We recommend you have the following information at hand prior to starting the termination process:
- Board-approved anticipated date of termination.
- Plan name, date plan was adopted, and plan year end month (see the Adoption Agreement and Summary Plan Description).
- If selling the business: Anticipated sale amount. Have the company stock ledger readily available as well.
- Amount of money left in the company bank account and retirement plan bank account (if any).
- Payment for plan termination services.
- If you have nontraditional investments in your plan we will also require information regarding your assets/investments.
Contact Leading Retirement Solutions prior to terminating your plan to ensure that your plan is up-to-date
How Do I Terminate My Retirement Plan?
In general, retirement plans are established with the objective of continuing indefinitely. However, business owners may opt to terminate their plan when it no longer satisfies their business needs, or if they wish to establish a different type of plan. Regardless of the reason, plan sponsors must complete several steps in order to effectively terminate their plan. If you wish to start the termination and dissolution process for your company sponsored retirement plan, below you will find important information regarding the process and what we will need from you in order to move forward.
The Typical Plan Termination Process
- Complete and return the Plan Termination Kit.
- You will receive a termination invoice, payment of which will initiate the termination process.
- Request that Leading Retirement Solutions prepare the company resolution approving the termination of your retirement plan; OR Provide Leading Retirement Solutions with the company resolution approved by your company/organization approving the termination of your retirement plan. The resolution must reference the effective date of the termination of the plan.
- Upon receipt of all required documentation, the plan termination process generally takes 3-6 months to complete.
- The IRS requires that your retirement plan legal documents be in compliance and all IRS amendments adopted prior to termination of the retirement plan. This requirement is fulfilled by and referred to as the Pension Protection Act Restatement. If you have not already secured Leading Retirement Solutions to complete this requirement, you will need to do so, prior to terminating your retirement plan.
Services We Provide
As part of the Plan termination process we will file the final IRS Form 5500 for you, before terminating Third Party Administration and Recordkeeping Services for your plan, if applicable. As a result, you will continue to be responsible for ongoing administration and maintenance fees that may be assessed by LRS over time.
Costs You Can Expect
We require an initial deposit which can be paid by credit card or check, so that we can get started on your plan termination. Additional fees may apply for required restatements, amendments, participant notices and plan corrections.
Nontraditional Assets
If your plan holds nontraditional assets (more details below) it is important that you properly liquidate and/or transfer such assets out of the retirement plan. We cannot finalize the dissolution of your retirement plan or file the “final” IRS Form 5500 until all assets are properly removed from the retirement plan.
Corporate Dissolution
What If My Plan Has Nontraditional Assets?
If your plan holds nontraditional assets, including but not limited to: qualified employer securities (QES), private stock, qualified employer real estate, real estate, promissory notes, agricultural/maritime rights, livestock, precious metals, and other hard money lending, it is important that you properly liquidate and/or transfer such assets out of the retirement plan. We cannot finalize the dissolution of your retirement plan or file the “final” IRS Form 5500 until all assets are properly removed from the retirement plan.
Regulations generally require that you obtain a valuation of the nontraditional asset(s) in accordance with current regulatory requirements related to valuing the applicable asset type, as a necessary step in closing down a retirement plan. LRS will also require a final valuation of such asset(s) for purposes of completing the final IRS Form 5500. We encourage you to secure the necessary expertise and service providers to ensure that such asset(s) are properly purchased, transferred, and/or titled in the name of the retirement plan.
For more frquently asked questions realted to the plan termination process, review our Plan Termination FAQ.
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