For example, under former rules, the use of separate plans by members of affiliated service groups or controlled groups of entities was permissible as long as the plans did not discriminate and were deemed comparable with respect to benefits. All plans must now satisfy this rule on an individual basis. As a consequence of this revised minimum participation rule, many employers have opted for the termination of their plans. They did not wish to face the additional costs of covering substantial numbers of employees under their qualified plans or risk having their plans disqualified. The excise tax must be paid by the employer and is due on the last day of the month following the month in which the reversion occurs.
Several exemptions exist regarding the imposition of the excise tax.
Another exception which may not be as obvious as the ESOP exception, but may be more significant, is found in Sec. The plan would fail to satisfy IRC Sec. The plan terminated or merged before the first day of the plan year in which IRC Sec. Consider Rollover Generally speaking, Sec. 4980A, occasioned by a plan termination, is not available to plan participants or beneficiaries receiving plan distributions on termination.