When a plan has formally terminated and submitted a Form 5310, Application for Determination for Terminating Plan, the IRS will review the application in an expedient manner. However, on many occasions there are questions raised which need to be addressed before a favorable letter is issued. Also, the employer or trustee is not required to hold the assets until a favorable determination letter is issued, but usually will do so as a safety feature to ensure that distributions will receive the favorable tax treatment to which qualified plan distributions are entitled.
NOTE: The IRS does not maintain or hold the assets during the termination process.