Jump to content

When is Plan Terminated?


Archimage

Recommended Posts

I have an employer whose practice has ceased operations in order to dissolve. All employees and operations are terminated other than the owner/shareholder. The company is still in legal existence although the only operation still happening in existence is the collection of A/R. Does anyone know of guidance that would suggest the plan terminates when the practice theoretically ceased operations?

Link to comment
Share on other sites

Since the entity still exists, it should probably document the plan is terminated as to all contributions as of xxxxx date and intends to distribute to participants ASAP. A 5500 needs to be filed as long as the plan holds any assets.

Link to comment
Share on other sites

As referenced above, have the dircetors of the corp. sign off on a consent terminating the plan as of date x in preparation for the subsequent dissolution of the corp. Consider submitting the plan to the IRS, if need be. Keep Rev Rul 89-87 in mind in terms of distributing assets as soon as administratively feasible so the IRS does not disregard the termination and treat it as an ongoing plan.

Link to comment
Share on other sites

I think we are getting off subject. Basically the business has ceased all operations. All employees were terminated early this year other than the owner but is no longer drawing a salary. No resolution has been made to terminate the plan. The employer wants to get a contribution for this year. I was curious as if the IRS has ever ruled that a plan was terminated due to company operations ceasing. I want to make sure that it is okay to give all of the contribution to the employer. Since all NHCEs terminated with <500 hours I do not have a coverage problem. A formal resolution will be adopted some time next year.

Link to comment
Share on other sites

I don't think you would have an issue on whether the plan terminated. I assume that the reason the owner gets a contribution and nobody else does is that you have a last day rule (and you haven't put such a provision in the Plan in anticipation of this event creating a possible discriminatory amendment under 401(a)(4)).

I think your issue would therefore be whether the owner was "employed" on the last day. I would think that if you continued to pay him comp for his duties in the wind up you would be home free. Based on the facts that you presented, I think you have a closer quesiton.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...