Terminating a retirement plan is complicated. The importanceof having a well thought out plan in place before beginning theplan termination process is imperative becausemaking mistakes can be costly.

To better understand why plan sponsors were making mistakes in qualifiedplan terminations, the IRS Employee Plans Compliance Unit conducteda “Termination Project” in 2011. Over 75% of the sampled sponsorsmade errors!

So what kind of errors did plan sponsors make?

• Did not file a final Form 5500 series return

• Did not actually terminate their plan

• Mistakenly indicated the plan was terminated when it wasfrozen

• Mistakenly used the same plan number from a previous ordifferent plan

• Distributed all plan assets but didn’t mark the final Form 5500series to show it was the final return

• Distributed all plan assets but did not indicate zero assets atthe end of the plan year

• Did not distribute all plan assets as soon as administratively feasible (*generally within12 months)

Why did plan sponsors make these errors?

• Length of time required to find missing participants

• Difficulty in distributing certain types of plan assets (realestate or partnership investments)

• Not aware all plan assets must be distributed

• Not aware of the difference between a frozen and terminatedplan

• Not aware there were still assets in the trust

For more information on the “Termination Project” conducted bythe IRS Employee Plans Compliance Unit click on the link –(IRS Termination Report).

This is the second video of a three-part series on DC planterminations, presented by Mike Wilder, Vice President of ClientServices, Retirement Clearinghouse.