Multiple employer plan-controlled group?

[Guest m.n.ouellette]

Ok, I will try to make this question as succinct as possible:

A Multiple Employer plan. One big-daddy holding company, several small employers. One employer "spun out" and opened their own plan. The employees/participants went into the new plan of their employer (ER did not change), and their balances went with them, non-vested and vested. 100% of their balances moved into the new plan. They did not become 100% vested; the part's will continue on their same original vesting schedule.

Here's my question: now another of the employers is pulling away from the big-daddy corp, and does NOT want to open its own plan. But the big-daddy corp wants those 3 participants to be able to take their entire balances, whether vested or not.

There is a great attorney involved in all these corporate splits, but he is very expensive (duh!) and my client(s) don't want me to call him. SOoooo, here I am, asking the experts in my field to HELP. I know this is confusing to me; but maybe you have had experience with this sort of transaction. How can I make these 3 part's be 100% vested? Per the expensive attorney: there is NO partial termination!

Thank you thank you THANK YOU!!!!!!!

[K2retire]

Is the attorney an ERISA specialist, or a corporate guru? My guess is that he or she is looking at the total number of participants compared to the 3 in question saying that the percentage is too small to be a partial termination.

I am not an attorney, nor do I ordinarily work with multiple employer plans. However, when I have dealt with an employer ceasing to participate in a plan, the ERISA attorneys with whom I have consulted have always said that it was a partial termination as to the employees of the withdrawing employer.

[Guest m.n.ouellette]

Is the attorney an ERISA specialist, or a corporate guru? My guess is that he or she is looking at the total number of participants compared to the 3 in question saying that the percentage is too small to be a partial termination.

I am not an attorney, nor do I ordinarily work with multiple employer plans. However, when I have dealt with an employer ceasing to participate in a plan, the ERISA attorneys with whom I have consulted have always said that it was a partial termination as to the employees of the withdrawing employer.

The attorney quoted Rev Ruling 2007-43, and he says that there is "no partial termination in a spinoff of a portion of a plan with a subsidiary that is leaving a control group".

After posting this yesterday and continuing to wrack my brain, I think, simplistically, it comes down to who owns the forfeitures when the spin-off occurs. In the first company that left, they took 100% of the plan assets b/c they had funded the plan match, and deducted it. The employer did not change, and there was no creation nor destruction of an entity. In the second company that is spinning-off, with the 3 employees, they paid for the match and deducted it, but if they don't open a plan, where do the forfeitures go?

If no one feels like getting involved in this question, I understand. It's probably much more complicated than is appropriate for this board... sorry! I need to consult with an ERISA attorney, I'm pretty sure.

Thanks so much for your reply.

[Guest m.n.ouellette]

Ok, I think my vague situation/question just got more simple:

When a participating employer is no longer part of a control group, is there a termination of "that portion" of the plan in any way?

A subsidiary company is coming out from under the umbrella of a larger holding company, and the 3 ee's of the sub-co wants to pull out at 100% but not open a new plan.

Can those 3 participants become 100% vested (reference my original question here), or do the forfeitures stay at the holdings' plan?

Reg's would be most helpful.... Thanks! You don't know how much your input is valued.

[JanetM]

One participating member of a control group becoming ineligible to participate in a plan does not normally make partial termination and 100% vesting. If the number of participants is large enough then the 3 people leaving won't trigger the partial term.

If you are spinning off or selling this company you can opt to vest them. There could be issues if this is very small group or the 3 going are all HCEs

[Guest m.n.ouellette]

One participating member of a control group becoming ineligible to participate in a plan...

Does the "becoming ineligible" have great significance? They are pulling out/spinning off from the Holding company. Does that actively make them ineligible?

And how, in your second paragraph, do we go about vesting them?

Thanks so much.

[JanetM]

If they are not longer member of CG they will not meet the definition of "eligible employee" under the plan. Once you spin them off they will be eligible for distribution as they separated from service with the CG. Choice of vesting is up to sponsor. Unless this is small group where the 3 will trigger partial terminationa and require vesting. Of course you need legal advice if these 3 are HCEs and those remaining in plan are non HCEs.

If you elect to vest them you will have to do resolution and amendment making it happen.

[Guest m.n.ouellette]

If they are not longer member of CG they will not meet the definition of "eligible employee" under the plan. Once you spin them off they will be eligible for distribution as they separated from service with the CG. Choice of vesting is up to sponsor. Unless this is small group where the 3 will trigger partial terminationa and require vesting. Of course you need legal advice if these 3 are HCEs and those remaining in plan are non HCEs.

If you elect to vest them you will have to do resolution and amendment making it happen.

Thank you Janet. No, they will have to take their vested portion only. But they wanted to find a way to become 100% vested, withOUT amending the plan's vesting schedule.

Thanks so much, and I feel better because this is how I thought the answer would come back!

[Guest Sieve]

We like complicated . . .

I'm a bit confused, though, because first you call it a multiple employer plan (which means the employers are not members of a controlled group), and then you say that it is a controlled group. Can you clarify? And, are these employees HCEs?