Settlement income received after final 5500 filed

[Guest LoloV]

Any ideas on how to handle the following situation...

A final 5500 was filed for the 2002 plan year. All money had been distributed. We have now received some settlement income for a fund error. It is to go to everyone on record as of a certain date in September, 2002. Do we need to file a 5500 for 2003 to report the income and distributions?

Any guidance would be appreciated.

Thanks,

Laurie

[JohnCheek]

Filing a second "final" return in 2003 will probably not be too difficult, and probably not cause too much confusion at DOL. However, if your plan has more than 100 participants, you need to address the audit requirement. Maybe you can justify a position that the plan had zero participants after the 2002 final return.

Also, you have to address reporting of the income received by participants, on 1099-R (assuming this is a pension plan).

[Guest jfp]

You can take the position that all assets WERE distributed in 2002, and among those assets was the right to receive the settlement proceeds which were not made available until 2003. The "plan" was merely the conduit for distributing the proceeds directly to the participants who are entitled to them. Perhaps the right to receive the settlement proceeds should have been included as an asset on the 2002 5500, but that's merely a mistake; it wouldn't trigger a requirement to file a 2003 5500.

I realize the merits of this position is debatable, but it's not unreasonable and the likelihood of DOL or IRS making an issue out of it is slim.