Employer initiated terminations that lead to partial plan termination?

[Guest 410b]

Do terminations for cause, such as failing drug tests or violating attendance policies with tardiness, add to layoffs when evaluating the number of terminations against the 20% limit for partial plan termination?

[david rigby]

It may help you to use the Search feature (look to upper right of the page). Use "partial termination" (with quotes) as the search term.

One of the relevant hits will be this:

http://benefitslink.com/boards/index.php?showtopic=42266

[Guest 410b]

That thread still leaves me confused.

My question and "question assumption" are different than Chuds'. I had arrived at the conclusion that IF there was a partial termination, full vesting of all terminated participants was required. My issue is whether there is actually a partial termination or not.

I am assuming that participants mean all employees who have entered the plan, regardless of whether or not they have chosen to make contributions to it. I am assuming the period involved is a plan year and that layoffs in two separate plan years do not have to be added together.

Terminations due to layoff do not amount to 20% of the participation base. Working with Sieve's comment in post 4 of the thread:

Terminations due to layoff + terminations for cause (gross misconduct) + terminations for cause ( under-performance ) = a sum that is in excess of 20% of participants at the beginning of the year + additions.

So the question, has the plan had a partial termination?

Chuds seems to think that there is case law that says no. Sieve says I can exclude just the gross misconduct terminations for cause. John Simmons' example seems to me to say that I can't exclude any of them for purposes of determining the partial plan termination.

[david rigby]

I am assuming that participants mean all employees who have entered the plan, regardless of whether or not they have chosen to make contributions to it.

I believe that "participant" means as you say. (There may be other opinions.)

I am assuming the period involved is a plan year and that layoffs in two separate plan years do not have to be added together.

Not necessarily. Two separate layoffs could be part of the same event. For example, consider a CY plan year; layoff 1 occurs on 12/1/08 and layoff 2 occurs on 2/1/09. The two are probably part of the same event.

Other discussion about involuntary terminations "for cause" give credence to assuming these are "employee-initiated". It may help to discuss with qualified ERISA counsel. Since a partial termination always involves a subjective analysis of facts and circumstances, likely it will be important to have good documentation, of facts as well as conclusions.

[Guest 410b]

Wow!

The "not necessarily" certainly complicates things.

In your example, if layoff 1 and layoff 2 combine to make a partial plan termination in 08, will the 100% vesting rule still apply just to terminations in 08, or will terminations in 09 be included as well?

[david rigby]

In your example, if layoff 1 and layoff 2 combine to make a partial plan termination in 08, will the 100% vesting rule still apply just to terminations in 08, or will terminations in 09 be included as well?

Return to the concept of affected participants. Any partial termination means only 100% vesting for affected participants. It does NOT refer to participants terminated in the PY of the event.

[J Simmons]

410b,

I find the exhaustive analysis of the 7th Circuit in Matz v Household International Tax Reduction Investment Plan, 388 F3d 570 (7CA 2004) to be very helpful whenever I'm faced with a question about partial terminations.

[david rigby]

Matz v Household International Tax Reduction Investment Plan, 388 F3d 570 (7CA 2004)

http://www.benefitscounsel.com/archives/001272.html

[WDIK]

I find the exhaustive analysis of the 7th Circuit in Matz v Household International Tax Reduction Investment Plan, 388 F3d 570 (7CA 2004) to be very helpful whenever I'm faced with a question about partial terminations.

Most of us would just find it exhausting.

[Guest 410b]

Thank you.

I think the SeaRay and economic conditions references will be useful.