Does a newly established PSP have to file Form 5500 for first two year

[Moe Howard]

A PSP is established on 01/01/2001. There is a 2-year service requirement before entey is allowed.

Although the employer has many employees employed on 01/01/01 that will most likely meet the 2-year service requirement on 12/31/02 (and thus enter the plan on 01/01/03) ... the plan will have no participants, nor make any contributions, during the plan's first two years of existence (namely: years 2001 and 2002).

MY QUESTION:

Must a Form 5500 be filed for years 2001 and 2002 ??

[jaemmons]

Question: Why not change the effective date of the plan to 1/1/03?

Since there aren't any participants (no one is eligible yet), there really isn't a plan benefiting anyone at this point, so no 5500 would be due until possibly 2003. (unless I am missing something which may be a possibility)

[2muchstress]

In this situation, I have always filed a 5500 with a bunch of zeroes. It doesn't take much time to complete the forms if there are no assets. I'm not sure of the answer to your question and would be interested to see if you could get away with not filing but I don't think so.

Anyways, it seems to me that there would be no harm in filing.

[Blinky the 3-eyed Fish]

For eligibility you must consider years of service before the effective date of the plan. So no employee was hired before 7/1/00?

[Moe Howard]

Blinky: You must be thinking of fact that "years of service prior to adoption of plan" MUST count toward number of years employed for vesting determination. But there is no rule (that I am aware of in either ERISA or IRC) that such period of service must count toward meting the eligibility requirements necessaryto enter the plan.

[2muchstress]

I administer several plan documents using the Accudraft volume submitter, and several prototypes written by ERISA attorneys where years of service prior to the adoption of the plan are specifically excluded for vesting purposes. I would sure hate to think that all those attorneys are wrong - though it would be great if they were

[Blinky the 3-eyed Fish]

Moe, I think you have it backwards. Years of service for vesting may be excluded prior to the effective date of the plan assuming there is no predecessor plan. Years of service for eligibility CANNOT be excluded prior to the effective date of the plan. See 410(a)(5)(A) or ERISA 202(B)(1).

(I edited the above to correct an incorrect cite.)

[2muchstress]

I think I would have to agree with the 3 eyed fish. However, I don't know if the original question was answered.

If a plan has no assets, you still have to file a 5500, right?

[jaemmons]

But if you have no assets or participants, do you even have a plan? I assume there is a plan document which would meet the written requirement for establishing a qualified retirement plan but the trust houses NO contributions. Unless the effective date is being used to start vesting service, I would just change the trust and plan agreements to set the effective date to 1/1/03 and not worry about filing "hollow" 5500's for the first two years.

[Blinky the 3-eyed Fish]

I think this discussion is moot. The original question was posed because of a misapplication of how the eligibility would work. Who would set up a plan in a year in which there would be no participants or assets? It's like throwing away money to administer something that serves no purpose.

If there was ever a situation where someone implemented a plan with no participants or assets, their TPA or whomever facilitated the plan document should be shot.

[2muchstress]

I agree. However, there have been many times where a company will set up a psp with the full intention of funding it. Then for some reason or another, the company is unable to fund their plan. At which point, you would have eligible participants, but no assets.

In this case, I believe a 5500 should still be filed, hollow as it may be.

Reasoning: You have a written plan, the plan has been submitted to IRS for favorable determination, plan has received favorable determination, plan has received a trust ID number. For all intents and purposes, a plan exists. Isn't it a requirement for all plans to file a 5500?

[jpod]

Before we shoot anyone, I'll give the designer of this plan the benefit of the doubt and ask the question: Why was the plan set up with a 2-year service requirement that did not count past service?

Could it be that there was a need to have a plan to receive a rollover or a plan-to-plan transfer? If so, there are missing facts here which would/could change the answer to the 5500 question.

[Blinky the 3-eyed Fish]

Jpod, you CAN'T not count past service with the company sponsoring the plan. Also, notice I said there would be no reason to set up a plan without BOTH participants and assets. The situation you describe does not meet that criteria.