CandleFocus Glossary Editor
Voluntary Plan Termination is the process of ending a retirement plan without the mandate of a court ruling or government agency. Generally, employers may terminate voluntary plans for a variety of reasons such as facing bankruptcy, involved mergers and acquisitions, or the need to switch to another plan.
The process of voluntary plan termination requires compliance with the Section 4041 of U. S. Code and Federal Regulations. The plan administrator, or person in charge of the plan, has several requirements and responsibilities, some of which include sending notices to plan participants, performing any required minimum distribution computations, dealing with defaulted eligible rollover distributions, and issuing various documents such as Form 1099-R. Plan participants affected by a voluntary plan termination are typically able to rollover their distributed money to another qualified plan.
When employers initiate the decision to terminate their voluntary plan, it is important for them to understand the importance of the required steps to avoid any legal challenges. Employers must remind plan participants of their legal rights during a voluntary plan termination. Employers are required to provide an explanation of the necessity to terminate the plan, and legal rights related to the termination such as the right to receive a lump sum distribution or to rollover money from the plan.
In summary, Voluntary Plan Termination is the process of ending a retirement plan without the mandate of a court ruling or government agency. To do so, it is important for employers to comply with Section 4041 of the U. S. Code of Federal Regulations in order to ensure the process is done properly. Records must be kept and notices must be sent to affected plan participants in order to keep them informed of their rights. Plan participants can usually rollover the distributed money to another qualified plan.
The process of voluntary plan termination requires compliance with the Section 4041 of U. S. Code and Federal Regulations. The plan administrator, or person in charge of the plan, has several requirements and responsibilities, some of which include sending notices to plan participants, performing any required minimum distribution computations, dealing with defaulted eligible rollover distributions, and issuing various documents such as Form 1099-R. Plan participants affected by a voluntary plan termination are typically able to rollover their distributed money to another qualified plan.
When employers initiate the decision to terminate their voluntary plan, it is important for them to understand the importance of the required steps to avoid any legal challenges. Employers must remind plan participants of their legal rights during a voluntary plan termination. Employers are required to provide an explanation of the necessity to terminate the plan, and legal rights related to the termination such as the right to receive a lump sum distribution or to rollover money from the plan.
In summary, Voluntary Plan Termination is the process of ending a retirement plan without the mandate of a court ruling or government agency. To do so, it is important for employers to comply with Section 4041 of the U. S. Code of Federal Regulations in order to ensure the process is done properly. Records must be kept and notices must be sent to affected plan participants in order to keep them informed of their rights. Plan participants can usually rollover the distributed money to another qualified plan.