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plan terminating final contribution


CAR

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Business sold in asset sale this week. All employees were terminated (and rehired by new employer) 2 officers now working for new ER also remain employed by old corporation to close it out. Profit Sharing Plan (standardized) is currently scheduled to be terminated at the end of this fiscal and plan year (9/30). Employer wants to make a profit sharing contribution for this plan year. All participants with over 500 HOS in this plan year will receive allocation then will become 100% vested once the plan terminates. Currently, the plan requires employees to wait until end of plan year after termination to receive distribution.

Questions: 1) As long as corporation stays in existence, any problem waiting until 9/30 to terminate the plan then make the final PS contribution and begin distribution of terminated employees accounts? or 2) is this a partial termination because the majority of employees were terminated upon sale of assets? and if so, must we allow immediate distribution and vesting for those terminated employees? 3) the two remaining officers will receive large bonuses in this year: since plan uses W-2 wages, any problem with allocating contribution based upon wages including these bonuses?

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1. No.

2. It is a partial termination, but that does not, in and of itself, mean anything other than the requirement to consider all affected employees 100% vested.

3. Shouldn't be a problem.

If you think you have any issues, submit the plan for a letter of determination on termination (Form 5310). In fact, even if you don't think you have any issues, submit the plan for a letter of determination on termination.

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