Frozen Money Purchase Plan

[Just Me]

We have an ESOP that has a frozen money purchase portion (it was merged into the ESOP years ago). We filed Form 5500 and included the codes for both an ESOP and a MPP (since that portion of the plan is subject to J&S, etc.), and completed Schedule R to report plan distributions. We left part II of Schedule R blank because the form says to skip this section if the plan is not subject to Section 412 minimum funding. We got a reject letter. DOL is not buying our response, and says that if you have a money purchase plan/feature, you MUST be subject to minimum funding, and to call IRS since it's an IRS schedule. IRS has no clue what to do. DOL person suggested that we put 0's in for the amount of funding.

From my Googling, this seems to be a common problem for which there is no right answer. (i.e., you can't properly fill out the 5500 for a frozen money purchase plan.) Has anyone had a successful response to the DOL on their reject letter that I could learn from?

Thanks in advance!!

[Just Me]

Gee, I get to answer my own question.

The IRS just called back to tell me that even though a frozen money purchase plan is not subject to Section 412 minimum funding requirements, lines 6a,b, and c of part II of Schedule R should be completed with all 0's as responses.

[Bird]

That'll work (using 0's) but I question whether you should be coding it as a MPP at all if it was merged into another plan. Does the existing plan have any MP language in it (e.g. "The required pension contribution is 0% of compensation.")? If not, I don't see how it's a MPP.

[JanetM]

I agree Bird. If MPP was merged into ESOP then you don't really have a MP feature with out plan doc language making it so. I would go back and check the document to see if it is there. If not then you just have this money type with J&S requirements.

[Just Me]

The MPP was merged into the ESOP before it was frozen, so there was a MPP contribution for a number of years. This portion was frozen and now states that the MPP contribution is $0 after the freeze date. It seems much more prudent to indicate on the 5500 that the plan had a money purchase portion, as it had always been reported as such, and the plan contains MPP language that looks like any other frozen MPP.

However, the question I was asking, and the point I wanted to share was that if you have just a frozen MPP (lets forget the ESOP complication), and you indicate on Form 5500 that it is a MPP, the DOL computer will do a data check and look for responses in part II of Schedule R regarding Section 412 minumum funding requirements, even though Schedule R says to skip part II of the plan is not subject to minimum funding. The IRS says answer it anyway with all zeros.

This can't be the only 5500 that was rejected for this reason, because the IRS guy had this very question in his "book" of commonly-asked questions.

Thanks for your input anyway.

[Bird]

Sorry for going off tangent. If that's the way the plan is written, then it IS subject to minimum funding, it's just that minimum funding is 0, so I agree with the IRS' response.