New DB Plan; Old 5500 Problems

[JAY21]

New client for 2007 wants DB plan and reveals fact that he has an old MP and PS plan still in existence but currently terminating through other advisor (legal) but he has never filed 5500's on these plans. He's wondering if 1099-R filing and 945 filing on those plans by investment company as part of plan term will trigger 5500 tracking/red flags. I've suggested the voluntary correction approach of course on late 5500 filings, but since it's his decision, does anyone think the IRS receipt of 1099-R/945 would trigger an inquiry into 5500s ? I kind of think not especially given 5500s are now filed through PWBA (DOL) but would appreciate other opinions.

As best I can tell it seems to be limited to 5500/Disclosure issues as plan doc has been consistently updated by national investment company, CPA apppears to have handled the easy contribution calcs correctly, small office hasn't had any distributions previously.

[SoCalActuary]

$100,000 is the magic number. If the combined assets exceeded that amount, then you should recommend a final 5500 for each plan, showing the distribution on the 1099R and a 945 if any taxable withholding applied.

When you add the DB plan, you should certainly take account of the other plans to check for your $100k minimum assets.

[JanetM]

$100,000 is only for 5500EZ. OP said this is small office with no distribution history. Sounds like delinquent filer program is clients only option.

[JAY21]

I agree the delinquent filer program is the best way to go, but the question the client has asked is if the 945 and 1099-R filings themselves will link (tracking wise) to the fact that the 5500 have not been filed. I think not but would like other opinions. Obviously he's weighing his risks.

[Effen]

I don't know if they will/can connect the two. I had a client who submitted PS & DB plan documents to the IRS for approval (which they subsequently received), signed-up for the PBGC on-line stuff, then decided he didn't want the plans. Never filed 5500, never filed a PBGC, never paid my bill, never heard from either the IRS or PBGC ... although it has only been a year, so we still have hope.

I would caution you about answering his question and taking him as a client. He has already demonstrated that he does not do well required filings. He also apparently doesn't seem overly concerned about fixing things since he asked for your opinion if he didn't. So let’s say you officially recommend that he does the delinquent filer thing, but then you also verbally tell him that you doubt the IRS will pick-up on it if he doesn't. Haven't you just told him that in your professional opinion you don't believe the IRS will catch him? I'm not sure that is a position you want to be in if the IRS does come calling.

I suggest you tell him the delinquent filer program is the only alternative you are willing to discuss and that he should consult with his attorney regarding other possible options.

Also, what makes you think he will treat his new plan any differently? Kinda like the woman who goes after the married man, then complains when he cheats on her