The HR Legal News Blog

Qualified Plans: How NOT to Terminate Them to Avoid Mistakes

Qualified Plans Should Be Terminated Properly

More than 75 percent of the plan sponsors who participated in the Employee Plans Compliance Unit (EPCU) Termination Project failed to take all the steps necessary to complete the process of terminating their qualified plans.  Among the mistakes catalogued by the EPCU were the following:

 

  • Distributing all plan assets, but not marking Form 5500 as final.

 

  • Failing to distribute all plan assets as soon as administratively feasible after the plan termination.

 

  • Ignoring the requirements for locating missing participants and beneficiaries.

 

  • Confusing frozen and terminated plans.

 

  • Using the wrong plan number.

 

Although terminating a plan is both time-consuming and complex, plan sponsors can avoid making mistakes by careful and methodical planning.