Partial Termination

[austin3515]

Got a multiple employer plan. Most of the employees from ONE of the employers were let go.

So, the question is: Do apply the partial term rules at the "employer/controlled group" level or at the plan level. I would have to assume it is the employer/controlled group level, but thought I should throw this out there.

[J Simmons]

Austin, I think it applies at the employer/controlled group/affiliated service group level. I have no citation, but vesting is a public policy allowance to ERs as a tool to encourage EE retention. Vesting due to partial termination comes from the notion that if the employment termination is initiated by the ER and beyond the EE's control, the purpose for vesting being allowed in the first place does not apply to the situation. Just because unrelated ERs share the same retirement plan it should not distort these dynamics or reasons for vesting on ER initiated terminations of a proportion within the ER's own EE pool. Otherwise, you may have an ER that is considering closing a plant or location want to merge its retirement plan with a multiple employer plan of other, unrelated ERs before the plant closure in order to skirt the partial termination rules.

[david rigby]

There may be some discussion in prior threads.

http://benefitslink.com/boards/index.php?showtopic=40331

http://benefitslink.com/boards/index.php?showtopic=41013

Search for others.

[PensionPro]

§1.413-2. Special rules for plans maintained by more than one employer

(a) Application of section 413©

(3) Additional rules

(iii) The special rules of section 413(b)(2) and §1.413-1© (relating to (A) section 401(a)(4) and prohibited discrimination, and (B) 411(d)(3) and vesting required on termination, partial termination, or discontinuance of contributions) do not apply to a section 413© plan. Thus, for example, the determination of whether or not there is a termination, within the meaning of section 411(d)(3), of a section 413© plan is made solely by reference to the rules of sections 411(d)(3) and 413©(3).

[Guest Sieve]

To translate (for those who can't wade through it all), PensionPro's citation to the IRC Section 413© regs is authority for, and in agreement with, John's response that the partial termination rules in a multiple employer plan apply at the emplyer/controlled group level (i.e., each employer is treated separately).

[casey72]

The proper citation is 1.413-2(d), which says that all employers are viewed as a single employer for purposes of 411. That means you have to look at the plan as a whole in determining whether there has been a partial termination of MEP. It's not done on an employer-by-employer basis. ERISA Outline Book confirms.