Parting thoughts: How to manage your retirement plan when you close up shop.
Closing or selling your business? Before you do, review the checklist below to see how you can preserve all your retirement benefits.
Depending on the type of small business you own — S Corporation, C Corporation, Sole-proprietorship, partnership, etc. — there may be different steps you need to take once you decide to close your business for good. A visit to your accountant or tax advisor is a critical first step, as is learning the specific rules in your state about business termination.
In addition, you may be dealing with the sale of your business or saying good-bye to long time clients and colleagues. But, in the midst of all this activity, it's also important not to lose sight of the retirement savings you've been building over the years — savings that were meant for this time in your life.
The specific steps you'll need to take to access your retirement savings will depend on the type of plan you have. For questions about your specific plan, Fidelity's Retirement Representatives are only a phone call away. However, as a general guideline, here are some actions you may need to take as you terminate your plan:
For more information call a Fidelity Retirement Representative at 800-544-5373 between 8 a.m and 8 p.m. Eastern time, or e-mail us.
If you own a SEP-IRA
1.
Make your annual SEP-IRA contribution for the final plan year as appropriate for yourself and all eligible employees.
2.
Take any applicable tax deduction for your SEP contribution on your IRS form 1040.
If you own a Keogh Profit Sharing or Money Purchase or Self-Employed 401(k)
1.
Review your plan documents, following specific rules about plan termination and distributions.
2.
Make final year contributions, paying particular attention to any Money Purchase funding requirements.
3.
Make final year contributions for all eligible employees.
4.
Take all appropriate deductions for your contributions and any employee contributions based on your tax-filing status.
5.
Request a Plan Termination kit from Fidelity to assist you with proper notification requirements that the plan is terminating.
6.
Fill out your final IRS form 5500 (due 7 months upon termination of plan)
If you own a SIMPLE-IRA
1.
Review your plan documents for any specific requirements or notifications when terminating a plan.
2.
Make any final contributions for the plan year in which you are ending your plan. Plan Manager can help.
3.
Meet your matching or non-elective contributions for you and any eligible employees.
4.
Before taking any taxable distributions, make sure you have met the 2-year requirement to avoid 25% early withdrawal penalties.
For more complete information, be sure to consult your tax advisor: You don't want to miss anything that could jeopardize the tax-advantaged status of your plan. In addition, you may want to visit the IRS website, www.irs.gov, for small business plan termination requirements.
Next Steps
Consider consolidating all of your IRA savings into one Fidelity IRA for ease and convenience. Transfer assets from another institution online.
