5500 Plan Characteristics

[Guest BUG]

I have a Volume Submitter 401(k) Plan that does not allow for profit sharing contributions. Can someone confirm that I DO NOT include code 2E on the 5500?

Thanks!

[ETA Consulting LLC]

I really don't think it matters. I say that because 1) the plan does not have a profit sharing contribution (NO), but 2) a 401(k) is, technically, a feature of a profit sharing or stock bonus plan (YES).

I imagine that 100 plans that are 401(k) only would have some percentage not include 2E in the pension codes and an offsetting percentage (1-%) including the 2E.

I would include it, but would certain respect a decision not to. My reason for including it would be because it is a feature of a profit sharing plan, which implies that if the plan would become Top Heavy for any reason, a non-elective 'may' be required despite the fact the plan is not set up to make profit sharing contributions. Arguably, until such time as a non-elective is made (for whatever reason), you may decide not to include it.

Good Luck!

[BG5150]

I have a few plans that do not offer a Profit Sharing option.

I do not put 2E on the 5500.

[Guest niobehorton]

I prefer profit sharing.

___________________

Uncommon Article Gives You The Facts on types life insurance as well as term life insurance cheap That Only A Few People Know Exist

[BG5150]

I prefer profit sharing.

How do you justify that if there is no profit sharing feature currently available?

[Tom Poje]

Interesting. IRS just released the following a few months ago in regards to Money Purchase plans. Apparently, despite being merged into 401(k) profit sharing plans many continued to code the plan as money purchase because those assets are still subject to the joint and survivor rules!

see my underlined notes below. Since there is no code for 'defined contribution' I can only conclude the IRS uses that term interchangeablly with profit sharing (otherwise the IRS comments make no sense - no pun intended)

...................

The responses showed that only 1 plan sponsor in the sample had adopted a money purchase pension plan with a 401(k) feature after ERISA by incorrectly adding a 401(k) feature to an already existing money purchase pension plan. Once brought to their attention, the sponsor applied to EPCU to correct their plan error. As opposed to an examination, errors discovered during the compliance check process may still be voluntarily corrected or self corrected through EPCRS because the plan is not considered to be under examination.

Instead, mostly all the sponsors had merged a money purchase pension plan into a 401(k) profit sharing plan due to changes in the deductibility rules for defined contribution plans beginning in 2002. These changes allowed a sponsor to contribute and deduct in a single plan what previously could only be contributed and deducted in 2 separate plans. Rather than maintaining both a money purchase pension plan and a 401(k) profit sharing plan, sponsors adopted or continued a 401(k) profit sharing plan, discontinued the separate money purchase pension plan, and transferred it’s assets into the 401(k) profit sharing plan.

After the merger, sponsors continued to report they were both a money purchase pension plan and a 401(k) profit sharing plan on their Forms 5500 due to the special quality of the merged assets. For example, joint and survivor rules continue to apply to the money purchase pension assets even when they are merged into a 401(k) profit sharing plan.

Some sponsors in the sample indicated that their plans were money purchase pension plans or 401(k) plans, but were not defined contribution plans. Since both money purchase pension plans and 401(k) plans are types of defined contribution plans, there appeared to be some confusion on plan types. A minority of sponsors responded that their plans were only money purchase pension plans and not 401(k) plans, or 401(k) plans and not money purchase pension plans. These types of preventable errors result from sponsors selecting the wrong pension feature codes on their Forms 5500. Finally, a few potentially noncompliant situations which required review of the plan sponsor’s books and records were referred for examination.

http://www.irs.gov/Retirement-Plans/Employ...e-Pension-Plans