Fully Vest Term'd EEs Non-vested Bals?

[Guest cole stevenson]

We have acquired (thru a recent merger) a small legacy 401(k) plan with about 100 balances. Almost all are associated with terminated employees. For this reason we want to terminate the plan.

Under this plan's rules, the nonvested portion of participant balances are forfeited *only* at the time participant takes a distribution. So, we have a handful (maybe 20) of non- or partially-vested participants who terminated employment anywhere from one to seven years ago and have plan balances which still reflect employee and *all* employer money. (They voluntarily elected to leave their money in the plan.)

Question: Upon plan termination, are we required to fully vest the non-vested portion of these balances?

Thanks in advance for anyone's two cents worth.

Cole Stevenson

[IRC401]

You probably will need to vest anyone who hasn't had a five year break in service. (and it is very dangerous to accept the opinion of someone who hasn't read the document)

[rcline46]

First, the IRS considered the plan terminated when substantial and recurring contributions ceased. Second, the regulations required you to 100% vest all balances on plan termination. Therefore all may have been vested some time ago. Most definitely all are vested now. The fly in the ointment are those who left recently who were not 100% vested and were paid.