terminated plan

[pmacduff]

I don't know why I have such an issue finding old threads...so...my apologies for resurrecting a topic that I'm pretty sure has been covered before. I just can't find it...

Plan terminated 7-10 years ago & filed a final return. (There were only 2 participants.) Now - there are some residual assets (less than $500) that have been "found". Distributions can and will be made to the 2 participants.

Does this mean the final return must be amended and refiled after this amount of time? If not, does the Trustee still file a 1096 & 1099-R forms? What does he use for the EIN/name information (plan or plan sponsor)? Plan Sponsor is also no longer in existance but participants have been located.

Thanks in advance.

[Guest Sieve]

I don't know what the earlier threads said, but I believe that the "right" thing to do would be to amend the "final" return, file the missing returns, and then file a new final return when distribution of this residual asset has been completed. On the other hand, I don't think I would go through all of that, because it would open all sorts of other administrative issues (such as, will you now need to amend for EGTRRA & go in under VCP for all the missing amendments, etc.?). Normally, I'd just have the employer put the funds in an escrow account, held by someone as Trustee of the non-existent Plan--but, without a sponsor, I don't know what EIN I'd use on the 1099-R, unless you just get a new EIN for this Trustee for this one transaction. Interesting.

[Bird]

I agree, doing the "right" thing is going to raise more problems than it is worth. Getting it to the participants and doing it even half-right is likely to cost more than the funds that appeared.

You might want to consider having the money paid to the service provider as an expense, the theory being that the net assets all along were $0. And if that windfall makes anyone uncomfortable, then the service provider can turn it over to a charity.

[Kevin C]

I would not be comfortable treating the funds as an expense. What services justify the fee if there are no account balances? Only reasonable fees can be paid by the plan.

We had a similar situation come up recently during an IRS audit of a terminated plan. The final 5500 was filed for 2006 and the later distributions were paid in 2008. They did not make us amend the final 5500 or file any later ones. The IRS's concern was that the participants were paid the correct amounts. The amounts will be reported on 1099-R, etc. Of course, this was done with IRS blessing, which you won't have.

I wonder if a call to the IRS would be helpful?

[pmacduff]

Thanks everyone...as I mentioned, the participants are already located and ready and able to be paid out. I think both rolled the original $$ and are not yet old enough to retire so each wants to roll this "residual payout" into their IRA account.

The concerns expressed to me were whether or not these would be considered valid rollovers (I maintain yes, they are!) and whether or not there was going to be any responsibility on the part of the Trustee to file an amended 5500 return and 1096/1099-R forms. The Accountant is trying to handle this for his former client who is (was?) the Trustee of the Plan. The trust did have its own tax ID #, so it is possible for the Accountant to prepare and have the Trustee file the 1099-R forms. I think he was hoping that an amended 5500 was not necessary. There is no tax withholding on the rollovers, so there won't be any tax deposit issues.

I don't believe it should be necessary to file an amended final return that is over 7 years ago for this amount, but also know that the "right" way might be to do just that.

Thanks again