Can employer take action now to terminate money purchase pension plan effective 1/1/03?

[Guest tws]

In 2002, board of directors decided to terminate money purchase pension plan effective 1/1/03. Other than reflecting this in the minutes of the meeting, no further action was taken. Can the employer act now to terminate the plan effective 1/1/03? If so, want action do they need to take?

[mbozek]

What does the resolution say? A properly drafted resolution will contain a provision authorizing corporate officers to carry out the board resolution by taking appropriate action which would include filing a determinaton request and distributing assets. If not then consult the attorney who drafted the resolution.

[chris]

Apart from mbozek's response, you'll want to check to see if the plan has a last day allocation requirement. If so, it may still be possible to issue a IRC 4980F/ERISA 204h notice to the participants telling them that no contributions will be made for the 2003 plan year and that the plan will be terminated.

[Guest tws]

If there is no properly drafted resolution and the plan has a last day allocation requirement, can a properly drafted resolution be adopted now and a 204h notice be given before the end of this year? Thank you for your input.

[chris]

Generally, yes. 4980F requires the notice to be given a reasonable time prior to the adoption of the amendment reducing/eliminating benefit accruals. For plans with fewer than 100 participants I believe 15 days is still adequate notice. Otherwise, it may be 30 or 45 days I can't remember which. The notice will need to explain in simple terms that no contribution is to be made for the 2003 plan year and that the plan will be terminated as of X date, e.g., October 31, 2003.