5500 reporting of asset reversion in terminated DB plan

[bvhea]

On Form 5500-SF, Line 8, how do you report assets that have been reverted to the employer as part of a defined benefit plan termination? URGENT: 5500-SF due 1/18/2011

I understand that Line 13a will need to be answered "Yes" and the full amount of the reverted assets will need to be reported. Form 5330 has already been filed and the excise tax paid.

What I don't understand is how to report the reversion in Line 8 to wind up with zero ($0) assets at the end of the year and no error message. The instructions don't seem to address this issue, and 8j doesn't seem right since only 25% of the reverted assets were then contributed to a qualified replacement plan.

[Andy the Actuary]

You will note the same issue on Schedule H for large plans.

If you don't clear out and mark the 5500 final, you'll get an error. If you list as a transfer out but don't identify transferee plan, you'll get an error. If you list as expense, which it is not, the size may raise a flag. If plan is covered under Title IV and you list as a benefit distribution, you may have problems later because the PBGC 501 will not agree with the 5500-SF.

If it were my plan and I was unable to obtain an answer from the IRS, I would subcontract out the preparation of the form. In absence of any guidance, I would report as "other income."

It's beyond belief that your question is not addressed on the form or in the instructions. But it appears it hasn't.

[david rigby]

Andy is correct. This is a good question, with no help from the instructions.

If you get an answer from the EFAST2 Help Line 1.866.GO-EFAST (1.866.463.3278), please tell us.

[chc93]

On Form 5500-SF, Line 8, how do you report assets that have been reverted to the employer as part of a defined benefit plan termination? URGENT: 5500-SF due 1/18/2011

I understand that Line 13a will need to be answered "Yes" and the full amount of the reverted assets will need to be reported. Form 5330 has already been filed and the excise tax paid.

What I don't understand is how to report the reversion in Line 8 to wind up with zero ($0) assets at the end of the year and no error message. The instructions don't seem to address this issue, and 8j doesn't seem right since only 25% of the reverted assets were then contributed to a qualified replacement plan.

It seems like Line 8b Other income (loss) is a reasonable place for the reversion. The "loss" can possibly be viewed as a "reduction of plan assets" rather than "investment loss". Also, I'm not sure Line 8j would be correct, since I thought that the reversion to the employer has to occur first, then the employer transfers to a qualified replacement plan which then reduces the excise tax.

[bvhea]

Quick update - DOL/EFAST2 representative said she would call me back Tuesday to respond to my question then.

1/20/2011 Quick Update - The rep referred the question to the Chief Accountant who is supposed to call me tomorrow. Should I hold my breath?

[My 2 cents]

So did you get an answer? Are you still holding your breath?

Another couple of days and you might make it into the Guiness Book of World Records!

[bvhea]

After leaving about three messages, I stopped holding my breath (lol!). That actually worked, because I finally got a response from the DOL representative today. First, the Chief Accountant, who I was told was going to call me, never did and the DOL rep now says, he never will. Way to make a taxpayer feel special!

Next, the DOL rep questionned how I knew that there was a reversion. Honestly, did she think I was calling for my health? Sorry - that was maybe too snarky. Anyways, after the DOL rep acknowledged that both the directions for 2009 and 2010 were completely silent as to how a reversion should be reported in the Financial Information section of the 5500-SF, I suggested the ever-popular slot of 8g - Other Expenses might be the right spot. Her reply was, "You have to follow the directions." What?!?! When I again pointed out that there were no directions, she agreed that 8g was probably the best place.

I ended the call with the suggestion that perhaps the next set of 5500 directions could address this issue, since to the best of my 15-year experience, the directions have always been silent. Her response was that the directions for 2011, and maybe 2012, were already written, but she would pass along the request.

Well, this whole affair was an exercise in futility. If the DOL or IRS come back with questions about this 5500-SF filing, I'm going to point them to this message board. At least it'll prove I tried to find the right answer for the Plan Sponsor. I still find it hard to believe that I'm the only preparer to have ever had this question, but it's time to move on. Thanks for your interest in this topic. If I ever get an answer, I'll try to post it here.

[Guest jsmorrison]

well, with these parts and times in our life, you can't really expect perfection coming from these facilities and personnel. best thing to do, is do your thing, and get it over with the fastest and smoothest way possible. so you can get on other aspects of our lives and taking care of other business, rather than sitting and listening to hope-filled promises of these people.

i am sorry for the harsh words, since i have in my experience some of the worst with these facilities.

go ahead and post here the results, if you have them later okay.

cheers!

[JButtrick]

Well, Here it is 2017 and the 5500-SF instructions still don't seem to address how to report a DB plan reversion. Has anyone found an answer in the last 6 years?

[My 2 cents]

35 minutes ago, JButtrick said:

Well, Here it is 2017 and the 5500-SF instructions still don't seem to address how to report a DB plan reversion. Has anyone found an answer in the last 6 years?

Maybe if we all hold our breaths...

Hasn't been a problem for me - I haven't seen a termination surplus in ages!

[DMcGovern]

2018 and instructions still do not address this situation.  I did find in IRC Section 4980(d)(2)(B)(iii)(III) that "such transfer shall not be treated as an Employer reversion for purposes of this section."  This relates to the excise taxes when the amount meets the requirements for the 25% cushion.  The cushion amount has to be a direct transfer to the replacement plan, and done before any amount is reverted back to the Employer.  

Would it be possible to treat the cushion amount as a transfer to another plan?  Report on 5500 SF the amount transferred in Part III.7.j; 13a would be "no" (assuming no assets remained after the transfer to the replacement plan), 13b would be "yes"; and report the replacement plan information in 13c.

Would you also need to file a 5310-A in this situation?

[ActYouAiry]

I'm working on a final 5500 with an employer reversion. The 2020 instructions still don't provide guidance on where to put the employer reversion to allow the assets to reconcile (as far as I can see). I know for accounting purposes it's treated like a negative employer contribution. I tried entering the amount as a negative employer contribution [line 2a(1)(A)] into Relius Webclient and I didn't get an error. My current plan is to go that route unless I end up getting better guidance from the auditors. Since the negative employer contribution amount will match the employer reversion amount on line 5a, I'm hoping that won't raise any questions. I'll let you know how that goes... 

[ActYouAiry]

Update: the auditors did not have a definitive answer for me regarding where the employer reversion should be entered and agreed that the employer contribution line was as good a place as any. I submitted the 5500 with the asset reversion entered as a negative employer contribution on schedule H and the filing was accepted by EFAST2 with no validation errors or warnings. 

[Hojo]

Another year and more silence on this issue.  From what I can see, if you enter it on 8j and enter nothing in 13c it is now a warning and not an error so you can still submit the filing.  8j and 13a add up so I would assume anyone looking at the form would understand what happened.