Partial Plan Temination - "Affected" Participants

[Flyboyjohn]

Plan sponsor is a government contractor with 2 contracts in different states requiring 300 employees/participants each.

Sponsor loses one contract and terminates those 300 participants on 8/1/2015, easy conclusion that we have a partial plan termination.

Current IRS position seems to be we have to vest all participants who terminated (or will terminate) in 2015 whether they terminated voluntarily or not and whether they were associated with the lost contract or not.

Seems to be a gross expansion of the rationale behind the partial termination rule.

Anybody support a position that in addition to the 300 participants who terminated 8/1/2015 we only have to vest the participants that worked on the lost contract and were involuntarily terminated this year?

Planning pointer: if you have large government contracts that are subject to being lost maybe put in separate plans for each contract?

[david rigby]

A partial termination is (generally) a facts and circumstances test.
- First, the IRS presumes all terminations during the appropriate time frame are subject to the deemed vesting requirement.
- Second, the plan sponsor has the ability to document other facts that might exclude some of those terminations. For example, an employee who died (but this might trigger 100% vesting anyway).

Your "event" need not be retroactive to the beginning of the year (and could even extend into a subsequent PY).

[BG5150]

I think in a partial plan termination, I could make an argument:

Say the company has two offices of 40 people each, one in LA and one in NY. The company closes the LA office. Partial plan term. I would argue that only the people who worked in the LA office were affected if there were no other reductions in staff in the NY office other than voluntary terminations or dismissal-for-cause of employees in NY.