Final 5500 EZ- money purchase

[Guest taxchicks]

My client wants to terminate his money purchase keogh. He has never had to file a 5500 EZ as plan only has about 12,000 in assets (has been in existance for 10 years). He is a sole proprietor and the only participant and really cant afford to contribute anymore. His broker told him that he could not just terminate plan (client wants to rollover to an IRA) as it is qualified and as such he needs to talk to his tax advisor (me) as the reason must be valid (ie company is going out of business). Is there a valid reason he can give for terminating this plan? He can't afford to make any more required contributions. (He will NOT be going out of business.) Also if he terminates this month (October) does he need to make a contribution for 2006? Does it get pro-rated for the year? Thanks so much for anyone who can help. As you can see, I don't have much experience with this but I am doing my best. I have read every posting on this forum and the questions were not answered. Also googled the subject, but no luck. I just want to advise him of his options and not make any mistakes. Thanks again!!

[Guest Pensions in Paradise]

It's a money purchase plan that's been in existence for 10 years and there is only $12,000?? Sounds like you might have a funding issue.

Anyway, in response to your questions your client does not need to state a reason for terminating the plan. But he/she does need to adopt a formal resolution which terminates the plan. Since it is a money purchase plan, the termination date must be at least fifteen days after the resolution is signed.

As far as the funding requirement for 2006, your client will have to make a contribution for 2006 unless the plan was previously frozen.

One other thing. Make sure your client has updated the plan document to comply with all changes in law.

[Blinky the 3-eyed Fish]

One other thing. Make sure your client has updated the plan document to comply with all changes in law.

Just a crazy hunch, but me thinks the client has document problems already.

[Guest Pensions in Paradise]

Blinky - how old is your picture? You look pretty good for a 94 year old fish.

[Bird]

His broker told him that he could not just terminate plan...as the reason must be valid (ie company is going out of business).

I am shocked...SHOCKED that a broker would give such incorrect information.

The other info posted here is correct. You should also be aware that a final 5500-EZ is required even if one was never required.

[Guest taxchicks]

His broker told him that he could not just terminate plan...as the reason must be valid (ie company is going out of business).

I am shocked...SHOCKED that a broker would give such incorrect information.

The other info posted here is correct. You should also be aware that a final 5500-EZ is required even if one was never required.

[Guest taxchicks]

Thanks for the info everyone!