Acceleration upon Termination of Plan

[ERISA-Bubs]

We have a plan that covers our control group. We spun off a division years ago and they are no longer part of our control group. Can we cancel the plan and accelerate payments just with respect to the spin-off? Or can we cancel the plan just with respect to the spin off and accelerate those payments?

My concern is I don't want to have to cancel other nonqualified plans of the control group as a result of accelerating payments for a spun off entity.

[JanetM]

Sounds like you left the spun off group in the old plan. You have a couple problems now. First mistake was not paying them out at the six month mark after their separation from service, when they were spun off. 2nd mistake is now they are going to get hit with the 20% additional tax plus interest since it was not paid for years as stated in OP. I think you need to find an ERISA counsel who can amend the original plan to exclude the spun off group, add new plan to cover those spun off and then go and fix failed distributions, and if you want to keep out of court, pay the interest and tax the participant is going to owe. Might be cheaper than the lawsuit settlements or the court costs and bad publicity.

[ERISA-Bubs]

I don't think we have a problem there. The division was actually a sub. The employees remained employees of the same employer (the sub) when it was spun off, so there was no separation.

The question is this -- the plan covers the entire control group that the sub used to be part of. Can we terminate the plan and accelerate payments to employees of the sub? If we do that, does it require the control group to terminate all like plans and not adopt a new one for several years?