Partial Termination/Full termination

[k man]

Can you declare a full termination of a profit sharing plan if the employer has not made a contribution since 12/03?

basically all the employees have left (in several waves) and we are left with a trust and some assets attributable to former employees.

the plan is basically an orphan plan at this point as the employer was sold to a foreign investor.

[WDIK]

To determine if the plan truly is an orphaned plan and what steps should be taken to terminate the plan, you may want to review the proposed rules.

A summary can also be found here.

[Kirk Maldonado]

Technically, what you had was a complete cessation of contributions to the plan, causing full vesting. The interesting work will be for you to determine when that occurred, so as to make sure that all of the eligible persons became fully vested back then.

[k man]

they cant use the orphan plan rules because nobody is willing to act as QTA. declaring it a full termination seems like the best course.

i would imagine determining how far back to vest the participants is the issue.

[saabraa]

I wouldn't automatically agree that there's been a discontinuance of contributions which requires full vesting. The mere cessation of contributions is only part of the story--The rest of the requirement is that there's LACK of a valid business reason for the cessation. Going out of business, lack of profit, using most of your equity for capital improvements; these are all examples of situations refuting the "cessation" assertion.

On the other hand, the current situation does suggest real possibilities for a partial termination. Anyone "affected" in a partial termination must be fully vested.

And someone already mentioned that those participants who have been cashed out of any vested balance and have additionally forfeited their non-vested account balance according to the plan's provisions, prior to the effective date of plan termination (and are not affected participants of a partial termination) can legally be said to have properly forfeited the nonvested balance.

[k man]

the trouble here is no matter how you look at it (either partial term or full term), you have to 100% vest the terminees. here there is not enough money to do that.

[Kirk Maldonado]

k man:

If you are looking for somebody to act as the named fiduciary for the orphan plan, I have somebody that you can contact. He will also act as the TPA too, if that is also desired.

I've known him for over 20 years, but I don't get any kickbacks, referral of business to me, or any other incentive to recommend him, so that there is no conflict of interest. Here is his contact information:

Nick Saakvitne

(310) 451-3225

saaklaw@aol.com

www.ERISAFiduciary.com

NICHOLAS L. SAAKVITNE, A LAW CORPORATION

4712 Admiralty Way, PMB #601

Marina Del Rey, California 90292