Who gets the leftovers from a terminated pension plan?

Question

My wife's employer has just changed to a defined benefit pension plan. If the plan terminates before my wife reaches retirement age, what happens to the contributions left after she is given credit for her vested amount? Does she get them -- or does the employer?

Answer

All employees become 100% vested in their accrued benefits if a pension plan is terminated. On occasion, unallocated amounts may remain in the plan account at termination -- generally as a result of an erroneous actuarial computation. These amounts generally will revert to the employer, but the employer will pay a penalty on the reversion.

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