Partial Plan Termination
Definition of "Partial plan termination"
Scheme to recapture excess pension assets by splitting a qualified plan in two, and terminating one of them. In the mid-1980s, many pension plans became "overfunded" because their investments had performed so well. In order to recapture the "extra" money, some business firms split the pension plan into two plans, one for current employees and an overfunded one for retirees. The company buys annuities to pay the required benefits to retirees and reclaims the excess assets. The other plan is kept in place for current employees.
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