partial plan termination, or not?

[K2retire]

LLC with 5 plan participants: 2 members, 3 other employees. One member starts dating an employee. The employee is asked to resign. 20% of the plan participants have now left under circumstances that may not have been of her choosing. About a month later, the LLC member whose girlfriend was asked to leave, also leaves. We now have 40% of the plan participants terminating in the same year, related to the same event, but not at the same time.

The bundled plan service provider says that both people left voluntarily, so no partial plan termination. If the employer wanted to treat this as a partial plan termination, how is it documented?

[david rigby]

Write an amendment providing 100% vesting for all participants leaving between date X and date Y?

If you have any concern for (a(4), include that in your review/analysis.

[DMcGovern]

Write an amendment providing 100% vesting for all participants leaving between date X and date Y?

If you have any concern for (a(4), include that in your review/analysis.

Is it possible that such an amendment could be discriminatory? If done, 50% of the HCEs would receive this special vesting, versus 33% of the NHCEs. It is my understanding that vesting is a benefit, right or feature that must be nondiscriminatory under 401(a)(4) and the current availability of a BRF would be tested under 410(b).

As far as the partial plan termination issue, it seems like it could be argued that the NHCE termination was "employer initiated". I guess it depends a lot on all of the circumstances, but certainly something to address.

[Belgarath]

There's a rebuttable presumption that all employee terminations are involuntary. Given that one was "asked to resign" it would appear that this was employer initiated. I'd tell the employer that it appears to be a PPT, but that they must make the decision and tell you how to proceed.

[Guest Sieve]

Of course, you could then take that position and file a Form 5300 to request a ruling.