Plan Termination Date

[Medusa]

The firm that I work for seems to routinely allow retroactive plan termination dates for defined benefit plans (non-Title IV). For example, they are trying to terminate some now, effective 12/31/08, on the basis that there haven't yet been any 2009 benefit accruals. I say no and am becoming very unpopular.

Am I correct that there is simply no basis at all for doing a retroactive plan termination? This is one of those things that I thought everyone knew but now I'm starting to doubt myself.

[david rigby]

IMHO, a termination date must be affirmatively adopted (by the relevant authority) on or before its effective date. However, it is perfectly reasonable to terminate a plan today (for example), knowing that the benefit has not changed since 12/31/08, since there is no 2009 service.

This is not a 12/31/08 termination date, and the 2009 plan year is fully effective.

[John Feldt ERPA CPC QPA]

I would not think this possible either. You cannot avoid the schedule B requirement by retroactively adopting a plan terminaton date.

Have they submitted their plan termination amendments for IRS review (via Form 5310)? If yes, did the IRS say anything about that?

[Medusa]

Thank you. I am not insane.

The attraction of retroactive termination is the potential savings of (a) not having to pay for a valuation for the current year and (b) not having to possibly come up with a required contribution for the year. That being said, these would not be the clients who agree to incur the extra expense of applying for a determination letter. Know what I mean?

Thanks again,

Med

[John Feldt ERPA CPC QPA]

Crystal clear.