DBP

[Guest epicdoc1]

I have had a DBP for my C corp-(only employee) and am moving overseas. I was told by actuary that 2 options are (1) Termination with or without IRS determination letter, and (2) Rollover in to IRA.

Not clear to me whether I must first terminate to rollover and what the realistic risks of being audited are if I dont go down IRS determination letter pathway which takes 6-12 months.

I do not want to cash out now.

Help??

[Effen]

I think you may have misunderstood. In order to get the money out of your plan, you need some triggering event. Generally, you either need to terminate your employment, or you need to terminate your plan (or both). When you terminate your plan, you can ask the IRS to look at everything and confirm that your plan was qualified. Once that IRS confirms this, you are generally assured that your distributions are eligible for favorable tax treatment and can be rolled over to an IRA. If you do not seek IRS approval, it doesn't mean your distributions don't qualify, it just means you don't have a letter from the IRS specifically telling you that it does. Either way, you can roll the money to your IRA, however without an IRS determination, you are slightly more at risk if they audit.

Most attorneys’ recommend that you get and IRS determination. The only times I have seen that they might not is if you recently (last year) submitted and received and IRS determination letter for the current document.

It is really a question you should be talking to your counsel about, not necessarily your actuary.

It does extend the termination process by about 8 months and can be relatively pricey, but you would be generally assured everything is fine with the plan before you take a distribution.

[david rigby]

No quibble with Effen's comments.

I do not want to cash out now.

If this means you prefer to leave the assets invested without a distribution now (but expect to take a distribution later), then you will need advice from counsel and actuary together. A plan cannot exist without a sponsoring organization, so closing your company may force you to terminate the Plan. Alternatively, if the company continues to exist, then the plan may continue to exist, which may accomplish your goal, with your legal counsel's confirmation, but their will be some ongoing admin costs. If your counsel does not have familiarity with ERISA matters, it may be worthwhile to ask your counsel to consult with experienced ERISA attorney.

[Guest bobolink]

FWIW, I filed for a determination on termination in December, 2009 and received the favorable letter April 15, 2010. I received two letters from the reviewer raising off-topic issues easily disposed of.

[Dougsbpc]

We filed for a determination letter with IRS on a DB termination in September 2008 and have not heard anything from the IRS yet, other than their initial letter indicating they received our termination package.

[Mike Preston]

I think it is random. I have one which was submitted in early Feb and we are on the second round of substantive comments and one that was submitted months ago and nothing other than the acknowledgment.