Terminating a 401K plan

[Guest Chrisj]

Hi all:

I'm new here, and just looking for some advice. My company ( I am an officer and plan administrator) filed chap 7 BK about a year back and terminated all the employees. We were current with all 401K obligations at the time of BK, but the recordkeeper has refused to "decertify" the plan, and has kept piling up the billing anyway. Most, but not all of the employees have rolled out of the plan, but there are still 2 in it, that have not done so (despite my urging). I would like to leave this cleanly, but I am not going to pay the recordkeeper $3K+ just so they will decertify the plan (which, if they had done so at the beginning, they would not have racked up the $3k+)!

If the recordkeeper will not decertify, what are my options? Can I just walk away?

Thanks in advance for any and all suggestions Chris J

[Guest Chrisj]

Hi all:

I'm new here, and just looking for some advice. My company ( I am an officer and plan administrator) filed chap 7 BK about a year back and terminated all the employees. We were current with all 401K obligations at the time of BK, but the recordkeeper has refused to "decertify" the plan, and has kept piling up the billing anyway. Most, but not all of the employees have rolled out of the plan, but there are still 2 in it, that have not done so (despite my urging). I would like to leave this cleanly, but I am not going to pay the recordkeeper $3K+ just so they will decertify the plan (which, if they had done so at the beginning, they would not have racked up the $3k+)!

If the recordkeeper will not decertify, what are my options? Can I just walk away?

Thanks in advance for any and all suggestions Chris J

My Bad!! It should be deconvert, not decertify. Sorry for the lingo mixup

[Jim Norman]

I'm not sure what you mean by "deconvert", but as a corporate officer, you are likely a fiduciary to the plan, so don't "walk away", whatever you do.

There are steps to terminate the plan. A board action, amendments for any new laws or regulations effective as of the date of termination, IRS submission and a determination letter is advisable but not required, and distribution of all benefits to participants.

Until all is done, the plan is ongoing and must file 5500s. You have a 5500 requirement for 2005 and 2006 will be the final assuming the final distributions are made this year.

Do not let the 2 remaining participants hold up the termination of the plan, you can distribute without their consent if you meet the requirements of 1.411(a)-11(e)(1). If the plan was not already amended to make an IRA rollover the default distribution, amend it for such now, then set up IRA accounts for them, transfer their accounts to the IRAs and get it wrapped up.

[Guest BXO]

Don't walk away. Determine what is necessary and attempt to negotiate the fees downward. As noted, you'll need the 5500s, 1099rS, and maybe discrimination testing. You should have a simple board action.

[smm]

What in the world does "deconvert" mean?