can a termination be rescined by board action

[Scuba 401]

can't really find any authority one way or the other but can a corporation rescind a termination if for example a merger or corporate sale doesn't occur? the corporation has both a DB and a DC plan.

[ETA Consulting LLC]

Here are some issues that have to get vetted in whatever the client decides to do:

1) When you amend a plan to terminate, affected employees become 100% vested with respect to their accrued benefits under the plan. Once this happens, un-terminating a plan will not take away that vesting.

2) Also, when you amend a plan to terminate, plan Participants will often incur a distributable event. This effectively given a Participant a right to receive a distribution that they may have not otherwise received.

You will not find any precedent on this because there are several rules within the foundation of ERISA that must be considered. Sometimes, any action taken is certain to violate at least one of these rules. When it comes to employees' rights, that would tend to be a rule that you would ever want to violate.

You may need to go to the IRS (better yet, the DOL) to propose what you are trying to undo and flowchart the effect it will have on Participant's inalienable rights. At worst case, their current accrued benefits will likely remain at 100%, but you may end up taking away their rights to distribution since the plan is (in fact) not terminating. While this is a cutback, some type of relief would be needed. When flowcharting this, you would need to look closely at how the amendments were written and what was communicated to employees to determine which cutback rules apply.

Notice, I am merely thinking out loud (brainstorming) as to what the issues may be. I've never seen anything like this in my short 16 years in the industry.

Good Luck!

[david rigby]

There has been at least one prior discussion thread on this point. Try the Search feature.