Partial terminations

[Guest Salvador A Mander]

Mass layoff creating a presumption of partial termination of a DC plan occurs in a single month, say April. Who must vest?

No:

1. anyone who voluntarily terminates (of course must be careful regarding constructive discharge) before the RIF.

2. anyone who voluntarily terminates (same as above) after the RIF

What about those employee-participants who are terminated for cause during the year - either before or after the RIF?

I believe they are counted for purposes of calculating the turnover, but it doesn't seem that they should be entitled to vest upon the partial termination.

However, Rev Rul 2007-43 includes a sentence that may indicate that EVERY terminated employee during the year must vest:

"If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a

severance from employment during the period must be fully vested[.]"

Is the partial termination viewed as occuring in April, so that the earlier and later terminations during the year do not require vesting? Thus, the significance of the "applicable year" being the plan year (or possibly longer where there are multiple related layoffs) is to determine whether a partial termination has occurred. But determining who must vest depends on whether their participation terminated as a result of the corporate event (i.e., they were laid off or constructively discharged).

Put differently, if a partial termination occurs in April (and it's the only partial termination for the year), then only those who are laid off as a part of the RIF vests upon the partial termination.

Is there a general consensus on this?

[david rigby]

I don't know if there is "general consensus". Here are a few prior discussions for your reading:

http://benefitslink.com/boards/index.php?showtopic=43817

http://benefitslink.com/boards/index.php?showtopic=42855

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