dumb question RE unlocated participant

[thepensionmaven]

We terminated a profit sharing plan in 2016, submitted an LOI to the brokerage firm.  One of the participants could not be located, and we asked the firm to have the check payable to an eligible rollover institution that handles lost participant accounts.

The investment firm followed all instructions but the one that was to be payable to the firm that would open a rollover for the lost participant.  

They wrote the check out to the client, and the client deposited the check into his corporate checking out and had totally forgotten about it; we have told him more than once to get the check reversed, but he has done nothing.

The accountant recently advised the client a final 5500 can now be filed as there is $0 in the plan.

This would be nice, but does not pass my smell test.

[Larry Starr]

You are right and the client is an idiot.  We would send a sign off letter telling him he is on his own because he didn't do what we told him to do.  Tell him to let the acct do the 5500.  More than likely, the client will come back and beg to be taken back on and do what is right.  If he does, great, take him back. And if he doesn't, it isn't your problem.

[Peter Gulia]

The plan's assets is not perfectly zero because the plan owns a gain contingency for restoration of a prohibited transaction.

Can the retirement plan's administrator now make a payment to the default-rollover custodian?

Shouldn't the payment be for the amount mistakenly deposited plus interest?

Should the Form 5500 reports show the prohibited transaction and a correction?

[mming]

I've seen final 5500s filed showing the assets being netted out to $0 by listing a benefit payable, but I'm sure not everyone agrees with that method.

[Larry Starr]

5 hours ago, mming said:

I've seen final 5500s filed showing the assets being netted out to $0 by listing a benefit payable, but I'm sure not everyone agrees with that method.

Then you've seen 5500s that are just plain wrong.