Qualified plans: partial plan terminations

Employers that sponsor qualified plans must monitor those plans for compliance with the Code's requirements on partial plan terminations. Partial plan terminations occur when, by virtue of employer action, a plan realizes a significant decrease in the number of covered participants. In the case of a partial termination, a special 100% vesting rule applies. Sec. 411(d)(3) provides in part that in order to he qualified, a plan must include a provision stating that in the case of a partial termination, all affected employees have a nonforfeitable right (100% vesting) to their funded accrued benefit, in the case of a defined benefit plan, or their account balance, in the case of a defined contribution plan.