One-participant plan started in 1980, no updates, no 5500s

[katieinny]

I know there are probably hundreds (thousands?) of plans out there just like this, but I can't see how a VCP filing is going to even come close to fixing this. I'm less concerned about the ancient document, because I think the IRS has addressed the non-amender issue. I'm more concerned that we can't go back to see if there were employees who worked enough years/hours that should have been covered. Then, we've got to beg the DOL to forgive the lack of 5500 filings, and there is no DFVC program for a one-person plan that probably shouldn't have been a one-person plan anyway. I'm afraid of opening a can or worms. I would love to hear how other retirement plan professionals would handle this.

[TPAMan]

Run away!

[MoJo]

I know there are probably hundreds (thousands?) of plans out there just like this, but I can't see how a VCP filing is going to even come close to fixing this. I'm less concerned about the ancient document, because I think the IRS has addressed the non-amender issue. I'm more concerned that we can't go back to see if there were employees who worked enough years/hours that should have been covered. Then, we've got to beg the DOL to forgive the lack of 5500 filings, and there is no DFVC program for a one-person plan that probably shouldn't have been a one-person plan anyway. I'm afraid of opening a can or worms. I would love to hear how other retirement plan professionals would handle this.

Got you beat. Just had one from 1979.... Owner died. I'm not sure but.... I think the bene's took a taxable distribution and may be holding their breaths for a while. VCP filing and penalties (if you could even calculate what they might be) would have exceeded the balance of the plan.

[ESOP Guy]

I think MoJO has the right answer. Terminate the plan convince the people (or at least anyone who is a HCE) to take a taxable distribution. It sounds like the plan is too flawed to save. You then hope that one can run out the statute of limitations clock on the mess.

edit: fix minor typos

[katieinny]

Yes, I'm getting that advice locally, too. Distribute the assets to the sole participant (which is a substantial amount, by the way), pay the tax and let it go. Another option offered was to hire a well known ERISA attorney with close ties to the IRS who might be able to negotiate a settlement. Between the amount he pays the attorney and the settlement, at least half the balance will be eaten up. I guess I can offer both options to the guy and let him pick. Thanks for your input.

[K2retire]

I guess I can offer both options to the guy and let him pick.

That sounds like the option with the least liability risk for you.