Late Distribution to Terminated/Deceased Participants

[chris]

Shortly prior to end of 2006 Employer segregated out terminated participant's accounts and proposed to pay them out. 1099-R was issued, however, admin personnel never sent check. Thus, account balance stayed in segregated account until recent plan internal audit (not IRS). Off the top of my head appears that reasonable correction would be to issue corrected 1099-R's (if possible) and distribute out acct balances plus the higher of rate of return for period in question or IRS underpayment rate under §6621. There are also the distribution forms issues as well. Any suggestions appreciated. Thanks.

[chris]

Consultant advises to treat the two balances (not distributed out) as being in the general fund and go back and reallocate earnings of general fund for 2006 and allocate a piece of the 2007 earnigs to them as well. Obviously, appears to be a 411d6 issue as to the other participants. Proposed alternative would be for the Employer to make a restorative payment into the plan as to the two accounts not distributed and not invested. The restorative payment would be determined by the rate of return for the general fund which is where the accounts would have been held. Any thoughts?

Plan is to be terminated in 2007. EPCRS states that SCP is not available for a terminated plan even if there is a plan trust still in existence. Any idea as to when the IRS would deem a plan to be terminated for purposes of EPCRS (I know 89-87 applies in other contexts), e.g., consent of directors dated 10/31/07 to terminate plan as of 12/31/07...is plan deemed terminated as of 10/31/07...?