An employer wants to terminate their 401(k) Plan. There are no employees...just the owner.

The plan year is 8/01/08 - 7/31/09

The Resolution says that the plan is terminated effective July 31, 2009.

The plan has already distributed 100% of the assets out of the plan in January of 2009.

This doesn't seem right to me, as the distribution should be made after the effective date of the termination...right? How can distributions be made before the effective date of the termination?

Can someone please help clear this up for me?

Thank you.

If distributions were, in fact, made prior to termination of the plan (i.e., prior to 7/1/2009), then there must be a distributable event--pursuant to the plan documents (& regs, of course)--allowing such a distribution. If not age 59-1/2 or terminated from employment, what is the distributable event for salary deferrals in your scenario (i.e., 6 months prior to plan termination)? Sounds like a major operational error, to me.

There is no reason, by the way, that the plan has to terminate as of a plan-year end--if the plan is no longer active, it should be terminated as of a current date so that plan termination distributions can properly commence and, hopefully, the filing of an additional Form 5500 will not be necessary.

It sounds like the train has already left the station. Take Sieve's first paragraph, and look into EPCRS corrective steps for making distributions before EEs were eligible for such.