Plan Termination and Benefit Accruals (Posted December 22, 2004) Technical Tip 135: The following question and answer were from the IRS Q&A Session at the 2003 ASPPA Annual Conference: A money purchase plan has a plan year which is the calendar year. An amendment to terminate the plan is adopted and effective on September 1, 2003. Is a contribution required for the plan year ending December 31, 2003? Does it matter if the plan has a 1,000-hour requirement? How about last day of employment? Response: Any participant who has satisfied the requirements to receive an allocation prior to date the amendment was adopted would have accrued the right to receive an allocation. If the amendment is adopted on September 1, 2003, and the plan requires only 1,000 hours to receive an allocation, any participant who was credited with 1,000 hours from January 1, 2003 to September 1, 2003 would have to receive an allocation. For purposes of determining the required contribution, only compensation earned during this eight-month period would have to be taken into account. If, however, the plan required both 1,000 hours and employment on the last day of the plan year, the plan could be amended without obligating the employer to contribute to the plan. View all Tips © 2009 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.