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Given the cost of filing a 5310, how many are still doing it?


katieinny
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We have a client that has a one-man plan that just got through a VCP filing due to loans that did not meet the dollar amount and repayment requirements.  Now, we're going to terminate the plan.  My feeling is that a 5310 should be filed to protect the rollover of what's left, but that $2,300 filing fee is certainly a deterrent.  The plan documents seem to be up to date, but I suppose there could be other problems.  Thought I would ask what others are doing.

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You can perform a review of the plan while putting yourself in the auditor's shoes.  If you find a form or operational defect, then correct it prior to shutting the plan down.  Presumably, this happens (to some extent) when you submit for VCP.  When I'm submitting VCP, I try to include every error I can find in order to obtain a Compliance Letter on that error. Then, it would be incumbent on the auditor to discover something that you didn't (in the event the plan gets audited).  You can even use the Form 5310 as a guide without actually submitting it. Those are my thoughts.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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When using pre-approved plans, which these days are most of our plans, we do not generally submit for a d-letter. We give the client the choice, and as you mentioned, the fee (plus our fee to prepare the filing) is a deterrent and virtually none of them elect to file. We have the odd DB plan (are all DB's odd?) that files, but very few plans file.

And what ETA and RBG said.

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Agree with above.  At the end of the day, the determination letter upon termination doesn't offer that much protection - certainly for document issues, but it really says the termination of the plan doesn't impact qualification, but in theory they could audit and find some operational issue that wasn't reviewed subject to the favorable determination.  If you use a pre-approved document then you shouldn't have to worry about that end of things.

Ed Snyder

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Not a surprise to most, but I disagree!  We push the 5310 filing pretty hard if there is any significant amount of money involved for the owner which is going to be rolled over to an IRA.  We look at that letter as an insurance policy that the IRS (or any creditor) will never attack that IRA because the funds did come from a qualified retirement plan.  Once there is a couple of hundred thousand dollars involved, we are generally going to suggest the IRS letter is the way to go (and our clients almost always do so).  We know we are going to get the letter and we tell teh client that; but they also see the fights we have to go through with IRS to prove that all the right things were done along the way (and yes, we use pre-approved volume submitter docs). FWIW.

Larry.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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It might be due to the fact all ESOPs are custom documents but 99% of all ESOPs I deal with get a letter upon termination. 

I was always taught these letters were cheap insurance even when I worked on 4k plans.  I always thought there were reasons to believe a plan that had a letter was less likely to be audited after the termination then one that didn't get the letter.  There used to be a question on the 5500 way back also. 

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On 12/8/2017 at 5:18 PM, ESOP Guy said:

I always thought there were reasons to believe a plan that had a letter was less likely to be audited after the termination then one that didn't get the letter. 

I thought so too, but anecdotal evidence indicated otherwise.  We had one that was really annoying; of course a plan termination often goes hand in hand with a business termination, and of course they come calling several years later.  I explained to the auditor that we had an FDL and he said "oh sure but we just need X, Y and Z" and of course X, Y and Z was really everything.  We had all of our plan records but the client had to go to a warehouse and dig out payroll records and whatnot.  Could simply be me overreacting to a random event but that convinced me there was no benefit to getting an FDL on termination, especially given that we are using pre-approved documents. 

Ed Snyder

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