How to handle terminating DC plan with 415 suspense account.

[Guest CTYSON]

I have a corporate client who contributed in excess of 15% of participant compensation in 1999. Client also had a 10% money purchase pension plan so excess contribution couldn't be allocated. Excess was held in a 415 suspense account with the intention of using it to reduce future years contributions. A 5330 was filed to pay excise tax on the nondeductible amount.

In the year 2000 there were no eligible employees except the owner. He did not take any compensation and now he wants to terminate the plan. My question: What happens to the 415 suspense account? Should it revert to the employer and would it then be subject to a 50% excise tax? Are there any other alternatives? All I can come up with is to keep the plan around and have the owner take comp in 2001 so that he can receive an allocation. Any other comments or ideas?

[Kirk Maldonado]

Use the excess funds to pay the legal fees associated with finding out what to do with the excess funds.

[Wessex]

My memory may be failing, but I thought there was an explicit Code provision that required reversion to the employer of any amount in a 415 suspense account existing at termination that could not be allocated to participants. (On the other hand, it may be my research skills that are failing as I cannot locate the provision to provide a cite!)

Normally, I would entirely endorse using "excess" assets to pay plan expenses, but I am not sure that it would work here. Expenses are normally allocated pro rata across all accounts in the plan (or on a per capita basis), thus giving only a small amount, if any, of the expense to the suspense account.