Profit Sharing Plan with no contributions for three years

[Guest tajcc]

Does anyone know what would happen to a profit sharing plan that only has profit sharing contributions (no deferrals or other contributions) that does not make profit sharing contributions for over three years? Does the IRS consider this to be a partial plan termination?

[ERISAnut]

Not necessarily. This is purely a facts and circumstances issue. Impossible to guess. Other material information would be viewed (profits of the company, for instance).

[Guest Sieve]

My rule of thumb is that without business necessity or business hardship, lack of a ps contribution for 3 years probably will be considered a total discountinuance of contributions, resulting in full vesting.

[John Feldt ERPA CPC QPA]

Full vesting as of what plan year?

[J Simmons]

It's been a while since I dealt with this issue, but if I recall right, its the full vesting occurs retroactively as of the first day of the plan year that no contributions were made.

[Guest Sieve]

The discontinuance is effective no later than the last day of the year following the last year in which substantial contributions were made. (Treas. Reg. Sectioin 1.401-6©(3).) I would think full vesting occurs then.