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Plan permanency is a "thing". It is best discussed with an employer BEFORE the plan is adopted. This takes away the first excuse an employers makes is "no one ever told me so". Is the IRS serious about it? Yes, it's in the regulations and the IRS Manual. See https://www.law.cornell.edu/cfr/text/26/1.401-1 and 1.401-1(b)(2) in particular. Also see the IRS Manual Section 7.12.1.13 Permanency Requirements/Reasons for Termination https://www.irs.gov/irm/part7/irm_07-012-001#idm139730249437392 . This latter link provides a lot of details on what is considered by the IRS in reviewing a plan's permanency, and you will find the answers to your questions and a lot more information. Is this something the IRS even checks? Yes. One way the IRS can learn about the issue is during a review of a company's tax returns. Seeing a deduction for a contribution in one year but not in subsequent years likely will trigger a question. Another way depends in part on whether to plan has filed a Form 5500-EZ, 5500-SF or 5500. The IRS has a formal Entity Control Check that it uses to keep track of filings made year over year. See page 24 of the IFILE User Guide https://www.efast.dol.gov/fip/pubs/EFAST2_IFILE_User_Guide.pdf . The IRS can track filings for the pairing of the employer's EIN and Plan Number. If there are too few or an abrupt end with no designated final filing, this may trigger an inquiry. Keep in mind that a discontinuance of contributions also can lead to a plan being considered terminated. Take a peek at IRM 7.12.1.14. If you convince a plan to delay terminating but the employer makes no contributions, you potentially are making the situation more complicated. Consider cutting your losses with these clients, and focusing your time and resources on educating employers before they sign up.

Funny thing - when I was in high school, I took typing (all right, mostly because the teacher was radiantly attractive) but we had what was, for those days, pretty advanced electric typewriters. I got reasonably good at touch typing. Then when I went to college, all I could afford was this little Underwood manual typewriter, which was about the size of a lunchbox. You couldn't really touch type because you had to hammer the keys, and if you went more than about 20 words per minute, the strikers stuck together, and correcting errors back then wasn't fun. So over the course of 4 years, I lost the ability to type without looking at the keyboard, and have never regained it to this day. It is a source of amusement to my co-workers that I type while holding a pen, in writing position, between the fingers on my right hand. I've thought about doing a video of "Remedial Typing For The Slow Of Wit Dinosaur" but I don't think it would catch on. Boy, did this get off track. My apologies to the original poster.

I agree that the IRS has the permanency requirement and that it takes it seriously, as pointed out by Paul I. Regarding whether or not the IRS still cares, there are a lot of IRS policies and positions taken regarding qualified plans that can be fairly old and seem inapplicable, but do not fool yourself into believing that they have become obsolete and that they no longer apply. For example, there is a 1956 regulation governing the times when certain types of qualified plans can make distributions, including in-service distributions. This regulation is still frequently cited as the reason why a distribution can or cannot be made from that type of plan. See 26 CFR Section 1.401-1(b)(1)(i) - (iii). Regarding permanency, the IRS does not regularly cite that as a policy and none of its rulings or other guidance have relied upon it. The reason is that primarily under defined benefit plans, there was more of a potential for abuse by the top echelon of companies to terminate their plans and obtain substantial fully funded pensions upon plan termination and, if the plan were fully funded, to recover the reversions. When this was a factor, even before ERISA, generally employees were not vested at all until they were at or substantially near normal retirement age. The numerous legislative and regulatory changes that have been put into place in the intervening years, such as 415 limits, compensation limits, stricter nondiscrimination regulations, benefit accrual rules, top-heavy rules, etc. have tended to greatly curb the potential for abuses, at least to the extent of calculating benefits and providing for more meaningful benefits for rank and file employees. In today's defined contribution plan environment, the potential for such substantial disparities in favor of owners and upper echelon management is substantially attenuated. So, while it is still on the books and considered by the IRS, its prominence as a substantial arrow in the IRS' quiver of controlling abuses is greatly diminished. Responding to your question regarding the Form 5310, an employer may but is not required to file for a determination letter from the IRS stating that the plan's termination will not adversely impact its qualification. Although it is optional, it is widely considered to be prudent to apply for such a determination letter. If the employer merely adopts a resolution stating the plan is terminated, distributes all of its assets and files a final Form 5500 for its final year of operation, there is always the risk that the IRS might conduct an audit on the plan's termination.

Millions for a 2-3 year plan sounds more like a 415 issue than it does a permanency issue!

Not wages, and not reported on W-2. Reported an a 1099-R, Boxes 1 and 2a, code "G" in Box 7. Now, employee might want to increase normal wage withholding to take all this into account, but that's a separate issue. Take a look at IRS Notice 2024-2, Q & A's L-1 through L-11 for a discussion of the issue.

I have not seen an IRS challenge to any client's early termination, but that doesn't mean there is little to no risk for an unsubstantiated early termination.

You misunderstand. The most pressing issue for almost all members of Congress is getting re-elected.