5500s for New Plans

[Guest erisafried]

Here's the situation: Company A adopts a new pension plan at the end of 2000 with retroactive effect to January 1, 2000. Company A funds the plan within the prescribed time after the end of 2000. Company A does not file the first 5500 for the new plan until the 2001 plan year even though the plan was effective in 2000 and was funded.

Company A advances several arguments in favor of this approach: B5 accounting firm said it was OK and we really really don't want to file for 2000; it's OK to combine what would nominally be the first year's filing with the second year's filing as long as the first year is "really" only a couple of months; or the plan is deemed to have been established on the last day of 2000 because that was technically when it was funded.

None of these seem particularly satisfying, mainly because there doesn't appear to be any authority for any of them. It appears that if you adopt a plan, whether on December 31, 2000 or January 1, 2000, it's up and running for 2000 and you have a potential filing obligation even if the plan was not actually funded until the first couple of months of 2001.

Anyone have any input on this? Is it DFVC time?

[Kristina]

When was the deduction taken for the 2000 contribution??

The plan was effective for the 2000 year. The whole year the fact that it was in writing for a few months has no impact on whether the plan was in existence for the whole year. Regulations clearly state that one may adopt a plan on the last day of a plan year to be effective for the whole year.

Also, since the plan was effective for the whole year and since the plan files the 5500s now and not the sponsor, a plan that was effective in 2000 and communicated to employees and funded within the corporate return period would be required to file a 2000 5500. (B5 or no B5)

Since it was a B5 firm that came up with the no filing required, I would ask for the code sections and the regulations they base that opinion on. I would also ask the sponsor why it is such a big deal to file for the 2000 year? I'm thinking there is something here you haven't been told.

I also think you have a delinquent filer situation.

[Guest erisafried]

The deduction for the first contribution to the plan was taken for 2000.

I'm with you: I couldn't find any basis for not filing for 2000 and I don't think there would be an exemption/exception even if the plan wasn't funded for 2000 based on the 5500 instructions.

B5 has no authority for its position other than "wesayso".

The plan's outside consultant concurs on all of this (i.e., that the filing should've been taken care of).

I suppose we'll be sending Uncle Sam some money now.

[Guest erisafried]

And it's not such a big deal to file the 5500 other than the fact that it should've been filed and wasn't. This is mainly a case of the left hand not knowing what the right hand is (or, in this case, is not) doing, not any short of interesting shenanigans.

[Guest James Osterhaus]

I agree with you. If you have a plan that started in 2000, a 5500 would have to be filed for that year whether funded after the plan year ends or not. Did they claim the 2000 contribution as a deduction on their taxes for 2000?. I would think that combining the plan years would cause a problem in the event of an audit.

[Kristina]

Look at it this way. After paying those fees for the B5 "advise", any fees they pay to the IRS will look cheap.

[Guest erisafried]

Some might even call it poetic justice given the fact that it is a law firm's plan at issue.