Annual Notice Requirement for Spouse Only Plan

[Sue]

I know this seems like a silly question, but a plan sponsor has closed his business (physician) and the only 2 participants left with a balance are the physician and his spouse, are they required to receive the annual Safe Harbor and QDIA notice?  Thanks.

[Bird]

I think you have to ask yourself what happens if you don't.  As for the SH notice, is he making contributions?  The SH notice is part of complying with the SH rules, but if he has no employees, then there's not much lost for noncompliance...unless it could be argued that his own contributions, if any, are invalidated.  Having said that, it's not so hard to spit it out.

As for the QDIA, that is to protect the trustees in the event of someone suing them.  If he's going to sue himself then I can't help him.  But again, having said all that, we'd probably go thru the motions of sending the notice just because it is easier to do that than to think about it.

[Lou S.]

I'd look at this way.

The SH Notice is an IRS requirement and potential qualification issue so unless you are amending out the SH for next year I'd do the SH Notice for sure. Whether or not he distributes it to himself and his wife is between him and God.

The QDIA notice is a DOL requirement, since the Plan is no longer subject to Title I pretty sure you don't have to do this one, though as Bird notes might not be that difficult to crank one out and send with SH Notice.

The final question is, if he closed his practice is there some reason to not terminate the Plan and distribute to IRAs? Is he going to have some trailing income he wants to defer?