Plan sponsor has disappeared

[Guest PWBAer]

Trustee is missing the Plan sponsor. Company stopped withholding deferrals approx 18 months ago with intent to terminate the Plan. Plan sponsor never executed Board Resolution officially terminating the Plan. Plan sponsor has "disappeared." How does trustee go about terminiting Plan without signficant legal costs to Plan participants?

[Guest Big John]

Wow! No shortage of tax and legal issues here. It would seem likely that the IRS would consider the plan terminated as of 18 months ago anyway because that is when there was a complete cessation of contributions. The trustee would be wise to (i) file the termination with the IRS, (ii) obtain legal counsel, or (iii) both. As I understand it, a terminated plan is required to distribute all assets within a year of plan termination, or if later, within a reasonable period of time after receiving a Letter of Determination with respect to the the termination. That could be a problem in this case.

Another thorny issue is that this plan has no sponsoring employer. These so called "orphan plans" seem to be a problem for the IRS. Their official position seems to be that a qualified plan must have a plan sponsor. That last I heard (from a PPD conference I think) was that the IRS doesn't really know what position to take on orphan plans. Given the uncertainty on this matter, some legal fees might be money well spent.

One final thought. If the plan document sets forth the trustee's duties as caretaker of investment matters, the trustee will be a fiduciary only with respect to such matters. If the trustee, in the absence of the sponsoring employer, now begins to manage and control the plan's operations in addition to the investments, it seems like the trustee will have greatly expanded his or her fiduciary responsibilities AND LIABILITIES.

That's the world through my eyes. I'm not sure I helped you much, but good luck anyway.

[Guest PWBAer]

Thanks for input, Big John. Big mess is right. Found DOL Advisory Opinion Letter 97-03A which addresses similar issues.