Canceling Mandatory Employer Contributions

[rocknrolls2]

Employer X is an insolvent 501©(3) organization going through state receivership proceedings. X sponsors a 403(b) plan providing for a matching contribuiton equal to 1% of compensation to employees who are accruing benefits under the employer's defined benefit plan (which is going through a distress termination) and are employed on December 31of the plan year. In addition, the 403(b) plan provides a nonelective contribution equal to 5% of compensation for those employees hired after January 31, 2007 and employees who elect out of the defined benefit plan as of April 1, 2007 who are employed as of December 31 of the plan year and are credited with at least 1,000 hours of service for the plan year.

May X amend its plan to cancel the employer contributions since no employee will have yet earned the right to receive the contribution on December 31?

Alternatively, may X amend its plan to further condition the contributions upon there being sufficient funds after satisfying the claims of creditors entitled to greater priority in the state receivership?

[mbozek]

Employer X is an insolvent 501©(3) organization going through state receivership proceedings. X sponsors a 403(b) plan providing for a matching contribuiton equal to 1% of compensation to employees who are accruing benefits under the employer's defined benefit plan (which is going through a distress termination) and are employed on December 31of the plan year. In addition, the 403(b) plan provides a nonelective contribution equal to 5% of compensation for those employees hired after January 31, 2007 and employees who elect out of the defined benefit plan as of April 1, 2007 who are employed as of December 31 of the plan year and are credited with at least 1,000 hours of service for the plan year.

May X amend its plan to cancel the employer contributions since no employee will have yet earned the right to receive the contribution on December 31?

Alternatively, may X amend its plan to further condition the contributions upon there being sufficient funds after satisfying the claims of creditors entitled to greater priority in the state receivership?

I dont know anything about state recievership proceedings and its effect on a plan termination. If this was a bankruptcy filing then whatever the bankrucptcy court decides would be applicable because ERISA does not preempt any other federal law.

Is the employer subject to ERISA?