AlbanyConsultant Posted June 21, 2021 Share Posted June 21, 2021 The former plan sponsor of a plan that terminated and was paid out in 2011 just received a check at her home from the fund platform that held the old plan. The accompanying letter says that, as plan fiduciary, she needs to handle this $1,400 which comes from a settlement from 2012 by either allocating it among the plan participants or applying it as plan fees, so this leads me to think that this isn't specifically for her account. Ignoring the fact that a settlement is arriving in 2021 from nine years ago... there were 8 or 9 participants with balances in the final year of the plan. Distribution fees alone could easily eat up 1/3 of that. Throw in some consulting time... The problem I see is that there is no trust any more to pay the participants from. We'd have to re-establish the accounts back at the platform, probably sign new paperwork, send distribution forms (find the participants!), etc. And if the trust has assets again, doesn't that mean the plan is active again and we have to file a 5500? Update the document? By the time all those fees are tallied up, this money is definitely spent. On the other hand, taking this money pre-emptively but not doing that work to 'earn it' seems wrong, unless consulting for it is a very long process. Any suggestions? Thanks... Link to comment Share on other sites More sharing options...
Madison71 Posted June 21, 2021 Share Posted June 21, 2021 Upon direction, pay out in equal amounts to participants who were paid out upon termination of the plan. Charge a distribution fee to process distributions. Since it is under 1,000 per participant can issue direct and is under $200, then no withholding although will need to report on Form 1099-R if in excess of $10?? Link to comment Share on other sites More sharing options...
chc93 Posted June 22, 2021 Share Posted June 22, 2021 Try looking at DOL FAB 2006-01. Pages 8 and 9... DOL says "it might be appropriate for a plan fiduciary to not accept the settlement distribution". We had this situation a few years ago. They sent the checks back... interestingly 4 checks for about $1,400. Never heard anything after that. fab2006-1.pdf Carike, C. B. Zeller and Bill Presson 3 Link to comment Share on other sites More sharing options...
QP_Guy Posted June 22, 2021 Share Posted June 22, 2021 What about this? If the Employer can identify plan expenses that were paid by the Employer, then the Employer could view this money as reimbursement of Plan Expenses. Link to comment Share on other sites More sharing options...
QDROphile Posted June 22, 2021 Share Posted June 22, 2021 Maybe after considering the prohibited transaction issues. Link to comment Share on other sites More sharing options...
AlbanyConsultant Posted June 24, 2021 Author Share Posted June 24, 2021 If the former fiduciaries are considering allocating and paying this out, this is going to lead to messy 1099-Rs, isn't it? They can't get 'free money', so there has to be a 1099-R, but who is the 'payor'? The platform, whose TIN they had been using while the plan was active a decade ago? From other asking around that I've done, I don't believe that this will cause the plan to have to be 're-opened', so no new documents or 5500s would be needed. In some way, that seems at odds with the idea of needing 1099-Rs, though. Link to comment Share on other sites More sharing options...
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