BenefitsPerson

Amend the prior 5500 to indicate that it is a final return. Include an attachment that says the plan is not covered by ERISA and no further filings will be made. I had this situation before (about 4 years ago) and this is what the DOL told me to do. We never had a problem with the DOL since.

You can amend the plan to provide for an in-service distribution. Normal income taxes and the 10% pre-59 1/2 penalty would apply. You would need to figure out where the money for the taxes will come from.

You don't even get to the leased employee question until you first ask is the leased employee really a common law employee. You will almost never see a 10% MPP for leased employees.