B Or No B The Final Year?

[mming]

I've always been in the habit of filing a final schedule B along with a plan's final return. In the case where the plan had an EOY valuation date, the B would be all zeroes (except for the BOY RPA entries) since the plan would be fully distributed before the last day of the year. For plans with BOY valuations, I would do a regular valuation just like every other year except the projected benefits would equal the accrued benefits with 100% vesting. The half dozen or so actuaries that I've worked with over the years never indicated any problem with either of these approaches, regardless of whether the plan termination date was in the final year or the prior year.

Recently, a well-respected peer with 20+ years of experience pointed out that it's never a good idea to file a B with all zeroes, so a plan with an EOY val date should change it to BOY. With a BOY val, if the plan termination date occurs during the final year, a B should be filed. However, if the term date was in the prior year, a B should not be filed. Incidentally, I'm hoping this approach is OK since I have a plan that would "work out" if this was the case (barring keeping the EOY val date). My concern, other than filing a 5500 for a DB plan without a B, is, wouldn't one have to do a val just because a val date has elapsed? Is it not necessary because a val is being done within a year of the distributions? Using actual dates for a plan with a 12/31 PYE, consider a plan term date of 11/15/08 and a val being done as of 12/31/08. A val is then not done on 1/1/09 (after change to BOY), all assets are distributed 6/1/09 and a final return is filed without a B. Has anyone on this board handled a terminating DB plan this way?

[Blinky the 3-eyed Fish]

Hmm, a lot of questions. I will give you the two minute answer.

First, Rev. Rul. 79-237 requires the funding standard account to only be until the end of the plan year in which it terminates. So if your plan terminated in 2008, you should never be filing a Sch SB for 2009.

I too don't agree with your methodology in completing the B/SB in the year of termination. Just because the assets are distributed doesn't make an EOY valuation all zeroes. The distribution amount versus the liabilities created under the actuarial valuation will most certainly be different. An actual distribution could include a reduction in benefits (most often for the owner), an increase in benefits, valued under 417(e) rates, etc. The first two should absolutely not be considered for the valuation. And now you have PPA mandating the calculation of liabilities, so that further hampers this approach.

Similar comments apply to your BOY valuation methodology.

My two minutes are up.