Multiple Employer Plan

[Randy Watson]

Can the sponsor of a multiple employer plan terminate the participation of an adopting employer who the sponsor feels is jeopardizing the tax qualifed status? I assume so since the sponsor's consent is needed to allow an employer to adopt in the first place.

[Guest Sieve]

The answer is probably Yes, but it will depend on the provisions of the plan document, including the powers & responsibilities/obligations of the sponsoring employer with regard to the plan's multiple employer and participating employer status. And, the administrative process for removing a participating employer will be in the document.

[Randy Watson]

The answer is probably Yes, but it will depend on the provisions of the plan document, including the powers & responsibilities/obligations of the sponsoring employer with regard to the plan's multiemployer and participating employer status. And, the administrative process for removing a participating employer will be in the document.

Unfortunately the plan document does not specifically state that the sponsor can terminate the participation of an adopting employer, nor does it go into detail about the process for doing so. The plan states that an adopting employer can participate with the "consent" of the sponsor. Although the document is silent on the sponsor's power to revoke its consent it would make sense to me that the sponsor has that power. The only alternative would be a plan termination.

[rcline46]

Also check the Participation Agreement itself, it may give some aid in how to terminate it.

[Randy Watson]

Also check the Participation Agreement itself, it may give some aid in how to terminate it.

Nothing...poor drafting.

[Guest Sieve]

I'd agree that the drafting looks less than complete. But, inherent in the requirement that the sponsoring employer consent to another employer participating in the plan is certainly the ability to withhold or revoke that consent. So, I'd just deliver to the specific participating employer a signed statement from the sponsor saying that, pursant to Plan Section blah-blah, the sponsoring employer no longer consents to this particular employer's participating employer status.

[J Simmons]

I'd agree that the drafting looks less than complete. But, inherent in the requirement that the sponsoring employer consent to another employer participating in the plan is certainly the ability to withhold or revoke that consent. So, I'd just deliver to the specific participating employer a signed statement from the sponsor saying that, pursant to Plan Section blah-blah, the sponsoring employer no longer consents to this particular employer's participating employer status.

I agree with Sieve. Consent implies participation 'at the pleasure' of the sponsoring employer.