Plan Termination and 100% vesting

[cpc0506]

Plan sponsor elected to terminate their 401(k) plan effective December 31, 2018.  The termination paperwork was signed in May 2018.

When does the 100% vested rule come into plan?  The effective date of termination of December 31, 2018? Or the date the termination paperwork was signed,?

[401_noob]

Slides 13 and 14 of the following ASPPA plan termination presentation say that it is the effective date of the Plan termination, so 12/31/18.

 https://www.asppa.org/sites/asppa.org/files/PDFs/Education/Webcasts/Qualified Plan Terminations and Partial Plan Terminations.pdf 

[Bird]

Agreed but FWIW, back when we filed 5310s, the IRS would ask about payouts within 5 years of termination and then make us confirm that said participants left voluntarily.  I never understood the distinction but never had a problem so didn't have to argue it.  I guess the idea is that they don't want a sponsor terminating people in order to use the forfeitures for reallocation just before plan termination but it seems that should be covered under partial termination rules.

[CuseFan]

The five-year look back serves two purposes, I believe: (1) verifying that a partial termination did not previously occur and (2) collecting information to ensure that any partially vested participant without five consecutive one-year breaks and who was not paid out their full vested balance has been made 100% vested upon plan termination.

[Bird]

20 hours ago, CuseFan said:

collecting information to ensure that any partially vested participant without five consecutive one-year breaks and who was not paid out their full vested balance has been made 100% vested upon plan termination.

That's what I don't get - why would someone who term'd in 2015 and was paid in 2016 be entitled to recover their unvested balance if the plan terminated in 2018?  I understand if it was part of some systematic thing that could be considered a partial termination but I'm not aware of anything that would indicate they are automatically entitled to retroactive vesting.

[Kevin C]

On ‎12‎/‎21‎/‎2018 at 8:48 AM, Bird said:

That's what I don't get - why would someone who term'd in 2015 and was paid in 2016 be entitled to recover their unvested balance if the plan terminated in 2018?  I understand if it was part of some systematic thing that could be considered a partial termination but I'm not aware of anything that would indicate they are automatically entitled to retroactive vesting.

If the plan document provides that the non-vested portion is forfeited when the vested balance is paid, they wouldn't be entitled to retroactive vesting when the plan terminates.  See GCM 39310.  The GCM also says, as CuseFan indicated, that if the participant has not yet been forfeited, they become 100% vested due to the plan term.

I've never done an amendment for a plan termination that far in advance.  I don't think I would be comfortable recommending that they pay someone based on partial vesting after the termination amendment was adopted.