Terminating plan has dividends posted in new plan year

[Guest crosseyetester]

A calendar year plan is attempting to terminate in 2005. They have already distributed assets but apparently there will be dividends which post and will not be able to be taken out of the trust prior to 12/31/05. Can the 2005 Form 5500 be their last one or will they have to submit a form for 2006?

[Earl]

I would pay out asap and include in 05 1099s and 5500 shows $0. I don't think the IRS would mind; like I think there is (at least there was once) in the instructions "if the only money left in the plan is to be a reversion you can report as paid and file the final." (or something like that...)

And there is something somewhere about including income received shortly after the end of the year in prior year income. so the 1099 is not an issue.

I wonder it that is still in the instructions... Have to go look

That's what I would do.

[Bird]

I agree; I would include everything in the 05 reports. You didn't say what you're going to do with the dividends - if they're self-directed accounts, I guess they go to the participants (then there's the question of who's doing the 1099s and whether they will show 2006 distributions). If it's a pooled account, you can take the dividends as fees and accrue the fee expense in 2005.

[Guest crosseyetester]

It's a small plan. The two owners are the only participants left and they are rolling over their balances into IRA's. The intention was to roll over those dividends as soon as possible since all fees have already been taken out, unless there was to be a fee for a 2006 5500.

[pmacduff]

"and they are rolling over their balances into IRA's, so there will be no 1099." Shouldn't there be a 1099-R form for each with a code of "G" for rollover to an IRA? - why no 1099-R?

[Guest crosseyetester]

Sorry, still on holiday mode...thanks for catching that. Thankfully I'm not the one responsible for doing the 1099's......I edited the message above...

[pmacduff]

thanks crosseyedtester - didn't mean to be picky - just wanted to be sure I wasn't missing something...

[Guest mjb]

For tax purposes a distribution /payment is deemed to be made on Dec 31 if the check is mailed on that date, not when the participant receives it. I dont know if for trust accounting purposes the mailing of the check on Dec 31 becomes a liability against plan assets which will 0 out the plan assets on that date and not on the date the trust pays the payee's bank.