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401(k) Plan Termination

If you are terminating your Plan, you should consult immediately with your outside counsel originally assigned to you to determine the steps necessary to terminate your 401(k) Plan. This consultation will be at your own expense. The failure to correctly process termination and/or recordkeeping for your 401(k) Plan may result in the disqualification of your Plan, and you or your employees could incur unnecessary tax consequences in the winding up of Plan contributions.

Your Outside Counsel can guide you through the necessary legal hurdles to bring your 401(k) Plan to a close. These steps may include, but are not limited to:

  • Adopting a board resolution terminating the Plan;
  • Notifying participants of the Plan termination;
  • Determining whether the 401(k) Plan is compliant with mandatory federal and operational amendments prior to the Plan’s termination;
  • Consulting with your designated outside Counsel regarding additional requirements, including a determination as to whether IRS Form 5310, a formal request for a plan determination letter, should be submitted on behalf of the plan; and
  • Consulting with a CPA regarding any returns, including closing returns, which may need to be filed for the 401(k) Plan

If you need a recommendation of an attorney who can assist you during the termination of your Plan, please contact Guidant and we will be happy to give you that information.

Final Form 5500

A final Form 5500 is always due for the last Plan year, plus any additional part of a year in which the Plan existed (short year). Without filing your final Form 5500, the federal agencies overseeing 401(k) Plans have no way to know that your Plan is terminated. The final Form 5500 concludes your responsibility to the IRS and the Department of Labor as the Employer Sponsor of your Plan.

If you file late or fail to file a Form 5500, the IRS and the DOL may impose substantial monetary penalties and you will still be required to complete your Forms 5500.

Pursuant to Section 5.02(a) of the Retirement Plan Recordkeeping Agreement, you, as the Employer, may request Guidant to prepare the final Form 5500. For Guidant to complete the final Form 5500, you must supply Guidant with a written request to prepare the form, as well as all information necessary to prepare the form. Guidant will prepare a final invoice and will require payment for the preparation of this form prior to completion of the final 5500. In addition to the Form 5500, if your 401(k) Plan will have distributions, a Form 1099-R may be required. Please indicate if you would like Guidant to prepare the 1099-R’s required; there is an additional fee for preparing the 1099-R’s.

If it is still your wish to terminate your Plan, please call us at 888.472.4455 x3350 or email us at [email protected].

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