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Terminated Plan with Subsequent Income


Guest Scott Hakes
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Guest Scott Hakes

I have a Profit Sharing Plan that was terminated and all benefits distributed several years ago. Recently, we received a small (~$5,000) settlement from a class action lawsuit relating to one of the funds that the plan held prior to termination.

I'm unsure what I should do with these funds. I did a quick look around, but didn't find any guidance on the issue. Has anyone else dealt with this type of situation?

Thanks.

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Legally the award should be divided among those participants who invested in the fund and paid to them as a distribution. However, there is a question of whether the plan admin has any records of those participants. If the participants cannot be located then you could treat it as a forfeiture and check the plan rules for disbursement after termination of the plan. There really isnt any guidance on what to do with latent plan assets which surface after a plan has been terminated. I once had a client who received a check for $80,000 from an insurance co. that had demutualized for a group annuity contract used to fund a DB plan that terminated pre ERISA. The client elected to deposit the funds in another plan.

mjb

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Guest oxdougw

We had the same thing happen with the demutualization of Principal Financial. We received stock in an old plan that used to reside there. We had to go back to the old records and allocate those "windfall" gains to everyone based on their final plan balance.

Four had died and we found 3 bene's. The 4th will forfeit. We're also not paying out any checks less than $10 as deminimus.

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