plan vs plan sponsor

[thepensionmaven]

We have PA ( not state of, but Professional Association) that sponsors a plan.

The PA is in the process of being sold, projected to be 1/31/21; plan termination set for 1/31/21, as well with appropriate notices given timely.

We know IRS does not recognize a plan without a Sponsor and the IRS does give up to 12 months from the termination date to distribute all funds.

Obviously impossible to distribute all funds by 1/31/21.

Technically, when all assets are distributed, rolled over or cashed out, the "Sponsor" will not exist.

Maybe I'm being too technical, but how to handle such a situation?

[C. B. Zeller]

I assume the PA is being sold in an asset sale?

I don't think it would be a problem for the person who served as Plan Administrator to continue signing off on distributions and the final 5500 even after the business is no longer technically running. If they are really worried about it though, keep $1 in the company's bank account until everything is wrapped up.

Why is there a star next to this thread's title?

[EBECatty]

Assuming it's an asset sale, as C.B. Zeller notes, the corporate entity will still exist after closing for any number of things. The corporation does not immediately dissolve when its assets are sold. It has to wind down all its other affairs (pay debts, file final tax returns, collect any lingering A/R not otherwise assigned, etc.). This includes plan-related items (final testing, 5500, distribution processing, etc.). Generally the corporate entity will remain active to handle all those items and then dissolve (whether formally or informally) once everything is concluded. So the simple answer is: Do everything the same way you have been doing it. It's still a plan sponsor, just one without an active operating business.

[RatherBeGolfing]

2 hours ago, C. B. Zeller said:

Why is there a star next to this thread's title?

I saw that too.  On mine it says "featured post" and "[user] featured this post" so I think its an option for the mods

[thepensionmaven]

That is exactly what I thought.

The client's spouse (the other trustee, the one I have been dealing with)  does not understand the difference between a stock v asset sale or even why the question.  I had asked the accountant but have not heard back.

I am assuming an asset sale as buyer and seller are physicians; how would differ if stock sale (just in case I'm asked)

 

[EBECatty]

In a stock sale, the plan sponsor entity still exists and continues to have all the legal obligations it had before the sale. It's the same as an ongoing business terminating their plan, just under new ownership. If the individual sellers are trustees, they can remain as such or can be updated by the buyer. But either way, the entity still exists.

[Peter Gulia]

And under many States' corporation laws, even a dissolved corporation might have some powers as needed to wind up the corporation's duties and obligations.