SDB

[PS]

Hi,  Plan that is terminating has only one participant with balance in SDB and the security is currently not tradable.  the Plan sponsor wants to close the plan what option do we have? can the plan sponsor direct to move the SDB to a different fund? 

[Peter Gulia]

Check the documents governing the plan to discern whether the plan allows or precludes a distribution made by delivering property rather than paying money.

If need be, amend the plan to allow a distribution of property.

Instruct the broker-dealer to redeem or sell the window account’s securities other than the one that’s untradeable. Apply the money raised as the plan ordinarily does.

Instruct the broker-dealer to re-title the remaining securities account as the distributee’s individual “taxable” account, no longer held regarding the retirement plan.

Report one or more Form 1099-Rs so a report includes the fair-market value of the untradeable security.

That a security no longer trades on an exchange (or never traded on an exchange) does not by itself mean that the fair-market value is $0.00. Even a petition, involuntary or voluntary, of the issuer’s bankruptcy, even for a liquidation bankruptcy, does not necessarily make common stock shares worthless.

The plan’s administration should not deprive the distributee of the value of the untradeable security. Even if untradeable now, it might later get an offer.

This is not advice to anyone.

[CuseFan]

If the custodian of the current brokerage account also handles IRAs, and as @Peter Gulia said if the document allows (if it doesn't you can amend), then you may be able to do in-kind distribution by simple transfer of the account from plan to IRA. Even so, a market value of the distribution and rollover will need to be determined and reported on a 1099R.