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Restorative Payments


Guest ERISAAAAH
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Guest ERISAAAAH

The IRS clearly permits restorative payments be made to a plan (Rev Rule 2002-45) or to an IRA (PLR 200852034). However, it seems that the situations allowing for restorative payments all involve only an plan or an IRA (plan participants wronged and restorative payments made to the plan OR IRA participant wronged and restorative payments made to IRA).

However, I am curious what happens if a plan is wronged but is terminated before restorative payments can be made (terminated because only a nominal amount of funds remained as a result of a breach of fiduciary duty). Does a new plan need to be adopted? Can an IRA, which was created to accept a rollover of the remaining funds as a result of termination, receive the restorative payments? It doesn't seem to be a stretch to conclude that the restorative payment rules would allow payments be made to an IRA where a plan has terminated (especially since the termination was a result of the breach of fiduciary duty). I am curious if anyone has ever considered this before. Perhaps a PLR would be prudent.

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