Some Common ERPA Questions

1) How quickly can employer securities held in a plan be purchased back from the plan?
2) How long must a retirement plan be in place before being terminated?
It’s important to note that the existence of a plan and the investments it holds are separate issues.
The IRS’s view is that a retirement plan is meant to be permanent. This doesn’t mean that once in place the plan cannot be terminated. It means that the employer must be able to demonstrate an intent for it to be permanent. This is best accomplished by the passage of time. There is nothing in the regulations which dictates specifically how long a plan must be in place before being terminated to demonstrate that it was initially intended to be permanent. Facts and circumstances are used to assess permanency but in practice a plan being in place at least 3 to 5 years before a decision is made to terminate, is generally an indication of permanency. Obviously the longer a plan is in place the better.
So, to answer the question of how quickly can employer securities held in a plan be purchased back from the plan, the answer is employer securities are just an investment. The investment can be sold at anytime. Thus, there is no time requirement for employer securities to be held before being sold.
Just keep in mind that the plan needs to be kept in place long enough to meet the permanency test.  When you are ready to discuss how ERPA can work with your business purchase needs then you are welcome to contact us here.
Posted in retirement plans.