Plan term - vesting

I have a plan that has terminated effective 12/31/2023.

I am completing their 12/31/2023 plan year end work.

There were 3 participants that took a full distribution in 2023 (prior to the plan term or knowledge of the plan term).  They were not fully vested to the profit sharing.  2 terminated in 2023 and 1 in 2020. 

The money was forfeited and used in 2023.

Do we need to restore the accounts of the 2 participants that termed and distributed in 2023? 

If yes, where do I find, exact DOL or IRS language? 

Thank you!

No they don't need to become vested.

The language will be in your plan document regarding the timing of forfeitures. It will (should) say that a participant incurs a forfeiture immediately when they take a distribution of their vested benefit. For participants who don't take a distribution, they will (should) incur a forfeiture after 5 consecutive 1-year breaks in service.

The termination requires that all participants become 100% vested as of the date of the termination. The people who took their distributions don't have any unvested balance as of the date of the termination, so they don't get the 100% vesting.

This is typical language, but read your plan document carefully. It might differ.

Thank you CB!  appreciate it!

As C.B. Zeller implies, you have to read the plan document because there is a small chance that your plan contains a 5-year suspense account provision instead of a cash-out and buyback provision, in which case you would have to vest the suspense account.

Also, you do not provide a full description of potentially important facts. If the individuals were a substantial portion of the workforce and they terminated in connection with a winding down or shrinking of your business, you could have what is called a "partial termination" that would require full veting.

Thank you Luke.

There were only 2 and they voluntarily terminated.  No partial plan term.