Admin Error - Effect on 5500

[Guest liljunebug]

We have a take-over plan that one of my admin's just discovered an error from the 2006 plan year. Apparently, the prior RK set-up what they thought we additional matching funds as a receivable in the valuation. Upon examination, these funds aren't really due. However, the balance containing this "$1300" in receivable match was reported on the Form 5500. Is it going to raise a red-flag if we have a different starting balance for the 2007 plan year? this appears to have been occurring since the 2004 plan year, we don't have the ability to go back & correct multiple years valuations & 5500's. How would you address?

For that matter, when would ER funds ever be set-up as a receivable to be carried from year-to-year? In my experience, plan sponsors have always been required to pay whatever funding is due within the prescribed time-frame, not carry it over plan years. Is there a reason for this that we are missing? To me, it's over-stating participant's balances if you credit them with a balance on a statemetn that hasn't actually been funded by the sponsor.

[Bird]

I wouldn't start with a different beginning balance than the prior year's ending; I'm pretty sure that will get you a letter. I'd prefer to amend prior years, but to the extent that isn't possible, just make an adjustment to the current year's contribution to make everything tie out.

No, it doesn't sound like that should have been carried forward from year to year.

[Jim Chad]

I agree with Bird. I would not file with a beginning balance that is different from last year's ending balance. I would prefer to amend 2006 return by changing the gain/loss and ending balance. But there is not enough time for that. The DOL would not process the change in time and you would get a letter from them. This is a big can of worms to open for no good reason. I would zero it out in gain/loss and or in contributions on the 2007 5500

[PLAN MAN]

Am I missing something? You say the prior RK has been overstating employer contributions since 2004? How is this possible?

It sounds like the prior RK was accruing a final matching contribution for the year. Is it possible you are accounting for contributions differently that the prior RK and some of the match for 2007 is really the accrued contribution from 2006? If the match is not really due, do you think it was included in the ACP test for 2006 - should that test be rerun?

[JanetM]

Is this cash vs accrued accounting.

[BG5150]

You can certainly have ER contributions that are receivabe for multilple years. Sure the ER is supposed to pay everything on time. But if they don't, it is still considered a receivable, still owed to the plan.

An example would be a 1 to 1 QNEC that needed to be made due to a failed ADP test. That money is owed until it is deposited and should be carried as a receivable unitl it is deposited (for an accrual-based filing)

[Earl]

I have "discovered" that the open asset # didn't match the prior year's close a few times on filings (Sch I) and never seen a letter about it.

Has anyone ever?