Phase 1: Planning & preparation

As with any project, good planning usually leads to good results. After the project is planned and the timeline is established, the first thing to do is amend the retirement plan. Things to remember in the plan amendment:

Establish a plan termination date
Include all changes in the law or plan qualifications that will be effective on the termination date
Cease plan contributions
Provide full vesting of benefits for all affected employees
Authorize distribution of all benefits in accordance with plan terms as soon as administratively feasible

Phase 2: Announcement & notification

Proper communication to plan participants is mandatory. Make sure to include the following information in your notifications:

The decision to terminate the plan
When it will terminate
Resources available to help participants with their distribution, and how participants can take advantage of those resources
A 402(f) rollover notice, which includes an explanation of safe harbor and eligible rollover distributions

Phase 3: Locate missing participants

Inevitably, there will be participants who can't be located. The DOL's Field Assistance Bulletin 2014-01 specifically addresses four things a fiduciary must do to fulfill their obligations regarding missing participants. They include:

Use certified mail
Check related plan and employer records
Check with designated plan beneficiary
Use free electronic search tools

Phase 4: Distribute all plan assets

Because every participant in a terminating plan must be distributed, there is always a risk that your participants may elect to cash out, particularly those with smaller balances (<$20,000). Studies show that the majority of participants later regret cashing out their retirement plan savings during a job change or plan termination.

Instant Insights /

DC plan termination: 1 project, 5 phases

More From HR Executive

Related Stories

Recommended For You