The IRS recently completed its Termination Project focusing on plan sponsor compliance in filing the Form 5500-series after sponsors had adopted a resolution to terminate their retirement plan. The project found that over 75% of the sampled plan sponsors did not complete the termination process. Common mistakes found in the survey were:
- Plan sponsors filed a Form 5500 return marked “final return/report” but the return still showed assets in the plan at the end of the year
- Plan sponsors distributed all assets in the plan but didn’t mark the Form 5500 as “final return”
- Plan sponsors did not distribute all plan assets as soon as administratively feasible after the plan termination date
- Plan sponsors indicated the plan was terminated on the Form 5500 when it was actually frozen
Are you considering terminating a retirement plan? Are you aware of the IRS compliance requirements for doing so?