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Guest art

Sponsor out of business-second request

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Guest art

I love these message boards as I think that they provide a useful interchange of information. However, for the second time I have been told, essentially to research the topic myself!!

I have thoroughly searched all old messages, benefits link itself and the IRS through BNA, CCH, etc.

Is anyone familiar with the current IRS position on orphan plans--plans with no sponsor. In 1985 the IRS indicated that they might be issuing some TAM's on this issue. Did they?? Anyone have a cite??

Thanks--and excuse my frustration!!!

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Guest paradigm

The DOL has a procedure on abandon plans, their number is 202-219-8211 or they also have phone numbers of local offices on their web site: www.dol.gov

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I haven't heard of anything official, Art -- still makes me nervous, though. Can't have an employee benefit plan without employees of an employer, the reasoning goes. Would spell trouble for a sole proprietor who dies leaving plan asets to a non-spouse beneficiary ... no rollover opportunity, and the IRS wouldn't allow the trust fund to continue to operate if the business folds!

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Correct.

However, I think the IRS permits a "wasting trust" for up to a year, thus allowing the trust/administrator 12 months to find everybody and make payment.

You say that you have searched for the IRS position thru research services. Have you also called the IRS and asked? Seems like an issue on which they would have a well-defined policy.

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Guest art

Thanks to all who responded. I believe the general feeling is that there is no current guidance--but discretion says that you cannot continue to operate a qualified plan without an existing sponsor.

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Guest FredReilly

I have been involved with a number of cases with wasting trust and disolved employer situations some years ago (1989/1990). The IRS issued Rev. Rul. 89-87 on the "wasting trust" issue, and expressed an intent to issue similarly on the disolved employer issue. I had several conversations with a Charles Lockwood at the IRS at that time and I recall that they couldn't resolve the problems relating to sole proprietors. I have seen this issue on the regulatory agenda almost every year since, but it seems to be one of the lowest priorities. Lockwood was at PPD and, I think, went to FDP after the sale to CORBEL. You might want to look him up to see if he could direct you to who has responsibility for this at IRS now.

There are some old TAMs on this issue, but I can't seem to locate them in my files. I remember that they were consistently holding that a plan cannot be qualified without a sponsor.

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