Welfare plan - reversion to employer

[Guest 5500]

Terminated welfare plan has paid off all participant claim obligations and the balance remaining in the trust reverts to the sponsor. There were no employee contributions to the plan.

Question: where does the amout returned to the sponsor get reported on 5500 Sch I, Part 1? It does not meet the definition of a transfer for Line 2k because it is not to another plan. Do I just include it in line 2h Other Expenses in order to get the begining and ending net plan assets to reconcile?

[Lori Friedman]

This must be a tax-exempt benefits trust within the meaning of I.R.C. Sec. 501©(9)? If yes, how can the assets revert to the employer? Please see Reg. Sec. 1.501©(9)-4(d).

Kirk Maldonado, can you weigh in on this one?

[Guest 5500]

It is not a tax-exempt trust. I know about the Sec. 4976 issue, but still wonder how to show it on the Sch I?

[Kirk Maldonado]

Off the top of my head, I think that there can be a reversion if the trust didn't qualify as a VEBA under section 501©(9).

My recollection is that ERISA permits reversions under conditions similar to those for plans subject to the PBGC. Relying upon my memory (which is always an iffy proposition), I think that you can have a reversion if amounts remain after all liabilities have been paid off

[Lori Friedman]

It's interesting that Schedule I provides such detailed instructions about how to report a reversion on Line 5a, yet there's no guidance whatsoever about reconciling Lines 1 and 2 for the very same transaction.

I agree that a reversion isn't a Line 2k transfer, which has a clear definition.

My best guess -- report the reversion as a Line 2h "other expense". If the number agrees exactly to the amount report on Line 5a, a reader can easily follow what you've done. If the numbers aren't the same (i.e. you lump the reversion with other plan expenses), attach an explanatory statement.

Does anyone have a better idea?

[JanetM]

Only the fee line could remotely be used, the others are clearly defined and don't fit. Is not a transfer acccording to my manual.

I would put it on 2h and be done with it. Don't forget to file your 5330 and pay your tax while you are at it.