Will plan lose qualified status?

[Guest JD698]

If a large employer's new Collective Bargaining Agreement no longer requires it to make contributions to a Defined Contribution (Money Purchase) Pension Plan, can the employees of that employer withdraw their funds? Is there reason why these employees cannot/should not be paid out? Is there any danger in the Plan losing its qualified status?

Thanks in advance.

[Effen]

These are questions that need to be answered by your ERISA counsel and would be based on the provisions of your plan document.

That said, unless there is a distributable event I don't think you could pay out the employees of the employer who is no longer making contributions. They are still employed, they are still subject to collective bargaining, the plan hasn't been terminated...I don't really see any reason for them to be paid.

Why do you think the plan's qualification is in jepordy? Just because an employer w/drew doesn't generally have any impact on the plan's qualified status.

[Guest JD698]

These are questions that need to be answered by your ERISA counsel and would be based on the provisions of your plan document.

That said, unless there is a distributable event I don't think you could pay out the employees of the employer who is no longer making contributions. They are still employed, they are still subject to collective bargaining, the plan hasn't been terminated...I don't really see any reason for them to be paid.

Why do you think the plan's qualification is in jepordy? Just because an employer w/drew doesn't generally have any impact on the plan's qualified status.

So, the fact that the employer is no longer obligated to make contributions doesn't matter? The plan document does not make any reference to what happens when an employer's obligation to contribute stops. I guess it should.

[John Feldt ERPA CPC QPA]

Is it truly a multiemployer plan?

If one of the many employers no longer uses these union employees, but the other employers are still providing work for them, then the cessation of that one employer in and of itself would likely not constitute a distributable event. In that sense, it may help to understand this (in concept only) by thinking of the union as if they were the employer.

[Guest JD698]

The employees at issue here will still be working for the employer that is no longer contributing to this Plan. Contributions will be made by the Employer to a different Plan.

Any thoughts on whether the funds could be rolled over into another qualified retirement plan?

[John Feldt ERPA CPC QPA]

Look at the language in the plan regarding withdrawal of an employer, or termination of a participating employer.

It will probably tell you a notice is required and that the Employers must agree on the withdrawal procedure. The document might allow an option instead of a spinoff - to pay out the account balances of the employees of the terminated employer, unless the employee also is employed by another Participating Employer and it might spell out vesting. It may require the employers to agree on such a procedure.

Or, the document might spell out only an option for the money to stay where it is, or for the withdrawing employer to establish a plan to accept the accounts (spin-off) from the old plan.