52/53 Week Plan Year and EBSA

[mwyatt]

Just processed the 2009 filing (YE November 2010, not late) for a plan using electronic filing. Plan year as defined in the document ends on the last Friday of November. Plan has been filing 5500s since the 1979 year. This generated an error message since the plan year indicated on the forms isn't exactly 365 days long and we didn't check "short plan year" (which it isn't, and at some point under the calendar would have to check a box entitled "long plan year" given this logic). Anyone else run into this situation and how was it resolved? As a side note, hopefully they get this coding fixed before 2012 rolls around.

[A Shot in the Dark]

We have a few clients that have fiscal year ends and corresponding plan year ends that end up being a 51 to 53 week year depending upon the year. For our clients this fiscal/plan year generally end near July 31.

We have given up attempting to report on the Form 5500 the correct actual plan year end. We tried for a few years, but every year we would have to respond to an IRS Notice (or several notices) detailing a short plan year error or extended plan year error.

We now simply file the 5500 showing a 8/1 to 7/31 fiscal/plan year for 5500 reporting regardless of the acutal fiscal/plan year. Of course all calculations are completed using the actual dates.

The client agreed with our solution as did the independent auditors.

The indpendent auditors note the reporting issue in their audit.

To date we have had no problems.

[Andy the Actuary]

We have a few clients that have fiscal year ends and corresponding plan year ends that end up being a 51 to 53 week year depending upon the year. For our clients this fiscal/plan year generally end near July 31.

We now simply file the 5500 showing a 8/1 to 7/31 fiscal/plan year for 5500 reporting regardless of the acutal fiscal/plan year. Of course all calculations are completed using the actual dates.

So, if your plan year is say July 31, 2011 - July 31, 2012, you would show a Plan Year of August 1, 2011 - July 31, 2012, an actuarial valuation date on SB of July 31, 2011, and for PBGC, your census date is shown as July 30, 2011. Or do you simply make the correct calculations but report an actuarial valuation date of August 1 and a PBGC census reporting date of July 31?

[A Shot in the Dark]

Andy,

Our clients that have this issue are DC clients, primarily 401(k) and ESOP.

In the plan documents for our clients that have the 51-53 week plan year, we define the plan year as being:

The 51-53 week period ending on each allocation date and coninciding with the Employer's taxable year.

You ask a great question regarding a DB Plan in this situation; whereby a given plan year could include two separate actuarial valuation dates.

I am not sure of the answer.

[Andy the Actuary]

Andy,

Our clients that have this issue are DC clients, primarily 401(k) and ESOP.

In the plan documents for our clients that have the 51-53 week plan year, we define the plan year as being:

The 51-53 week period ending on each allocation date and coninciding with the Employer's taxable year.

You ask a great question regarding a DB Plan in this situation; whereby a given plan year could include two separate actuarial valuation dates.

I am not sure of the answer.

I had a DB Plan where the Plan and Fiscal Year end was the Saturday nearest October 31 (shoe warehouse inventory day). We put the correct dates on the 5500, Schedule SB, PBGC, etc. Of course, this was 1977 and all the forms were prepared by hand (or type written). Never a problem. Today, well, would you rather slide down a razor sharp banister or subject your unmentionables to being squeezed in a vise?

[mwyatt]

Some sort of resolution to report here:

Received an e-mail back from DOL asking for me to call the central number to discuss the situation. Described to initial contact that plan year is a "52/53" week plan year ending on the last Friday of each November, that the Plan has been in existence since 1979, has received favorable determination letters since inception, and had always filed 5500 filings on the actual plan year. His response was "well that's an illegal plan year". News to me, and is all over the IRS Code and publications as OK (see Publication 538, IR Rev. Ruling 81-159). I mentioned as such, and his response was "well that's the IRS; we're the DOL" (your tax dollars at work).

Fortunately was bounced higher to another person @ DOL. Her initial response was to have us file dummy 5500s showing a 365 day plan year, and then every once in a while file a short plan year to reset. Did remind her that the plan sponsor signs the 5500 under pains and perjury that the information is accurate, so that knowingly filing a 5500 showing a plan year that is wrong didn't sound like an acceptable solution to me or to the client.

Long story short, she got back to me later that the X-034 error is in fact in error in this situation, and that programmers are working on it; will keep in back of my head next year when we do the 2010 e-filing. So if you have a 52/53 week year, stand your ground.

[Andy the Actuary]

If the authors ever had to apply their own words, they'd never write them.

I would suggest changing to a 365 day plan year. Before so doing, if FASB applies, you would want first to ensure that the auditors would acquiesce to using a measurement date that differs from fiscal year end by no more than a few days. The other winking issues are possibly compensation/service measuring periods that overlap plan years and determination of the maximum deductible contribution.

This may be preferable to wishing and hoping that government programmers will even attempt to accommodate (this would throw off due dates for 5558 in some years). As it is said, "Spit in one hand and wish in the other and see which hand fills up faster."

[mwyatt]

Fortunately a straight profit sharing plan so no FASB issues.