One-day Plan Year?

[Guest DIY]

A profit sharing plan was merged into another profit sharing plan effective January 1, 2006, with "assets and liabilities ... transferred to [the surviving plan] as of that date." What is the current thinking on whether the disappearing plan needs an audit and Form 5500 for the one-day period of January 1, 2006? I found some posts from 2002-2003 on this, but wondered if there is anything more recent.

[namealreadyinuse]

It is much cleaner if the merger is papered as of 12/31 (or midnight on 12/31), isn't it?

We would treat the merger as having occurred after close on 12/31 and avoid the 5500. I can't think of any way to argue that participants are affected as long as you give effect to the LDY of the plan that is going away. It would take a pretty mean agent to raise a stink, imho.

[Kirk Maldonado]

There were some message threads in the past that contained some very creative and I think possibly viable solutions to this problem. Try using the search function to find them.

[MWeddell]

From the 1997 Enrolled Actuaries gray book:

QUESTION #38

Other DB Issues: Mergers and Short Plan Years

A plan sponsor intends to merge two calendar year plans.

To avoid filing a short plan year Form 5500 for either plan, should the merger date be December 31 or January 1?

RESPONSE

The merger documents should include language describing the transaction as taking effect at a time such as "as of the beginning of the plan year" or "as of the end of the plan year." As long as the intention is clear, the IRS should not question a date of either December 31 or January 1 on Form 5500 or on Form 5310-A.