Unfortunately, many sponsors in this position will realize too late that time is not on their side, and will be scrambling to perform all the steps necessary to effectively terminate their plans.
When conducted properly, a 401(k) plan termination can take up to 4 months, from start-to-finish, and will require significant planning, flawless execution and strict attention to detail. On the other hand, a poorly-executed plan termination could result in your plan not being properly terminated, which could result in delay, additional expenses -- and even worse -- the scrutiny of a DOL or IRS audit.
To educate sponsors in understanding the basics of terminating 401(k) plans, Retirement Clearinghouse has prepared a three-part video series.
Plan Termination Video #1: One Project, Five Phases
Terminating a retirement plan can be daunting. There’s a lot to do and if it’s not organized and conducted properly, it will generate even more “to-dos”. To minimize the sense of being overwhelmed, break down a plan termination project into five smaller phases.
Plan Termination Video #2: Common Mistakes Plan Sponsors Make
Terminating a retirement plan can results in a lot of missteps, but it doesn’t have to be that way. The importance of having a well thought out plan in place before beginning the plan termination process is imperative, because making mistakes can be costly. To better understand why plan sponsors were making mistakes in qualified plan terminations the IRS Employee Plans Compliance Unit conducted a “Termination Project” in 2011. Over 75% of the sampled sponsors made errors! Learn from their mistakes.
Plan Termination Video #3: Five Criteria for Selecting a Services Provider
Terminating a retirement plan takes a lot of work, good planning and specialized skills. Not surprisingly, many fiduciaries will choose to outsource plan terminations to service providers.
Selecting an outsourced provider is a critical decision. To help simplify the process we suggest using five criteria.
For more information on plan termination, visit: https://www.rch1.com/terminating-plans