PLAN SPONSORS PARTING WAYS

[Guest PAM]

I have a doctor client who sponsors two plans ps & mp. He has a partner who is an adopting employer. They both contribute 1/2 of the ee's contributions each year. The doctors are splitting. Do the employees going with the "adopting er" lose vesting? Are they terminted for vesting purposes? Are they affected at all if they roll all money into the leaving md's new plan? I may need to give more info.. but any thoughts would be helpful. Thanks

[Guest bswift]

pam, we probably need more info, but i do have a couple thoughts. If the participants working for the "adopting" dr. continue to work for that dr., they may not even have a termination of employment that would give rise to a distribution event under the plan. Whether or not they are fully vested may depend on whether the split up constitues a partial termination of the plan (generally, if more than 20% of the participants leave during a specific period of time (say a year) you'd have to think about partial termination issues. One solution might be to spin off the plan assets attributable to the participants who go to work for the dr. who leaves into a new plan sponsored by the new dr. That way, all of the participants' account balances would have to be transferred (even the nonvested part) and they would continue to vest under the new drs. plan. I hope that some of this makes sense and that it helps.

[Guest PAM]

Thanks bswift for your response. I believe that about 1/3 of the ees are leaving with the doc. So maybe a partial termination of the plan does occur. But can he continue to be an adopting er even if there is no affiliation between his practice and the old practice? Would he be better off to just set up a new plan under his own name and go forth? Since the ees were 1/2 his anyway, is it necesary to say a partial term occurred or can they continue to vest under the schedule? Yes I am confused about what the best course of action is for him. Thanks for the help.

[Guest bswift]

PAM, off the top of my head, you should consider having the new dr. create a new plan and having the old dr. spin off a portion of the old plan to the new plan, which covers employees that now work for the new dr. That way you don't really have to take a position on the partial termination and that might be the safest way to accomplish what you want done. hope that helps.