Pooled employer plan

[PS]

Hi,  

When a employer decides to discontinue in the pooled employer plan (PEP) and allows distribution, will the participants needs to be 100% vested? can someone share the IRS/DOL rule on vesting for PEP ( plan termination) 

Thanks

[Tigerket]

No answer in the PEP legislation, but it appears that the decision whether or not to terminate the employer’s portion of the PEP remains with the employer -  and it appears that leaving the PEP does not automatically terminate the employer’s portion - the employer can leave the PEP without terminating the employer’s plan. But if the employer decides to terminate at that time then it would seem the participants must be full vested. 
 
Your question begs for a answer from the agencies.  Presumably the DOL will describe an employer’s decision to use the PEP as a fiduciary decision - as it has under similar circumstances,  but the decision to leave the PEP looks like a settlor function? 

[PS]

1 hour ago, Tigerket said:

No answer in the PEP legislation, but it appears that the decision whether or not to terminate the employer’s portion of the PEP remains with the employer -  and it appears that leaving the PEP does not automatically terminate the employer’s portion - the employer can leave the PEP without terminating the employer’s plan. But if the employer decides to terminate at that time then it would seem the participants must be full vested. 
 
Your question begs for a answer from the agencies.  Presumably the DOL will describe an employer’s decision to use the PEP as a fiduciary decision - as it has under similar circumstances,  but the decision to leave the PEP looks like a settlor function? 

Thank you! 

[Luke Bailey]

If the employer wants to allow distribution based on termination of the employer's participation in the PEP, the only way to do that is to spin off the portion of the PEP that is attributable to that employer's employees into a separate plan for that employer and then immediately terminate it. That will require full vesting. The PEPs we have worked with, e.g. in acquisitions, have a package of forms that they can send the employer to accomplish that, but it administratively it is not quick in my experience because the PEP has no sense of urgency.

You can just stop contributing to a PEP, but then the employees have to separate from service to get distributions and the employer has to provide the PEP with information regarding separations until the last employee who participated has separated. But if you do that, while the continued service will count towards vesting, inevitably some employees will forfeit. Where will the forfeitures go? Allocated among the remaining participants of just the adopting employer? Does the PEP plan document say that? Seems to me that the IRS could apply the rule requiring complete vesting on cessation of contributions at the adopting employer level, not the PEP level. Certainly the same policy would seem involved, i.e. the last folks left in the employer's portion of the PEP would be the owners. Are you sure the PEP document does not require full vesting even if the employer just stops contributing?