Merger Effective 1/1/2010

[austin3515]

Does anyone have any support, q&a's etc., for me to support the follow:

If we merge two plans together on Januiary 1, 2011, may we treat the December 31, 2010 plan year as the final 5500 for the Plan that is being eliminated? I have heard Ian Dingwall (Chief Accountant at the DOL) say this on at least one occassion, but thought if I could find something in writing, that would be great.

Thanks,

[jpod]

Anxious to find out if you came up with something. It seems that this issue comes up almost every year in my practice and I always advise that technically there is a 1-day form 5500 required if you merge Jan. 1. I can't imagine what Dingwall is relying on (other than his own opinion, which should carry a lot of weight but still . . . ).

[austin3515]

More I thought about it, my opinion is that because we merged the plans on 1/1 and didn't specify what time of day, that foir the entire day of 1/1 there was only that single merged plan. So it was at the stroke of midnight that it was merged. The best argumentt he DOL can make is that for one one millisecond there were two plans, and let's face it, that is splitting hairs...

[david rigby]

No need to split milliseconds.

Perhaps the Gray Book will provide a reasonable response?

Q&A 1997-38

Other DB Issues: Mergers and Short Plan Years

A plan sponsor intends to merge two calendar year plans. To avoid filing a short plan year Form 5500 for either plan, should the merger date be December 31 or January 1?

RESPONSE

The merger documents should include language describing the transaction as taking effect at a time such as "as of the beginning of the plan year" or "as of the end of the plan year." As long as the intention is clear, the IRS should not question a date of either December 31 or January 1 on Form 5500 or on Form 5310-A.

Copyright © 1997, Enrolled Actuaries Meeting

All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

[jpod]

While it is splitting hairs, I disagree: if the merger is effective on Jan. 1, how do you escape the conclusion that both plan had assets at the end of the day on Dec. 31, and if a plan had assets at the end of the day on Dec. 31, how could it not have an opening balance on Jan. 1?

Putting that hair splitting aside, what would be a reason not to merge on Dec. 31?

[david rigby]

Just an opinion (and how I've done this before): merge on 12/31 and show asset transfers on Schedule H/I. The surviving plan assets at EOY will be the total, while the EOY assets for the disappearing plan will be zero. The auditor loved this solution.

[austin3515]

I will certainly do that next time, but I had always been "taught" (I think) to merge plans on 1/1. But in this situation the ship has already sailed...

[david rigby]

But in this situation the ship has already sailed...

Maybe not. Might be able to "fix" the merger amendment. Legal counsel.