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We terminated our relationship with our PEO. What
do we do now?
Can my employees have a distribution of their assets?
What responsibilities do we have if we don't establish
a successor plan?
What is a successor plan?
We
terminated our relationship with our PEO. What do we do now? { back
to top }
When a work site employer that co-sponsored a PEO multiple employer
plan terminates their relationship with the PEO, they have two
options:
- Establish a successor plan and transfer all of their employee's
assets to the successor plan.
- Leave the assets in the PEO's multiple employer plan.
Can
my employees have a distribution of their assets? { back
to top }
If you do not establish a successor plan, your participant's assets
in the plan must remain in the PEO multiple employer plan until
a "distributable event" occurs. Separation from employment
with the PEO does not constitute a distributable event. To obtain
a lump sum cash distribution or to roll over their funds to an individual
IRA, one of the following events must occur:
• Termination of employment with you.
• Retirement per plan specifications.
• Attainment of age 59½ (if in service withdrawals are allowed)
• Permanent disability per Social Security guidelines.
• Death of the participant.
Termination of the PEO / work site employer relationship does
not entitle your employees to receive a distribution. The employee
must terminate employment with the work site employer to be eligible
for a distribution.
What
responsibilities do we have if we don't establish a successor
plan? { back to top }
As co-sponsor of the PEO plan, you still have fiduciary responsibilities
to your participants. For instance,
- You must notify your former PEO's 401(k) department whenever
an employee terminates employment.
- Certain IRS reporting requirements may make your involvement
and cooperation necessary.
- Plan expenses related to your portion of the PEO’s plan
may be billed to your company or deducted from participant account
balances.
What
is a successor plan? { back to top }
A successor plan is another qualified plan that accepts the transfer
of your employee's assets. You can establish a successor plan by
co-sponsoring another PEO multiple employer plan or by establishing
your own independent 401(k). If you would like assistance in establishing
a successor plan, contact the Plan Document Department at Pinnacle
Financial Services at 561-547-4200.
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