What to do with old clearing account assets?

[Guest smstls]

We have a plan that changed trustees several years ago. At that time, money was transferred from the clearing/holding account of the prior trustee to the new trustee, where it has sat unnoticed, until recently.

Under the prior trustee these assets sat in an account that would temporarily hold assets until they were allocated. For example, the sponsor would wire their payroll contributions into this account and then the trustee would pull the money out of this account and put it into the Trust.

When distributions were processed, the funds would come out of the trust into the holding account and then the trustee would wire the money to the checking account that paid the distributions.

When the change in trustee occured, these assets were transferred to the new trustee, where they were kept separate, but never used.

It would seem that the balance in this account should be very small, but it is not. The theory (not yet confirmed) is that at one point the sponsor may have had to make an estimated contribution because they were not going to be able to post contributions within the DOL's required 15 business day rule. This has been known to happen. Then, when the actual contributions were posted, the sponsor again wired the full amount.

The question is what can we do with these assets? Can they be withdrawn or must they remain in the plan and used to pay plan expenses/future contributions?

[Guest welcomehome]

bumping- we have a similar situation. Thanks

[Bird]

For the sake of trying to get something going, I'll comment.

First, not to be a scold, but I think both the employer and recordkeeper have to review their systems to make sure this doesn't happen (again). On the plan side, there's money flying around not accounted for, and on the employer side there's money leaving the company that has been misclassified (well, maybe, depending on the ultimate resolution) as...well, we don't know what.

Anyway, I think the correct answer is to go back to when it occured and allocate it as an employer contribution. That's sure to be a problem, right?

The practical answer is to use it to pay expenses. How comfortable I would be with this would depend on how much there is, relative to different factors, but one of the key things I'd look at is typical annual expenses. if it's less than one year's expenses, I think I'd do it (prior year's assets could be increased by the found money and offset by an accrual for expenses, so participant allocations don't change).

[Alf]

It is a qualification problem that needs to be corrected or the plan could lose its qualified status. Hopefully you can justify being eligible for self correction. First, you need to clearly identify what the money really is. It sounds like contributions to the plan were never allocated and you now want to use the money to benefit current participants (by paying expenses, allocating now, etc.). That is wrong on so many levels that it can't be justified imo.