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draper1

death of sole proprietor

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assume a one participant qualified plan with

sole proprietor as entity type. sole proprietor

participant dies in service before retirement age.

sole proprietor has no will(i.e., dies intestate).

does suriving spouse automatically have the power to

assume all functions of plan sponsor and plan administrator?

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does suriving spouse automatically have the power to

assume all functions of plan sponsor and plan administrator?

I would actually take a different approach as the spouse is likely the designated beneficiary. Even though it is not an ERISA plan, the IRS does allow for the orphan plan termination process to be applied to this plan. This should be enough to provide the authority to the surviving spouse to close the plan down.

Good Luck!

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On draper1's hypothetical, consider the possibility that the decedent's obligation to serve as the plan's administrator might have become the obligation of his or her estate. If so, the estate's personal representative should administer the plan, or should appoint someone to administer it.

Also, if it happens that such an estate's personal representative and the participant's beneficiary are the same person, he or she might choose between a termination and continuing to administer the plan until the beneficiary chooses or is required to take a distribution.

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Also, if it happens that such an estate's personal representative and the participant's beneficiary are the same person, he or she might choose between a termination and continuing to administer the plan until the beneficiary chooses or is required to take a distribution.

I recently was involved in such a situation, and the Administrator of the Estate (not a beneficiary of the estate or of the plan) did step in as Plan Administrator (reluctantly, and without a clue - which is why I was involved). I think it is, in fact, a dangerous practice for the estate to get involved (although I fully recognize that there aren't always many options) as it potentially exposes the estate to liability with respect to any problems on-going with the plan (and arguably the estate is already on the hook for whatever liability the decendent had prior to their death with respect to the plan). In addition, if the Administrator of the estate is the plan administrator, might they not have a claim against the estate that they are administering for anything the decedent owed the plan (especially if the benes of the plan are different thant the bens of the estate), and be in a position of making a claim against themselves? When the plan was sponsored by a self employed (non-corporate) individual, and covered no other participant besides the deceased, AND the plan benes are the same as the estate benes (which covers most of these situations), then I think there is less potential for problems. But, and this is the case I was involved in, once the decedent died (and it was an "owner only" plan with no Form 5500 requirement), it became a "two participant" plan - with on-going issues....

Advanced planning is the only cure.

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it became a "two participant" plan - with on-going issues....

MoJo,

I agreed with everything you said until here. Once the sole owner dies, you can equally interpret this as a plan with no employer (so the plan became orphaned). I wouldn't let this type of event envoke ERISA, even though it "may" be a valid argument in the event a child of the owner is a beneficiary.

Your overall approach, however, is pretty consistent. That, in my mind, appears to mitigate all risks until guidance is issued to address the exact situation and prescribe the exact course of action.

Good Luck!

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I've seen documents that provide for such a situation where the majority beneficiary automatically assumes those duties if the plan doesn't have a successor trustee. Can't remember the specific wording, but that was the gist of it. Of course, that person can refuse the appointment if they wish.

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