plan termination

[Guest basilb]

Hi there.

I am trying to figure out when a defined benefit plan has to be terminated. It is going to be left behind in an asset sale and the company is winding down.

I understand that the termination process can take a year or so and the company needs to be around until distributions are made to avoid an "orphan plan" situation. But is it ok for the company to be basically an empty shell in the meantime, so long as contributions are made to the plan on time/annual reports are filed? I poked around and found an IRS official's informal response in a 1999 Q&A session indicating that this is fine, the company doesn't have to be actively engaged in business.

Not having seen any rules to the contrary, seems right to me so long as the plan is being maintained. But, considering the informal/dated source, was hoping someone could confirm.

Thanks in advance!

[Andy the Actuary]

Termination process has extended length only if application for D-Letter is submitted to IRS. While highly recommended, it is not required to request a D-Letter to terminate a plan. Only timing constrictions are prescribed by PBGC, if Plan is covered under Title IV.