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Un-Terminate a Plan


Dougsbpc

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A 401(k) plan with 20 participants terminates 7/7/2012 because the plan sponsor is being bought by another company.

The buyout deal falls through 11/2/2012.

The only action that has taken place is that a resolution and amendment have been executed to terminate the plan.

Could they just adopt a new resolution and amendment to activate the plan or must they go through with the plan termination then adopt a new plan a year from now?

Thanks.

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We know that the amendment to terminate the plan triggered two things: 1) 100% vesting on all account balances under the plan; and 2) a (potential) distributable event for all balances under the plan.

Not sure if un-terminating the plan would fail to constitute some type of cut-back with respect to those events activated with the amendment to terminate. If, however, you were to immediately create another plan, it would be a successor plan (or alternate plan); and the distributable event for the 401(k) source would not be in effect. That would (possibly) do nothing for the distribution available from the other sources.

This is just how I would begin to approach addressing the question. I'm not sure exactly where this approach would lead, but it incorporates some rules impacting what you're trying to do.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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There have been a few prior discussion threads on the question of "un-terminate". No definitive conclusion.

Here's my thought process: the termination was accomplished via plan amendment. If there have been no other actions to accomplish the termination, then the plan can be amended again to reverse it.

Caution: as stated above, you cannot reverse the 100% vesting.

More important than my opinion: ask the advice of the ERISA attorney who drafted the original termination amendment. (You did use an ERISA attorney, didn't you?)

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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As to the cut-back, see Carter v. Pension Plan of A. Finkl & Sons Company (7th Circuit 2011), available here:

http://www.leagle.com/xmlresult.aspx?xmldo...LWAR3-2007-CURR

"Like". That speaks to a slightly different issue; "what benefit is protected in a DB plan". It is the stream of payments at NRA (but nothing immediate). Reading it, I would wonder how the courts would've ruled if an immediate lump-sum payout of the Present Value of the Accrued Benefit was written into the amendment to terminate the plan.

So, the complexity is (which is why I "like" this cite), is determining what the cutback implications are and how the treat those. I think, since this "IS" a DC plan (and not a DB whose benefit is an amount payable in the future; a different date for each participant), that the availability of a distribution of the entire account balance (less 401(k) deferrals should you establish an alternate plan) is an issue.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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