Termination of Phantom Stock- No Payout

If an employer terminates a phantom stock arrangement before any triggering payout events and no payments are made as a result of the termination, is the employer still subject to the 3-year prohibition on adopting a new plan of a similar type under 1.409A-3(j)(4)(ix)(C)(5)? Thanks!

Check whether the phantom stock arrangement actually constituted a short-term deferral plan exempt form 409A (e.g. paid in a lump sum upon vesting).  Otherwise, it sounds like a voluntary termination subject to the one year/two year/three year rule.

chibenefits, I completely agree with XTitan regarding the possibility that upon close inspection you may be able to determine that this was not an nqdc plan, but an std plan. Having said that, if it were an nqdc plan, I don't think that your termination would be covered by the voluntary termination rules, because those rules specifically permit you to pay out early, if all the conditions of the exception are met. You are not paying out, so you do not need that exception. I would be more concerned that, depending on facts and circumstances, if you started a new plan, the "termination" without payout and the new plan would be considered together by the IRS as, in effect, an amendment. E.g., if the "terminated" plan had payout provisions and elections that were undesirable, and then the new plan has a better-thought-out payment scheme, but all the same participants are in the second plan, and they have the same phantom stock amounts, that would seem to me possibly a subterfuge.