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Refund of fees reactivates plan over a year later?


AlbanyConsultant
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I've got a small plan (<10 participants in self-directed brokerage accounts) that was paid out in 2016, and we filed a final 5500 for it in 2016.  Just got a statement for January 2018 that there was a fee refund of $2K to the doctor (and him only), so the account was reopened by the brokerage firm and then immediately paid out to him with withholding.  Great!  Brokerage firm also remitted withholding and will prepare the 1099-R.

 

Our initial thought is that since it was a plan account, it still is a plan account and therefore this transaction is a transaction in the plan.  So it needs to be reported on a 5500... probably an EZ, since there's only one participant in the plan for 2018.  But then we just skip 2017 altogether?

 

Any thoughts or ideas are appreciated, thanks.

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I was just about to ask a similar question, and I will still ask it in a different thread.

To answer your question, I would ask an auditor. 

If you don't want to ask an auditor, then consider, if you want to dot all your i's and cross all your t's, filing an amended 2016 5500 that is not final and shows an account receivable.  File the 2017 5500 with the same account receivable.  Then file a final 2018 5500 that shows the refund as income and a distribution of the same amount.   

I am not an auditor and I'm not sure this is correct, but it seems like it might work.  

 

 

 

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My personal opinion is as long as the tax treatment was proper and reported, ignore the 5500 issue. I might consider amending the the final return, accounting for this as a receivable/payable for 2016, but filing a 2018 return is just going to confuse everyone.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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With the ease of electronic filing these days, you could amend '16 to have a $2,000 receivable, an 2017 with same rec'able and 2018 with the payout. 

Maybe do 2018 short plan year and file a second 2017 for with 2018 dates a couple days later.

For a total of maybe 15 minutes of work, I don't even think we would charge the client.

I would just do the '17 & '18 filings on a one-participant SF just to keep things as consistent as possible.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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