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The lengths some folks will go to just to get a retirement plan contribution.

More than 2% shareholders are treated like partners for the 5500-EZ From PPA: SEC. 1103. REPORTING SIMPLIFICATION. (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR OWNERS AND THEIR SPOUSES.— (1) IN GENERAL.—The Secretary of the Treasury shall modify the requirements for filing annual returns with respect to one-participant retirement plans to ensure that such plans with assets of $250,000 or less as of the close of the plan year need not file a return for that year. (2) ONE-PARTICIPANT RETIREMENT PLAN DEFINED.—For purposes of this subsection, the term ‘‘one-participant retirement plan’’ means a retirement plan with respect to which the following requirements are met: (A) on the first day of the plan year— (i) the plan covered only one individual (or the individual and the individual’s spouse) and the individual owned 100 percent of the plan sponsor (whether or not incorporated), or (ii) the plan covered only one or more partners (or partners and their spouses) in the plan sponsor; (B) the plan meets the minimum coverage requirements of section 410(b) of the Internal Revenue Code of 1986 without being combined with any other plan of the business that covers the employees of the business; (C) the plan does not provide benefits to anyone except the individual (and the individual’s spouse) or the partners (and their spouses); (D) the plan does not cover a business that is a member of an affiliated service group, a controlled group of corporations, or a group of businesses under common control; and (E) the plan does not cover a business that uses the services of leased employees (within the meaning of section 414(n) of such Code). For purposes of this paragraph, the term ‘‘partner’’ includes a 2-percent shareholder (as defined in section 1372(b) of such Code) of an S corporation. S

It is driven by the plan document. IF your plan document is like ALL the plans I see then this is true: I have this conversation with clients all the time. It doesn't matter if the client thinks they retired or not. It doesn't matter if they give him a party and a gold watch. It doesn't matter if they fire the person or they leave voluntarily. In every plan I have read if the person separates from service and is at or beyond Normal Retirement Age they will have a Normal Retirement Date. As such they have retired. All that matters is age and if required by the plan service and they are no longer employed. I have even seen examples where the person is rehired to do a small project a year or two later and then they leave again. They just retired again and will another profit sharing contribution at least (in this case it is rare the person makes any 4k deferrals so match wasn't an issue) is due. So read your document very carefully and see what the definition of Normal Retirement Age and Normal Retirement Date is. Then read you allocation sections about allocations to someone who has reached either their Normal Retirement Age or Normal Retirement Date. You will most likely (about 99.99% sure) you will find out this person retired per the plan document and is due a contribution. Not trying to be mean but this is a classic example of the answer really is in your document.

Thanks Mike for the on-point commentary. I am not unfamiliar with the problems of hard-to-value assets, and would never allow someone to do this if asked. Unfortunately, as noted in the original post, brokerage firms make it easy to buy some of these things through a brokerage account and in fact they show up on the brokerage statements, and we only noticed it because we reconcile fully and have a lot of experience picking through statements - I imagine there are a lot of TPAs who just assume the numbers showing up on a brokerage statement are fair market values.

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This could self-corrected under EPCRS assuming processes and procedures are already in place and being followed. You would want to look at the difference between what he should have received had the money been invested as directed and the default money market amount. Any investment gains would need to be deposited into his account. If there happen to be losses instead, then nothing needs to be done. You would also want to communicate this with the participant and of course put them into the funds actually selected.