New or Successor Plan II

[Nate X]

I'd like to follow-up with a question recently asked since I have a similar situation as this one:

http://benefitslink.com/boards/index.php?showtopic=32782

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A large calendar year plan was part of an ME plan with Paychecks. The client stops participation in the ME plan in April 2006 and assets are moved to another provider in May 2006. The document is restated effective 3/1/06.

1. Do you agree that this is a continuation of the plan and not a New or Successor plan?

Assuming it is a continuation,

2. On Form 5500, would the Beginning of the Year assets be shown on the form, or would they be listed under “Transfers of Assets”?

3. What is my beginning date for filing Form 5500? (1) The document restatement date, (2) the date the client starts participation with the new provider, or (3) the plan year beginning date?

4. Would participants that had been previously reported on Sch SSA under the ME plan needed to be added using code C?

Thanks!

[Jean]

In a traditional ME structure, your client would be a participating employer, not the plan sponsor. The plan’s effective date is associated with the ME and your client has an “election to participate adoption date” which is not a plan effective date. This is how I clarify the date questions. The ME’s 5500 has that plan’s effective date and as there is no reporting to identify a participating client in an ME, your client's plan effective date should not be for a time period when they were only covered under the ME.

Likewise, when a client leaves the ME, they do not take any dates associated with the ME to the new plan. This is to eliminate the possibility of follow-up letters from DOL for lapses in filing years. Probably best to use a plan effective date of the restatement date, file a 5500 with a plan number associated with your client, not the ME. If they have never sponsored a plan before, use 001.

To answer your questions.

1. Yes

2. List them as ‘transfer in’ as the ME will list as ‘transferred out’.

3. Generally the restatement date as explained above. Regardless of the date used, use related employer rules to run plan tests. Run full year ADP / ACP and top heavy tests. This rule is also covered by the PEO rules that require the ME to test participating employers as separate unrelated plans. Generally, the new plan would receive corrective contributions or issue corrective distributions.

4. Yes, this is proper, although I’m sure often overlooked. ME should list as Code D.

[Nate X]

Thanks Jean!

Would you agree, in this senerio, that I would check box B(1) on Form 5500 to indicate it is the first report filed for the plan?

Thank you.

[Jean]

Yes.