AlbanyConsultant Posted April 12, 2016 Posted April 12, 2016 The board of a small NFP with a 401k/SHM plan terminated the contracts of the executive director and his assistant. They were the only two employees - and participants - of the plan. The board is currently looking for replacements. They were both fully vested, so I don't have an issue there. The plan allows immediate distributions, so both of the terminees are looking for their money. Once they get paid out... is this still a plan? The sponsoring entity still exists (well, it still has a board), though it would be hard to say that it is actually performing any service for anyone. The plan has a one-year eligibility; even if they hire someone now that employee won't meet eligibility until 2017, so the 2016 Form 5500 is going to show that it ends at zero participants. Is there going to be a problem with a plan that has zero participants, no money, and not marked as "final"? Thanks.
Bird Posted April 12, 2016 Posted April 12, 2016 I think there would be a problem if it isn't marked as final, yes. The question is, do they want to terminate it or keep it "open" for potential new employees? Lou S. 1 Ed Snyder
Lou S. Posted April 12, 2016 Posted April 12, 2016 Unless you take steps to formally terminate the plan you still have a plan, just with zero eligible participants and zero current assets. K2retire and LMOC 2
BG5150 Posted April 13, 2016 Posted April 13, 2016 Why not just amend the plan to allow immediate entry? Maybe one year for the match. The first year the people are hired, they aren't HCEs anyway. LMOC and hr for me 2 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Mike Preston Posted April 13, 2016 Posted April 13, 2016 I have no problem with an ongoing plan having a year or two with zero/zero. Such is the nature of eligibility criteria. LMOC 1
AlbanyConsultant Posted April 13, 2016 Author Posted April 13, 2016 I think there would be a problem if it isn't marked as final, yes. The question is, do they want to terminate it or keep it "open" for potential new employees? They are actively searching for new employees and want to have the plan available to them. Why not just amend the plan to allow immediate entry? Maybe one year for the match. The first year the people are hired, they aren't HCEs anyway. I have suggested this; if they're going to hire someone at ExecDir-level, do they really want a one-year wait for deferrals? I have resigned myself to having to answer a question from the IRS about this plan when they get the zero participant filing.
BG5150 Posted April 14, 2016 Posted April 14, 2016 I filed a zero participant/zero assets/non-final 5500 for much the same situation a couple years ago. No questions so far. But you never know. LMOC 1 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now