PS Plan - Partial termination determination - general question

Hi

PS plan, first year (combo with CB).

Vesting starts with plan inception i.e. no prior service is recognized. Vesting is 6 year graded, 2/20.

11 total participants during the year, some entered at BOY and some entered mid-year.

Last day and 1000 hour requirement for contribution.

5 terminated during the year, some left, couple fired but all replaced with new employees during the year.

Out of 5 terminated, need to include 2 to pass testing.

Doing 11-g corrective amendment.

Do I need to 100% vest or just partial vest? I am aware that some would 100% vest under 11-g rather than partial vest but do partial termination rules overwrite here?

Any comments/thoughts are appreciated.

The 20% reduction in active participants only creates a presumption of a partial plan termination. Whether or not a partial plan termination has actually occurred, and whether a given participant is affected by the partial plan termination, is a facts and circumstances determination.

If a partial plan termination has occurred, then all affected participants must become 100% vested. If the participant being brought in under the amendment was affected by the partial plan termination, then you could not give them lower vesting on a portion of their benefit merely because that benefit was granted under an -11(g) amendment.

Thanks, looking for some language on what is "facts and circumstances".

I believe one would be if all were fired and not replaced. This is not the case here.

I do not believe if all were let go because of a financial distress termination would create a partial termination. This is not the case here either.

Any other thoughts on what can cause partial termination and/or guidance on any publication that would provide some explanation of what "facts and circumstances" would be?

Agreed on your second statement.

Generally, was the workforce reduction the result of employer action - mass layoff, plant closure, sale of division, etc.? Usually any termination is deemed employer initiated, so employer should have clear detailed records in order to claim employee initiated voluntary terminations.

If most or all of terminated participants were replaced by new employees, then maybe this is a situation of normal turnover for this employer (industry probably plays a role here as well). If similar turnover has occurred before there was plan, that is further evidence supporting position that this wasn't a partial termination.

If 5500 filing shows a 20%+ reduction, employer should expect a letter of inquiry and have evidence to argue against partial termination.

Hi

This is what I am following up with the client, hard to get a response.

Thank you both for your comments.

A follow up situation but this is 11-g related

This time a cash balance plan.

Vesting 3 year cliff and no prior service since inception.

Need to include 2 categorically excluded but terminated employees to pass 401a26. Both worked over 1000 hours during the plan year.

In general, I would partially vest them if the vesting was 2/20. In this case, would 33% be reasonable or 100% is the way to go?

Thanks

Hey now, don't make yourself a fiduciary - lay it out to the plan sponsor and let him/her pick!

I agree with Bri.

I don't see any reason why the vesting granted by an -11(g) amendment would have to be equal to a percentage that would otherwise be available under the plan.

Good points

JAKYASAR--- 

Agree with points made--BTW, there are numerous articles out there on PTs--

If you look, I'd be surprised if you don't find several in the law review, benefits publications media.

BOB