Bankruptcy termination, DOL audit, late 5500 (Oh my)

[Saiai]

Have a client whose 401(k) plan is currently being terminated as part of a bankruptcy proceeding. I was brought into the mix a bit late. The plan began the process to formally terminate using Form 5310 but has now opted not to formally terminate. Instead, they notified all participants and are moving to distribute the assets. This is where I enter the scene. I've now realized that the plan is currently under some sort of an audit by the DOL and the DOL seems to be aware that we are terminating the plan. Due to the furlough I'm not quite sure the extent of the audit and where it is at because obviously can't discuss this with the investigator (it appears to have been limited in scope but I don't believe it has formally closed so I expect that it could be expanded at any time). I've also noticed that the plan is delinquent in filing last year's Form 5500. My plan is to file the delinquent 5500 ASAP and stop all plan termination distributions until I get a chance to discuss things with the investigator. My guess is that she's going to strongly suggest against an informal termination and urge us to pursue a FDL. Any thoughts on whether the plan has any chance of pursuing an informal termination process?

[Lou S.]

FDL is not a requirement nor is a DOL issue. If the contibutions are all up to date and you don't have any fiduciary breaches I'd think the DOL would be happy with any termination that got participants paid out in full without the bankrupt company plan going into orphan status.

[Lou S.]

Oh and you might want to get the late 5500s filed while the govenemnet is shut down. That might look good if it is taken care of before the audit discovers it on their own.