Final 5500 for Money Purchase Plan Merged into Profit Sharing Plan

[Guest lgjs]

FACTS:

The merger of the two plans was effective 1/1/02. However, it was a couple of months before the assets of the money purchase plan were transferred into the profit sharing plan. During 2002, before the assets were transferred from the money purchase plan into the profit sharing plan, the vested account balances of three participants who terminated during 2001 were paid out.

QUESTIONS:

1. Should question 7 of the final 5500 for the money purchase plan be 0 since the plan was merged effective 1/1/02?

2. Would the forfeitures resulting from the distribution of the vested balances to the three participants that occurred before the assets were transferred be forfeitures occuring in the profit sharing plan so that I could mark box 3b on Schedule T and not have to complete the remainder of Schedule T?

[QDROphile]

Your answer depends on how well the merger terms were drafted. The merger could be complete before the "transfer" of assets if the merger documents said that the MPP trust merged into the PSP trust. If so, you would have no "transfer" and you would have distribution form only one plan/trust. The "transfer" is simply the paperwork of conforming title documents.

Are you worried about the merger being effective January 1 and the implication that the plans existed separately for some moment on January 1? That would affect the year for which the final 5500 is filed if you have calaendar year plans. I doubt that it is worth the quibble.

[E as in ERISA]

QDROphile is exactly right. Ideally the assets of the MP belong to the PS at 1/1/02. After that date all assets and transactions should relate to the PS. But the documents aren't always perfect....

[KJohnson]

In Q&A 75 at the 1998 ASPA meeting the IRS representatives came to the same conclusion-- That for purposes of the final 5500, the effective date is the merger date stated in the documents and not the date that the assets are actually transferred.

They did note, however, that in the case of a termination the 5500 obligation continues until the last penny is distributed.