Employee Plans Compliance Unit (EPCU) - Current Projects- Partial Termination/Partial Vesting
The Partial Termination/Partial Vesting project focuses on information from employers Form 5500 (Annual Return/Report of Employee Benefit Plan) filings which indicate that they may have experienced a partial termination event. The project will determine if the entities are following the requirements of the plan document, and related law pertaining to partial terminations and if the information reported on the Form 5500 is accurate.
When a group of participants is involuntarily removed from a plan, a partial termination event occurs if the reduction in the participant group is deemed significant. A percentage test is used in determining what is “significant”. Generally, a significant reduction occurs when more than 20% of a participant group is eliminated from a plan during a short period of time. See Announcement 94-101, 1994-35 I.R.B. When a “partial termination” occurs, section 411(d)(3) of the Code requires immediate vesting of all members in the affected group.
The Project Process
The EPCU will send contact letters, seeking partial termination event information from the selected group of Form 5500 filers. We will request an explanation or discussion of any special circumstances that may have an impact on whether a partial termination event occurred. The EPCU will evaluate the response and take appropriate action.
If You Receive A Letter
Please complete the Request for Information. You may also furnish any other documents or clarifying material that you believe will be helpful for us to review. You should make every effort to be as complete and accurate as possible in your responses and respond by the due date. If you need additional time, make sure to contact the person whose name is listed on the letter to request an extension. Failure to provide the information could result in further action or examination of your plan.
If You Have Questions
Please feel free to call the person whose name is listed on the letter. Or you may e-mail us and we will be glad to answer any questions you have about the project and how it relates to you. Please include the “Partial Termination/Partial Vesting” in the Subject line of the message.
- Form 2848 (Instructions), Power of Attorney and Declaration of a Representative
- Letter1562-Z, Compliance Contact Letter