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Assets moved into Terminated Plan


Guest Beneflaw

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Guest Beneflaw

We have a frozen 401k plan. The sponsor chose not to go the route of applying for a final Determination letter since the Plan had recently been the victim of an IRS audit (prompting the freeze since it was so ridden with tainted assets, it was wiser to just forget it existed after it did all necessary corrections). It was voted to terminate the plan, effective 1/15/2011. As of 1/15/12, all assets were liquidated from the Plan....until, the Plan's service provider realized they made a mistake and in the prior year, placed QNEC monies in another qualified plan maintained by the sponsor, as opposed to the 401k Plan that it was intended for. This mistake, of course, came to light within the week.

So now, we are beyond the 12 month period due to an error made by the service provider. I read a similar post in another forum-looks as if we have to re-terminate the plan, and ensure the doc is up to par in terms of being in compliance for amendments, etc. Because the PYE is 6/30, the final 5500 has yet to be filed. I wouldn't think that we would have to do any sort of correction under EPCRS given that we are looking at 12 months + roughly 2 more months, and to my knowledge, we wouldn't be amending late on anything...thoughts are greatly appreciated.

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If the document was compliant on 1/15/2011 and the stupid 401(a)(9) amendment (if any) was adopted by 12/31/2011, what amendments would be needed to make the document compliant on 2/3/2012? It does not look like the plan will pass another year end before distribution of the newly discovered assets, so you don't have another Form 5500. You should think about whether or not there is an operational failure because of the misplaced assets and maybe a fiduciary breach. One might be affected by how the assets were invested while not in the plan.

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Guest Beneflaw
If the document was compliant on 1/15/2011 and the stupid 401(a)(9) amendment (if any) was adopted by 12/31/2011, what amendments would be needed to make the document compliant on 2/3/2012? It does not look like the plan will pass another year end before distribution of the newly discovered assets, so you don't have another Form 5500. You should think about whether or not there is an operational failure because of the misplaced assets and maybe a fiduciary breach. One might be affected by how the assets were invested while not in the plan.

Do you think that it would matter that the frozen (k) plan and the other qualified plan were both under 1 GAC, separated at the plan level (regarding your point about breach of fiduciary duty)?

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