Message Boards Digest

July 25, 2022

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SSRRS created a topic in Defined Benefit Plans, Including Cash Balance

Partial Plan Termination Occurs When Only Non-Owner Employee Terminates Employment?

"A DB Plan was adopted for 2014. The only participants for 2014 were the owner and 1 employee. The other 15 employees worked fewer than than 1,000 hours eac year, so they were not eligible.

In early 2015 the single participating employee terminated employment. He was 0% vested, because he did not have at least two years with at least 1,000 hrs -- just one, in 2014.

[1] Was this a partial plan termination?

[2] If yes, would this one terminated employee become 100 vested?

[3] Why should the owner be 'penalized' and be forced to make this employee 100% vested just because there were only 2 participants in the plan (and 1 terminated)? The plan is still in existence in 2022, 7 years later (with the owner still the only participant). There is not intent to terminate the plan any time soon. Calling this a partial termination seems quite harsh.

[4] What is the ramification if the terminated employee was removed from the plan (because at termination was 0% vested) rather than being kept in the plan and becoming 100% vested?"

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