plan merger-final 5500

[Guest Dolores Lawrence]

When preparing Schedule I for a final Form 5500 (money purchase plan merged into Profit sharing plan), how do you answer question 5a - was a resolution to terminate the plan adopted during this or any prior plan year? A resolution was adopted to merge the MPP plan into the PS plan. For purposes of answering this question, is this plan considered terminated or not?

[Guest b2kates]

I would answer the question yes. At minimum you have ceased future accruals of the money purchase benefits.

Back when I was at Peat Marwick, this situation was considered a partial termination

[Mike Preston]

I strongly disagree, and I don't say that too often on BenefitsLink.

The issue as to whether or not a merger of a money purchase into a profit sharing is a termination (partial or otherwise) is far from a done deal. There are many, many people who would disagree with the position you say Peat, Marwick espoused. They certainly didn't espouse that when I was there (many, many moons ago).

Whether they do or not, or even whether you or I do or not, though, is not the issue.

The issue is whether the plan in question is treating it as a partial termination (read: 100% vesting everybody). If they are, then I guess it isn't a problem. But I would not want to be asked why I filled this question in with a "yes" if the plan sponsor had decided, upon advice of counsel, that the merger was not going to result in 100% vesting. Especially, if a plan participant used the answer to that question to make the plan sponsor's life less than comfortable.

[R. Butler]

I agree with Mike Preston. I would answer no to 5(a). You are telling the DOL on Page 1 of the 5500 that this is the final 5500. You are telling them on line 2(k) that the assets are being transferred to another plan.

[Guest Tbrown]

I understand exactly where you are coming from and it was the way we were proceeding in the beginning. However, at a conference recently, we were instructed to answer yes to that question. According to the DOL, checking yes is necessary only to indicate that there will be no further filings for this plan. I realize this does not necessarily wash with the Final Filing box you are checking. Not to mention, under a plan termination, you could adopt a resolution but not distribute until the next year so there would be future filings. It doesn't make much sense, but I'm just relaying the info we received.

Check Janice Wegesin's web-site

www.form5500help.com

The vesting issue is something we hadn't thought about. But I can see your point that answering yes could give someone the idea that the plan was terminated and full vesting is necessary. Even though I think that's a stretch.

[david rigby]

I agree, it does not make sense to answer that question with a "yes". The question (and the instructions) refers to a resolution to terminate. A merger is not a termination.

Also, both plans were required to file IRS Form 5310-A prior to merger, so the notification the the IRS has already been done.

[Guest Tbrown]

Why would both plans be required to file Form 5310-A? In the case of every merger we have done so far, they have met the exception:

2 or more DC plans are merged and:

a. The fair market values of the combined equal the fair market value of each just prior to the merger (however that is worded).

b. The assets of each plan are combined to form the assets of the surviving plan.

c. The participant balances equal the their balances immediately preceeding the merger.

I would think that this exception would apply to 99% of all plan mergers done (particularly the ones that are moving from money purchase to profit sharing).

[Blinky the 3-eyed Fish]

Pax, why would a 5310A need to be filed? I thought this situation was one that met the exceptions, being that the account balances before and after the merger remained the same.

I edit this after seeing I was beaten to the punch.

[david rigby]

Fair enough. Forced to re-read the instructions to the 5310-A, I agree. Oops.