Plan Termination and one year rule

Hello -

I understand that the IRS has a one-year rule where all assets in a terminating plan must be distributed within one year following termination. Is there flexibility here - for example, we have a plan that technically has made all distributions, but now we have received a few uncashed checks. We are getting close to the one year period - do uncashed checks count against this one-year rule and we could have a failed termination. It seems more administrative - now we have to search for the participants, and then decide what to do if the search fails. So again, we may go past one year. An attorney told me once that the IRS does not really take action against a plan if there is good faith efforts applied. Any thoughts?

It's facts and circumstances. Document why it took longer then one year so you can address it with the IRS if they bring it up on audit but what actions are they likely to take? Unwind the termination and make you re-terminate? Where it might be an issue is where you drag out the term past some new required amendment dates but typically I've never seen the IRS challenge a term if it took "a little longer than a year" but if you terminated in 2023 and pay everyone out by the end of 2024 I can't see where the IRS would ever be likely to challenge  unless there were other issues with the Plan. That's not to say they couldn't be sticklers, I just think you'd have to have an auditor having a very bad day try to impose that rule which is a guideline as I understand it an not in the code. If they did do that you could always kick it up to a supervisor.

That sounds good, thank you very much!