In-kind Contribution

[emmetttrudy]

I am trying to figure out the correction for a plan sponsor if they contributed funds to their Plan in-kind as opposed to in case. Has anyone encountered this before? From what I understand:

(1) The transaction must be backed out (positions sold) and the funds re-contribued in cash. Should it be the original amount involved in the transfer of stock or should it be the original amount + any earnings, if any?

(2) It is a prohibited transaction so must be notated as such on the Form 5500.

(3) The amount contributed does not count towards the Minimum Required Contribution. So as a result, they should file a Form 5330 and pay the excise tax on the failure to meet the MRC.

What I am not completely celar on is how much excist tax is to be paid. Is there one excise tax to be paid because there was a prohibited transaction, and then another excise tax paid for failure to meet the MRC?

[Andy the Actuary]

Not suggesting this is viable but is thinking altered if no action taken in respect of in-kind contribution and client makes a cash contribution -- an additional contribution -- in the amount of the MRC? Then, at least in-kind contribution was not made to satisfy MRC.

[emmetttrudy]

The thinking would be different...except for in this case this is a 2011 plan year contribution. So any additional contribution made is already late.