Terminate Again

A defined benefit plan existed for over 10 years. The only participants were the two shareholders. Each owned 50%.

An amendment was executed that froze all benefit accruals and terminated the plan effective December 31, 2023. It is now past December 31, 2024. I know that unless there were reasons for the delay, all assets needed to be distributed by December 31, 2024. In this case, there were no reasons and it is now after December 31, 2024.

Question:  I would think that as of now (January 15, 2025) we would have an active plan with benefits frozen as of December 31, 2023.

Does anyone disagree? agree?

Thanks.

I don't think one year is a hard fast rule. More like facts and circumstances but if you are inside the 1 year window the IRS is fine with it. But if you are concerned, it couldn't hurt to have a new resolution re-terminating the plan or affirming the plan termination. You might also want to check if the delay requires them to adopt any additional conforming amendments.

As long as your "freeze" amendment isn't rescinded because you are deeming the termination no longer in effect it shouldn't have any material impact that I can think of but you may now need a Valuation and Schedule SB for 2024 that you weren't planning on which if the plan is underfunded could give rise to a required contribution.

Good point on the conforming amendments.

We will make sure to have those in the new amendment terminating the plan.

Even if the prior termination amendment is re-done now, I would would think that the freeze part of the initial amendment would still be effective for the 2024 plan year. No problem completing another valuation. Probably no contribution as this particular plan is over-funded.

I love this "re-terminating the Plan" terminology