Winding Down a ROBS Corporation and Its Plan: Tips to Help Prepare for the Process
Whether or not you’re working with an ERISA attorney to wind down your ROBS plan, there are a few ways to minimize the hassles and expense of closing down your corporation and your plan.
Perhaps you’ve sold your ROBS business, or you’ve just decided to close down. What’s next? Several steps are required to get from making the decision to close to completely winding down the ROBS. The details will surely vary depending on the circumstances, but here are some preparatory steps you can take to wind down as efficiently as possible.
Locate All Plan Records:
You are required to maintain signed copies of all plan documents that were in effect from the beginning of the plan until it is terminated and the final 5500 is filed. This includes:
Adoption agreement(s)
Base plan document(s)
Trust agreement(s)
All amendments adopted during the plan’s existence
The EIN of the plan’s trust (this is different from the EIN of the corporation)
Locate All Corporate Records:
The ROBS corporation has a life of its own, separate from the plan. Do you have all of the appropriate corporate records? These would likely include at least the following:
Board of Directors meeting minutes and/or signed consent actions
Corporate stock ledger
Get In Touch With the Plan’s Various Service Providers:
Contact the customer service representatives for these service providers, who will be needed to get the plan’s money moved correctly after the corporation is liquidated and to get all compliance wrapped up:
Third-Party Administrator – this is the company that prepares your Form 5500, such as Guidant, Benetrends, or LRS.
Registered Investment Advisor - the RIA needs to know that the plan is winding down so that they can assist, if possible, and eventually terminate their service agreement.
Fund Custodian – this is the institutional investment company where the plan’s cash contributions have been held. For example: Fidelity, Vanguard, or American Funds.
Bank – if your ROBS plan account still has a checking account open, you may use this account to receive the liquidating dividends owed to the plan as a shareholder. If that account is no longer in existence, you may need to re-open one for the plan, depending on your circumstances.
ERISA Attorney – it’s a good idea to have an attorney familiar with the rules applicable to a retirement plan to review (or document) the transactions to ensure compliance.
Decide How (And Where) to Take Your Distribution.
Your plan account, after liquidation of all of the stock, will contain your complete retirement savings. Where would you like that money to go? To yourself? If so, you could elect to receive a taxable distribution. Or you may prefer to send some, or all, of the account to an IRA or to another qualified retirement plan. If you want to elect to roll your plan account into an IRA, you should identify an IRA custodian who can help you with the process of receiving your rollover contribution from the ROBS plan.
If you use the above set of items as a preliminary to-do list, you will likely feel more prepared to guide your ROBS corporation and plan through the winding down process.
The Bottom Line is: Closing your ROBS business? Stay ahead of the process by organizing key plan and corporate records, coordinating with service providers, and planning for your distribution options.
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