What would it take for you to agree to sign the Schedule B?

[John Feldt ERPA CPC QPA]

Suppose a client misunderstood his DB plan 2 years ago, thinking all of the assets were his (the plan had one owner and 2 NHCE eligibles in the plan with accrued benefits). Suppose a ____ financial advisor convinced the owner/employer/sponsor/trustee (same person) to move all of his DB funds into his personal IRA. Suppose this happened just before the valuation date of November 1, 2005.

Now suppose that a VCP application is now underway, and the correction method will be to propose moving all of the IRA money back to the plan (the IRA had no comingling and no distributions). Suppose all of the assets from the IRA are in the process of being transferred back into the plan.

If you were the paid enrolled actuary, what would you do regarding the Schedule B for 2005?

Option 1: Would you wait until the assets are actually transferred back to the plan before signing a schedule B for the 2005 year?

Option 2: Would you run 2005 valuation with zero assets and offset the owner's benefit by the value of the amount that went to the IRA? Note: the plan assets were larger than the value of the owner's benefit.

Option 3: Once the assets from the IRA get moved back into the plan account, would you run the 2005 valuation using the 11-1-2005 value of the IRA to be considered "plan assets" and sign a schedule B for that?

Option 4: any other ideas out there?

Same questions for the 2006 valuation and schedule B too.

Oh, and assume that firing the client is not really an option now since they have begged for mercy by paying you in advance in the form of an unusually large check for val work and VCP work.

[Mike Preston]

If the distribution was improper and the money belonged to the plan, then I would insist it be put back before signing anything. This is actually in the client's best interest because it shows intent. Of course, this is subject to discussion with ERISA counsel, but every ERISA counsel I have worked with lo' these many years has said that if a course of action is determinable pre-IRS concurrence, then you do so prior to finalizing correction. Only if there are potential alternative courses of action do you delay. This does not seem like a situation where delay is appropriate.

[Effen]

I agree with Mike, get the money back into the Plan ASAP.

You might consider an Option 4 - assuming the VCP has been filed, prepare the 2005 Sch B using the assets in the IRA as the assets of the Trust. Add an attachment to the Sch B stating that your signature is based on the approval of a VCP filing filed on _____ and if the VCP is not approved your signiture is revoked. Make sure the PA also signs this attachment so they are aware.

I also strongly recommend you contact ABCD and ask their opinion. I found them to be very helpful in situations like this.