Terminating a plan..
If a self employed individual is a shareholder of an S corp, and they sponser a profit sharing plan, what are the consequences of terminating the plan? Say they are the majority shareholder and they want to move their money and no longer pay for the plan adminstator.
May the funds from the terminated plan be rolled over to an IRA, or is this similar to having a QRP become disqualfied and receiving a deemed distribution?
Thanks guys
Permalink Submitted by Denise Appleby on Mon, 2009-03-09 22:06
If the plan is properly terminated, the assets can be rolled over to an IRA or other eligible retirement plan.
The plan must be properly amended for regulatory changes before it is terminated. If the plan is not properly amended, the assets are not rollover eligible.
Care should be taken to ensure that the plan is not terminated too soon after being established, so that it meets the requirement of being ‘permanent’. For instance, the plan should not be terminated this year, if it was established two years ago…unless there is a valid business reason for the termination.’
Permalink Submitted by Joseph Arsenault on Tue, 2009-03-10 20:39
Thanks for the reply Denise.