Terminating Plan with no active participants

[Guest krisknapp]

The Plan Sponsor, a non-profit org, sold their healthcare facility to another non-profit org. All of the employees now work for the other non-profit org. The one key employee no longer receives compensation from the Plan Sponsor and has started a new non-profit org. The Plan Sponsor is terminating their Money Purchase Plan. The want to file for an IRS letter. Can we make distributions to everyone including the key employee since he is no longer an active employee? What happens if we pay out everyone before the IRS issues its determination letter? Would the plan be terminated if we pay everyone out and don't have the IRS letter yet or would we have to wait for the IRS letter in order for the plan to be considered terminated?

[Bird]

The plan is terminated when the sponsor says it is, by resolution (corporation) or other written documentation.

There is no requirement to submit for an IRS letter, but it's generally a good idea. If you submit, it's usually recommended to wait until the approval letter before distributing assets, but if you are confident that there can be adjustments to account balances, you might consider making earlier payouts. One particular reason for caution is forfeitures in the last 5 years...they seem to want to look at that closely and might want to vest up any participants who received less than 100% vesting in that time frame.