Voluntary Plan Termination

DEFINITION of 'Voluntary Plan Termination'

The discontinuance of a defined benefit plan by an employer. A voluntary plan termination may occur by the plan administrator only if all of the requirements for a standard termination or distress termination are followed. The U.S. Code of Federal Regulations, section 4041, addresses this.

BREAKING DOWN 'Voluntary Plan Termination'

Under a voluntary plan termination, the assets must be distrubted to participants according to federal laws. The employer has the unilateral right to modify or end the pension plan at any time, which are set out by the Employee Retirement Income Security Act of 1974. The allocation of plan assets is usually done by the plan administrator or trustee.

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