Participating employer goes away, is it a plan termination?

[Flyboyjohn]

Member of controlled group participates in a single employer plan.

That member goes out of existence, can we say that the plan terminated with respect to that participating employer thereby allowing us to force out all of that member's participants?

Or do we have to let participants with more than $5,000 and under age 62 leave their accounts in the plan?

I'm guessing it's the latter since "the plan" didn't terminate but I'm looking for a cite.

Thanks

[david rigby]

Are the participants still employed by the controlled group?

[Lou S.]

Members of a controlled group are treated as once big happy family for testing purposes, while I don't have a cite for this next piece, I would assume the IRS would treat them the same for cash out purposes. That is if they have more than $5,000 vested you could not cash them out without their consent prior to the later of age 62 or NRA, if t he plan allows.

[Flyboyjohn]

To answer DR the company folded, all the employees terminated employment so no they are no longer employed by a member of the controlled group.

We'd like to clean them all out of the plan on the basis of "plan termination" but suspect we can't since the plan hasn't terminated.

[shERPA]

I'd say you can't force out the over $5K participants. The fact that the one member of the controlled group folded is irrelevant IMO. The "employer" is the controlled group of entities, the employer did not terminate the plan, some of the employees were let go is all.

Now ask the question about the same situation in a multiple employer plan.........

[ETA Consulting LLC]

I agree with shERPA. The only way it could've been done would be to spin off the separate division and, then, terminate the spinoff plan. As it stands now, it doesn't appear as if you can force them out.

This could also be the approach for a MEP.

Good Luck!