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"Un-terminating" a 401(k) Plan


Guest EMC

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This is a follow up to the thread started last Fall on the Plan Terminations board regarding "un-terminating" a DC plan (thread started 10/2/00). BACKGROUND: the plan sponsor of a 401(k) plan has executed board resolutions "terminating" the 401(k) plan as of Date X, vested plan participants 100% as of Date X, amended the plan for legislative changes and received a determination letter, BUT has made NO distributions yet. The plan sponsor would like to "un-terminate" the plan before making distributions and begin allowing deferrals, etc. again

I was hoping that someone might have some additional insight, cites, or have had informal or formal comunications with the IRS on whether or not this presents a qualification problem for the plan (assuming the 100% vesting in benefits at "termination" is not going to be changed).

What is the risk in "un-terminating" a 401(k) plan for which there are board resolutions authorizing the termination, but where no distributions have been made at all and all participants will remain 100% vested?

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Since you have not gotten a response.... I sure don't see a problem with un-terminating. The problem would be with the administrator (the real one, not the contract one) failing to follow the board's direction. But since they are probably the same person/people that will go nowhere.

Just get a Resolution to rescind termination and authorize deferrals under the plan. You are stuck with the 100% vesting, though.

Wonder if any thoughts to the contrary....

My only experience is with DB plans unterminating due to lack of sponsor taking action to distribute and 412 kicking back in.

CBW

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Ah, the hazards of asking the same question on more than one board. There was a response.

http://benefitslink.com/boards/index.php?showtopic=8785

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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