terminating a 403b plan when the employer is no longer in business

[Santo Gold]

Any thoughts on how to terminate an ERISA 403(b) plan for an employer that is no longer in business? We have contact with the employer so it is not an orphan plan situation. The plan would still need to go through the process of adopting a plan document, terminating the plan, distribution instructions, etc., correct?

Anything else?

Thanks

[J Simmons]

Any thoughts on how to terminate an ERISA 403(b) plan for an employer that is no longer in business? We have contact with the employer so it is not an orphan plan situation. The plan would still need to go through the process of adopting a plan document, terminating the plan, distribution instructions, etc., correct?

Anything else?

Thanks

Being an ERISA plan, there is no doubt that even if there have been no benefit accruals or contributions since 12/31/2008, you need a plan document, terminating amendment, distribution instructions, etc. (For non-ERISA 403b plans, there's at least an argument under the regulations that such might not been needed if no post-2008 contributions. But Rev Prov 2007-71 was drafted assuming any non-ERISA plan that has received contributions since 12/31/2004 would need duch documentation as well.)

If the funding of the 403b plan you are dealing with is a single group annuity policy, then the employer (yet existing as a business entity though no longer a going concern) would likely have a contractual role in the group policy allowing the employer to direct when payouts will be made. If the funding is through individual 403b contracts, the employer might not have that authority. And the employer could perhaps be flummoxed in its attempt at termination.

If the entity no longer has any employees, each 403b participant would have a distribution triggering event by reason of the end of employment. No one would need plan termination to permit distribution at this time.

For a vendor and/or former employee unwilling to effect a 'distribution' incident to the employer's termination, the employer could perhaps set the 403b contract adrift from any plan and employer involvement by sending an assignment of any of its rights under the 403b contract over to the employee, and explaining that perhaps the employee is free to take a distribution whenever. It seems doubtful the DoL would have any problem from its perspective given that this method would terminate the ERISA 403b plan.