Leaderboard

A plan is not fully terminated until all assets are distributed. The IRS requires terminations be formalized, including a date, determinations, and distributions. Termination is not required. You can keep going even if there are no contributions. The plan still has to maintain and monitor the assets, follow notice and reporting rules, and make RMDs when the participant is 70.5. It probably makes sense to terminate. The admin and vendor fees for a plan, even a DC plan, will be higher than the admin fees for a low cost IRA.

IMHO, the cessation of contributions (even if permanent) is not a de facto termination. That is why preapproved plans frequently contain an option to maintain any type of plan as a frozen plan, i.e., the plan that precludes new entrants and further contributions (or accruals). I would agree that the distribution of the last dollar of plan assets is potentially a de facto termination. A plan that has permanently ceased contributions is often called a "wasting trust" and as such, continues to be an ongoing plan that must continue to be administered and updated as an ongoing plan and continue to make distributions to participants, for example, only upon distributable events as defined by the plan (such as retirement). The permanent cessation of contributions (whether declared by the employer or by the IRS) to a profit sharing plan is a de facto vesting event. The document usually has provisions built in with regard to the vesting. If the owner wants to keep the money in the plan, then the employer has all the duties and fiduciary obligations of maintaining a qualified plan, and is expected to wear the fiduciary hat whenever appropriate, such as ensuring that all required interim amendments for ongoing plans are timely adopted and that the trust provisions are being carried out in a prudent manner (and the owner or someone needs to be a trustee). Since the withdrawal of all plan assets might constitute a de facto termination, the employer should act with caution before doing so (as a plan termination can accelerate the deadline for required interim amendments). The owner should be getting lots of good advice and making a decision one way or the other as soon as possible.

probably best to make sure the NHCE have signed election forms indicating 0% otherwise down the road someone may claim "no one ever told me about this"

I am asking not debating when I ask this. is this plan terminated? There is a resolution to terminate but in order for a plan to be fully terminated you have to have a resolution and all the assets have to be gone. My first reaction is you can't file a final 5500 because this plan still has assets in the form of a contribution receivable. You have to resolve this issue and then you can say the plan is terminated. Happy to be told otherwise but that is my first reaction.