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Participant Notice for non-safe harbor 401(k) plan Termination


stephen

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I thought it was prudent but not required to provide participants of notice the plan was terminating.

However, today I found the following on the IRS website.  Did I miss a change?

https://www.irs.gov/retirement-plans/retirement-plan-participant-notices-when-a-plan-is-to-be-terminated

Page last reviewed/updated August 3, 2017.

When a plan is to be terminated, participants should receive a written notice of the company’s intention to terminate the plan and a notice of plan benefits. See Terminating a Retirement Plan.

Notice of intent to terminate the plan

Description: Written notification that the plan sponsor intends to terminate the plan or cease benefit accruals.

What it should contain: The notice should contain sufficient information to notify the participant of the termination of the plan. The notice might include identifying information such as:

  • the plan name and number;
  • the proposed termination date;
  • a statement concerning the cessation of accruals (benefit accruals are ceasing); and
  • a statement that there are sufficient plan assets to meet the accruals provided under the plan.

Timing: The notice must be provided to all affected plan participants and/or beneficiaries at least 60 days and no more than 90 days before the proposed date of termination.

Who is responsible for sending it: The administrator of the plan.


Notice of benefits upon termination of the plan

Description: A notice to each affected participant or beneficiary that specifies the amount of the participant’s benefit as of the proposed termination date.

What it should contain: The notice should identify the amount and form of each participant’s benefit including any personal data used in determining the amount of the benefit, including lump sum conversions, mortality and interest rates used to compute the benefit.

Timing: Promptly to any affected participant or beneficiary after the proposed termination date and on or before the distribution date.

Who is responsible for sending it: The administrator of the plan.

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I am not certain but I also found the information below.

 https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-termination

The IRS 401(k) Plan Termination page includes the following: 

Generally, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, notifying employees, filing a final 5500-series form and possibly filing a Form 5310, Application for Determination for Terminating Plan, to ask the IRS to make a determination on the plan's qualification status at the plan termination date.

 

https://www.irs.gov/retirement-plans/terminating-a-retirement-plan

The IRS Retirement Plan Termination page includes the following: 

2. Notify all plan participants and beneficiaries about the plan termination;

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If you are filing a 5310 then the NOIT is required as it has all kinds of info regarding dates to submit comments to the IRS about the proposed termination and is part of the info required with a 5310 filing and it must be in a certain window prior to filing the 5310 with the IRS.

If you aren't filing a 5310 the NOIT is not required.

However it is prudent to give participants some notification that the Plan is terminating but honestly you can probably do that with the Termination Package you are going to need to provide to every participant with a balance.

Edit - I think I have my Notices mixed up. PBGC covered plans have to provide the NOIT. For IRS filings it is a Notice to Interested Parties.

 

 

 

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Just as a practical matter, why would an employer want to pull off a stealth termination of their 401(k) plan?  Why not make a point of notifying everyone covered by the plan that it is terminating, whether the government requires it or not?  Terminating a 401(k) plan would necessarily require distributing all account balances, right?  How do you do that without telling the participants that the account balances will be paid out?  Even if not required by the IRS, common sense says you should tell everyone about it!

Always check with your actuary first!

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Notifying as a practical matter would almost assuredly be done. Especially to those participants with account balances since they'll be receiving distribution paperwork. But I believe the thrust of the OP is whether is was required which would trigger meeting certain deadlines, etc.

 

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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22 minutes ago, Bill Presson said:

Notifying as a practical matter would almost assuredly be done. Especially to those participants with account balances since they'll be receiving distribution paperwork. But I believe the thrust of the OP is whether is was required which would trigger meeting certain deadlines, etc.

 

SPOT ON.  

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