Pension Plan With a Fixed Term - Automatic Disqualification?

[Guest dolstein]

If a pension plan's governing documents provide for the termination of the plan upon the expiration of a fixed term of years, does the plan automatically violate the permanency requirement under Regulation 1.401-1(b)(2), regardless of how long that term is? Would inlcuding any provision for automatic termination upon the occurrence of a specified event, no matter how remote, disqualify the plan?

[ETA Consulting LLC]

These are good questions. Presumably, if you were to include such language, you'd have either an IRS opinion letter (if a prototype) or a favorable determination letter. Having such language doesn't preclude you from restating the plan to another document (in order to keep the plan in operation) after the stated event occured.

Good Luck!

[Effen]

Just curious, but why would you put such language in the plan and risk the issue? Seems to me it would be very hard to argue the plan is permanent when you already know when it is going to be terminated.

[david rigby]

I agree with Effen, putting a future termination date in the plan seems pointless, and might be an unnecessary "red flag". On a practical level, a date many years in the future might be irrelevant, but the original post implies something much less.

w/r/t termination on "occurrence of a specified event", just a guess: the IRS would view such provisison with skepticism but might consider it permissible. (If bankruptcy is the event in question, it's pretty common to have that in plan documents.)

[masteff]

You might try to dig up Rev Rul 69-24 and 69-25.