Near-orphan plan--filing ongoing 5500s

[Guest Richard Tennenbaum]

Plan was a 'near-orphan' plan; though company went out of business a few years ago, owners had another business and for the most part continued to maintain plan and file 5500s. DOL audited plan and found nothing major, but as a result the company, or what is left of it, has decided to terminate the plan. Plan has 2 participant accounts (HCEs) and a forfeitures account.

There have been no employees and no compensation paid for 2 years.

The company proposes to terminate and distribute the 2 participant account but there is the sticky issue of the forfeitures account. The way I see it, they can't file a final 5500 until all assets are distributed, but the forfeitures account will likely stick around for several years if the only use for the forfeitures is to pay plan expenses (administrator fees, 5500 filing, etc.). The plan allowed the forfeitures to be used to offset employer contributions, but there have been no contributions for the past few years. They would rather finalize the termination this year.

Any other suggestions short of reversion and paying the excise (which I'm afraid would lead to another audit)?

[Guest mjb]

why not have other busiess become plan sponsor and use forfeitures as conbributions to other business?

[pmacduff]

can the document be amended to pay fees with forfeitures? I can't imagine that someone is going to help terminate for free...

[Guest Pensions in Paradise]

My question is whether the forfeiture account is valid. You said that the company went out of business. That would imply that the employees were laid off. If thats the case, there should have been a partial termination of the plan at that time and all affected employees should have been 100% vested. You may want to go back and confirm where the forfeitures came from.

[rcline46]

Bet the document also says the forfeitures (suspense account) is to be allocated every year, looks like someone fell down on the job the year the forfeitures were created.