updating and restating terminated plans

[Guest srr]

Must a previously terminated plan 1997 forward be amended for gust. What if the business has terminated.

[rcline46]

If you filed with the IRS on termination (recommended) then you don't have a problem.

Otherwise, if the plan is audited by either DOL, IRS, or PBGC and it is not in compliance with laws in effect on the termination date they could disqualify the plan, and the more dollars to HCEs, the more likely the disqualification (or huge penalties).

Operational compliance does not work because the plan was probably operated not in accordance with the document!

Consider your exposure to a malpractice lawsuit should one of these plans be audited, and then decide whether to restate or not.

[mbozek]

Plan would only be required to be amended for Gust amendmnts effective in 1997, e.g. veterans reemployment act, 1996-7 tax act provisions. Dol does not have any authority to disqualify a plan. Plan can be disqualified by IRS but the S/l for denying employer deductions in a disqualfied plan is 3 year years from date er filed tax return. If last contribution was 1997 then s/l expired march 15, 2001, unless contribution exceeded 25% of gross income in which case the S/l would be 6 years, April 15, 2004. If IRS disqualifies plan now the S/l for including the employee benefits as taxable income expired on April 15, 2001 ( if benefits were distributed in 97) or on April 15, 2004 if the benefits exceed 25% of Gross income for 97. Termination of DB plan must be reported to PBGC but PBGC is only concerned with amt of benefits paid. There may also be a s/l for PBGC review after termination. If corporation maintaining the plan has been liquidated it is unlikely that IRS would ever be able to collect back income taxes even if S/l has not expired because owners are not personally liable for corporate income taxes. However, there could be liability by "a responsible person" for back FICA taxes on benefits included as taxable income if s/l for FICA taxes has not expired. The client needs to consult with tax counsel to determine whether any further action is required or whether s/l for agency review has expired.