How long does my plan need to stay open? Is there a required number of years?

There is no defined period of time that your plan is required to be open. However, the IRS does consider these plans to be permanent. The IRS assumes the plans will operate indefinitely or at least for “a few years.”

The IRS regulations do not clearly define what “a few years” truly means. But generally speaking, the IRS has not typically questioned a plan termination that happened more than 10 years after inception. In addition, employers that terminate a plan within 5-10 years have normally not had a problem.

But if you want to terminate your plan, just make sure that it’s a business necessity. A business necessity would usually involve lower business profits, change in ownership, or an issue that restricts funding the plan. The IRS has even accepted the fact that a company adopted a different retirement plan as a valid reason to terminate.