Trailing Dividends and Plan Termination

[Guest jjren]

DC plan with termination date 11/23/09. Most distributions have been made and accounts of unresponsive participants will be transferred to IRA tomorrow. This will leave $0 assets as of 12/30. The goal is to avoid a 2010 Form 5500. Problem is we know that there are dividends that will be credited later than today. These are likely to be very small amounts and will be distributed as soon as possible to participants, but since they will go in and out of the trust, will they create more plan assets that will require a 2010 Form 5500?

[Peter Gulia]

The plan's administrator might consider whether the facts and circumstances make it reasonable for the plan's financial statements to report in assets an amount for dividends receivable, and in liabilities an amount for distributions payable, as at December 31, 2009. It's possible that these amounts, along with others, might result in net assets of zero.

Following this, if all of the clean-up distributions are promptly paid and delivered in January 2010, the plan's administrator might consider whether the plan did not, under accrual accounting, have assets after December 31, 2009.

If the plan's administrator lacks expertise in generally accepted accounting principles, prudence might require the administrator to get advice about whether such an accounting would be consistent with GAAP. And if the plan's financial statements will be audited by a public accountant, it might be smart to seek the CPA firm's advance view about whether the accounting would meet GAAP.

I'm not saying that these ideas are suitable accounting or reporting; rather, I suggest only that it might be worthwhile to get professionals' advice.

[Bird]

You might want to think about paying those trailing dividends as fees instead of distributions, and accrue the divs and the fees in 2009 so the net assets are zero...I don't think it's technically correct, because you do have assets (and equal liabilities) in 2010, but I've done it and will do it again. I'd be less comfortable receiving the divs in 2010 and paying them out as distributions, because then they really and clearly are 2010 distributions, at least IMO.