EZ MP PS?

[Blinky the 3-eyed Fish]

I have a takeover plan from an accountant. There was a MP and PS plan that merged 12/31/01. Neither plan has ever filed an 5500-EZ due to the asset threshold. However, as of 12/31/01, the assets exceeded $100,000 on an accrual basis, but remained under $100,000 on a cash basis.

Obviously, I can report the accounting on a cash basis and make 2002 the first filing for the ongoing PS plan. But for the MP plan I feel that a 2001 final filing should have been made. Agree or is there any argument for not filing for the MP plan because it was merged and was not necessarily terminated?

[Guest jfp]

Don't you have to count the MP receivable as a plan asset (without regard to the cash vs. accrual distinction)? If so, I can see the argument that a first and final 5500-EZ for the MP was required. However, I doubt that could this ever be detected by IRS in a million years, and even if it seems like a good bet that the facts and the rules are cloudy enough to warrant abatement of late-filing penalties.

[Belgarath]

I haven't checked the form instructions, but I seem to remember that a final 5500 for an EZ filer must be filed REGARDLESS of the amount of assets. If so, the issue of whether to count on accrual or cash basis is moot.

[Blinky the 3-eyed Fish]

Don't you have to count the MP receivable as a plan asset (without regard to the cash vs. accrual distinction)?

Why would I have to count the contribution receivable on a cash basis? I see nowhere that you must use accrual basis for determining the $100,000 threshold.

Belgarath - let me rephrase my question of concern. Do I need to file a final 5500-EZ for the MP plan since it merged into the PS plan? I see on pg. 2 of the instructions that an EZ must be filed for the final plan year. (I know it's regardless of the asset amounts.) The final plan year is defined as the year in which distribution of all plan assets is completed. This was not the case with my situation as the assets were merged, not distributed, and they will continue to be reported with the PS filing in the future. I am looking for a way in which there would not be a late 2001 MP filing if it wasn't technically required.

[Belgarath]

Hi Blinky - I'd interpret the instructions (which I just got out and looked over) to require the final form for the MP plan for 2001. Under the last sentence in the "who may not have to file" section on page 2 of the instructions, it includes the words "...or distributed to another plan." FWIW.

[Blinky the 3-eyed Fish]

Ah, but it doesn't say merged. I know I am grasping at straws.

[WDIK]

Relating to mergers, Form 5500 instructions use the language that a final return should be filed for the plan year that ends when all plan assets were legally transferred to the control of another plan.

While not the instructions for the Form 5500-EZ, I would think that the intent is the same.

[mwyatt]

To quote from the 2002 5500-EZ instructions:

Note. All one-participant plans must file a Form 5500-EZ for their final plan year even if the total plan assets have always been less than $100,000. The final plan year is the year in which distribution of all plan assets is completed. Check the “final return” box at the top of Form 5500-EZ if all assets under the plan(s) (including insurance/annuity contracts) have been distributed to the participants and beneficiaries or distributed to another plan.

So I would say that you need to file the final year 5500-EZ regardless of the level of assets. So Blink I would agree with you that the 2001 5500-EZ should have been filed on the MP plan.