Plan Audit of Money Purchase and Profit sharing Plans

[thepensionmaven]

We have a client whose 2001 Pension Plan Return is under examination.

Two plans, MP and PS.

Two accounts for each plan.

Two doctors, one term vest doctor and one common law employee.

For 2001, max comp was $170,000, max contribution $35000.

The two doctors made $14,000 contributions to the MP, $21,000 to the PS, each.

The auditor wants to declare a funding deficiency for the MP because he says the plan is $3,000 deficient for each doctor.

Quite simply, the doctors contributed the $3,000 in error to the PS plan.

I can understand making the transfer to the MP plan, but not the $3,000 "deficiency" and payment of any excise tax.

Anyone have any similar experience with an audit like this?

Thanks,

Steve

[himt4]

Was it supposed to be $17,000 each to the mp plans, and $18,000 each to the ps plan? if so, did the mp's 5500 show the contribution correctly as $34,000 and was it only a mistake of where they put the money?

if so, I know that a lot of the Plan documents that we use have language that allows for the commingling of assets with any other Plan of the employer. Perhaps, you can make this argument to the auditor, that although the money was placed in the ps accounts it has been treated as mp plan money. This argument probably works better if both plans used pooled assets instead of having individual accounts, but maybe you can make it fly.

[SoCalActuary]

You should also look at the coordination of 415 limits between the two plans.

With a limit of $35,000 and a PS contribution of $21,000, the MP plan might have language that requires a reduction to $14,000 to comply with 415. I would consider using this argument if the MP plan had the language to coordinate 415 with the PS and the PS received its contribution first.