Document Type


Publication Date

Spring 1994


For over three decades, the Internal Revenue Code [hereinafter I.R.C. or Code 1 has contained provisions that require that all benefits in a single-employer tax qualified plan become fully vested when the plan is partially terminated. However, the Internal Revenue Service [hereinafter IRS or Service] has failed to articulate a standard for determining when a partial termination has occurred. Instead, the courts and the Service have utilized a “facts and circumstances” test which does not set clear guidelines. In light of the application of inconsistent approaches by the courts, recent decisions answering partial plan termination questions have served only to further complicate the issues. The result of this evolution is a body of law that contains relatively few “bright line rules” on which employee benefits practitioners can rely. This article examines the statutory, legislative and case history of partial terminations of single-employer tax qualified plans. It discusses an employer's ability to terminate single-employer plans prior to the enactment of the Employee Retirement Income Security Act of 1974 (hereinafter ERISA) as well as post-ERISA and thoroughly analyzes the legislative history of I.R.C. § 411, 2 the provision governing partial terminations. Case law, Treasury Regulations, and revenue rulings all provide examples of situations in which the courts and the Service have *266 made determinations concerning whether a partial termination has occurred. Accordingly, these relevant materials are also analyzed. The governing provisions of the Code and Treasury Regulations provide for a “facts and circumstances” test; however, no clear authoritative guidance for making such a determination has been issued. Therefore, this article provides a comprehensive analysis of the manner in which the courts and the Service have handled the issue. While this article does not recommend a bright line test, its purpose is to pinpoint the issues and to provide insight for practitioners who need to predict whether the courts and the Service will find that a partial termination has, in fact, occurred.

Publication Title

George Mason Independent Law Review

Included in

Tax Law Commons