Safe Harbor and Profit-Sharing Contributions for Dissolved Company

[mtopalovic]

Client is a dissolved company with 21 shareholders. Safe harbor and profit sharing contributions to 401k plan have not been made yet for 2025. Plan is terminated and all employees/shareholders have rolled over their account balances. The company has no money left. Currently working on reaching out to shareholders to make capital contributions, but many of the former shareholders have gone MIA. I thought of maybe having the termination undone, rescinding the safe harbor status of the plan and conduct testing, in order to get out of the company having to make over $300k in safe harbor contributions, but the recordkeeper confirmed that there are no assets remaining in the plan. Pretty sure you can't undo a termination if there are no assets. Any ideas are welcome.

[Peter Gulia]

If mtopalovic (or her employer) is a service provider, and not any fiduciary:

Have you been paid for all services already performed?

Might you decline to provide further services until they are paid in advance?

Might a suggestion that the corporation pursue shareholders for a contribution of capital be beyond your contract services?

If you assemble a draft of the plan’s administrator’s Form 5500 report on 2025, do it truthfully.

If you would be an electronic submitter of the administrator’s Form 5500 report, consider, after getting and considering your lawyer’s advice, withdrawing that service if the administrator instructs you to submit a report you believe would be false.

How will the plan’s administrator deliver to the plan’s participants, beneficiaries, and alternate payees the summary annual report that refers to the Form 5500 report on 2025?

Which person is responsible to tax-report distributions paid in 2026?

If contributions needed for 2025 safe-harbor treatment remain uncollected by October 15, 2026, has the plan lost 2025 safe-harbor treatment?

What steps could help you show that the service provider never had any discretionary authority, and never exercised any discretion?

This is not advice to anyone.

[WCC]

4 hours ago, mtopalovic said:

I thought of maybe having the termination undone, rescinding the safe harbor status of the plan and conduct testing, in order to get out of the company having to make over $300k in safe harbor contributions, but the recordkeeper confirmed that there are no assets remaining in the plan. Pretty sure you can't undo a termination if there are no assets.

My thoughts: Even though there are no assets in the trust, doesn't the plan have a receivable for the unfunded safe harbor contribution? Therefore, if the assets are not paid out in accordance with Rev. Rul. 89-87, then the plan is not terminated. So, even though you may not be "undoing" the termination through a board resolution, you do not have a valid termination if the benefits are not paid in a timely manner.