Tax Forms Needed If Assets Are $0 At EOY?

[mming]

No deferrals were made during the first year of a 401(k) plan and now the employer has informed us that he will not be making a profit sharing contribution. Are you still expected to file a 5500 showing zeroes everywhere on the Schedule I including the asset values at the end of the year, or would you just call this first year a mulligan and only start filing 5500s once the plan has actual assets (or at least a receivable contribution at the end of the year)? Since, technically, employees would be considered participants benefitting in this plan because they had the option to defer (and possibly impact their ability to contribute to an IRA if their compensation is high enough), I'm begrudgingly guessing that a filing is needed. Would that be the correct action to take? All help is appreciated.

[PensionPro]

There are two options the way I see it:

1) There is no 5500 filing requirement, since there are no assets in the trust, despite the fact that the 401(k) plan was effective during the year.

2) A 5500 is required to be filed, because the instructions state that "the return/report is due ... even if ... contributions were not made this plan year."

I would go with option 1, since option 2 seems to be talking about a plan with assets, but not making contributions for a particular year. Either way, the DOL computer may generate some queries.

[david rigby]

I would go with (2). The existence of the plan is more than the question of assets. Very likely, participants earned some vesting service during the plan year.

[Below Ground]

Maybe you did not have a plan at all? Just a thought.

[mwyatt]

If choosing between (1) no filing and (2) file w/ 0s, which situation would you rather have happen in future? I'd prefer the DOL coming back saying why did you file, no reason to, or 3 years from now asking where the late filing for year 1 is, and if you didn't do it, here's a nice late filing penalty.

[WDIK]

Personally, I think the Form 5500 instructions are pretty clear that a filing is required.

[mwyatt]

I'd agree w/ WDIK (having had this situation occur a couple of years ago w/ a 401(k) plan set up late in the year that didn't get fully implemented until after end of first year).

[JanetM]

Assets are not the deciding factor. If the plan was adopted and folks were earning vesting credit, I would file.