6 replies to this topic

[DMP]

A company has ceased doing business for all intents and purposes and one employee that terminated employment has requested an immediate distribution. Is an immediate distribution required? The trustee would like to wait until the expiration of one year before making any distributions in order to ascertain the employees' exact interest in the plan.

[Bird]

Until the plan is terminated, the provisions of the plan continue to control. So it depends on what the plan says.

[DMP]

THe Plan requires that distributions be made to a terminated participant after a one year break in service. The trustee wants to wait but the terminated employee is becoming a real thorn in his side wanting and immediate distribution and I am not certain it is worth waiting.

[Bird]

I wouldn't pay him out unless the plan is terminated, or amended to change the timing of distributions.

[pax]

However, the plan may be terminated. A plan cannot exist w/o a sponsor, so the "demise" of the company may automatically terminate the plan. A thorough analysis of the facts and circumstances of "...ceased doing business..." is appropriate.

[DMP]

Perhaps, my use of the phrase "ceased doing business" was a bit extreme. We are talking about a professional corporation that had two shareholders and several other employees. One shareholder terminated his employment, taking a couple of employees with him. The employees that stayed initially are now gone. The remaining shareholder is not currently practicing his profession but he has no present intention to dissolve the corporation. Therefore the plan should still have a sponsor. Would one alternative be to seek a dl regarding the status of the plan (partially terminated / terminated)? Wouldn't this effectively prolong the distribution (i.e. waiting until the corporation receives the dl to make distributions)?

[Bird]

Would one alternative be to seek a dl regarding the status of the plan (partially terminated / terminated)? Wouldn't this effectively prolong the distribution (i.e. waiting until the corporation receives the dl to make distributions)?

You already have a means of "prolonging" the distribution - following the terms of the plan. I don't see the need to do anything more. I'm not saying that you shouldn't apply for a DL but that's a different issue.