information.

[mwyatt]

The noted vesting discrepancy is one thing on the list to the new client tomorrow (Columbus day is an observed holiday up here in New England - albeit leaf peeping in driving rain wasn't quite what folks had in mind for the extended weekend).

The real concern I have here is that about $80k of these forfeitures were reallocated already in 2003 and 2004, with an additional $24k popping up from forfeitures for 2004 distributions. Looks like, if this was indeed a partial termination (and hence these forfeitures should never occurred due to full vesting requirement), that one either has to undo the $80k in prior allocations or the sponsor would need to pony up the $80k plus earnings to get the prior distributees back to whole. I know for sure that no action will be taken on reallocating the $24k currently in the forfeiture account until this is resolved one way or the other.