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June 26, 2007 at 01:05 PM
If a defined contribution plan sponsor shuts down a location and jettisons 23% of its employees, that move constitutes a partial termination of the plan.
Ingrid Grinde, an IRS official, has given that interpretation in IRS Revenue Ruling 2007-43, which concerns the minimum vesting standards described in Section 411 of the Internal Revenue Code.
A taxpayer wrote to the IRS about the effects of a shutdown of one of an employer’s four locations on the employer’s retirement plan.
When a plan undergoes a partial termination, “the rights of all affected employees to benefits accrued to the date of such partial termination, to the extent funded on that date, or the amounts credited to their accounts, are nonforfeitable,” Grinde writes in the revenue ruling.
