Plan Termination

[austin3515]

A Doctor's practice shut its doors in February and all of their employees work for a hospital now. The Doctor’s whom are owners of the orgainzation do as well. The practice is still collecting receivables from their pre-Hospital service, thus the doctors are still receiving compensation (W-2). There has yet to be an establishment of a termination date in the form of a resolution or amendment as the practice is just now beginning to "wind things down."

The Doctors are still handling "administrative" issues related to the practice, but are no longer performing medical practices. The work they are doing relates to paying old bills, collecting receivables and winding down the practice.

Issue 1: Termination Date:

When talking about prorating limits is there anything to stop me from using (for example) a 12/31/2011 termination date, thus avoiding proration? Or is there some date where the IRS could argue, "OK, you're monkeyhing with the rules here to avoid proration."

Issue 2: Post-severance compensation

I am also concerned with w-2 wages paid after May 15 (which is 2.5 months post transfer). When does my 2.5 month clock start ticking?

[Bird]

As long as they are performing services and receiving W-2 comp I think it's ok to keep the plan going indefinitely.

[david rigby]

All the other participants got vested, didn't they?

[austin3515]

They did, due to a partial term which took place in February.