One of the steps to take before terminating your retirement plan is to make sure your plan document includes all legal changes your plan is required to follow as of the plan’s termination date.
These legal changes to your plan documents:
- maintain the plan’s tax-favored status at termination; and
- ensure that distributions to participants are eligible for rollover to other qualified plans or IRAs.
Contact Leading Retirement Solutions prior to terminating your plan to ensure that your plan is up-to-date.
Required legal changes
- A terminating plan must be updated by way of a document amendment for all applicable qualification requirements – such as guidance or statutes – on the Cumulative List that applies to the period in which the plan terminates.
Example: The plan termination date is April 15, 2014. The plan must be updated for all items that apply to that plan on the 2013 Cumulative List because this list applies to the period February 1, 2014 – January 31, 2015.
- You must also amend your plan for any legal changes your plan is required to implement as of your plan termination date, even if they were effective after the Cumulative List cutoff date (Revenue Procedure 2016-6, Section 12.05 and Section 8 of Revenue Procedure 2007-44).
If you apply for a determination letter when your plan terminates, the IRS will notify you if you’re missing any of these amendments.
Determination letter for a terminating plan
Although not required, you can request the IRS to make a determination on the plan’s qualification status at termination:
- Form 5310, Application for Determination for Terminating Plan (instructions), for most pension, profit-sharing or other deferred compensation plans; or
- Form 5300, Application for Determination for Employee Benefit Plan (instructions), for a multi-employer plan covered by PBGC insurance, a plan only partially terminating, or for sponsors not certain of their status as a member of an affiliated service group.
All amendments to your plan legal documents should be adopted before submitting the plan for a determination letter.
IRS reviewer materials
Leading Retirement Solutions uses the following materials to review terminating plans. These materials were designed for internal IRS use. You might find them helpful in reviewing your own plan.
- Subject Matter Packages (Alert Guidelines, Explanations and Plan Deficiency Paragraphs)
- Termination Focus Reports – Annual highlights of recent changes in the law that may require plan amendments.
Need assistance in terminating your plan? Leading Retirement Solutions is here to help!