terminated plan and recovery 3 years later

[DPL]

Plan terminated and paid out in 2012. In 2015, plan has an expense recovery of $56,000, which needs to be distributed to 75 participants. What are the mechanics for re-opening the trust and handling the payouts so that they can be rolled over?

[jpod]

What kind of "expense recovery" is this? Are you sure it is a plan asset and not a recovery of part of an employer-paid expense? Is it a DC plan?

[DPL]

Plan is DC plan. Recovery of an expense previously paid by the Plan.

[ESOP Guy]

I am saying I can't cite any authority on this....

What i would do is issue forms and see how many of the people you can find. For the one's you find give them their share of the money. For the one's you can't find (after using a search service) I would set up an IRA for them. Issue 1099-Rs. Be done.

I wouldn't bother with a new Form 5500 or anything like that.

With that much money maybe it is worth the trouble to open up an account in the plan's name to park the money so it is clear the sponsor isn't trying to benefit from it.

In my 20 years of doing this work what I have found is these kinds of situations aren't even contemplated by the rules much less actually covered.

I am hard pressed to see how either the DOL or IRS are really going to object to this. For one thing to do much more and a large chunk of the money will be eaten up by fees and how does that benefit the participants.

Once again not saying that is the rules as much it is what I think is the practical solution.

[Peter Gulia]

While agreeing with much of the practical suggestions, is it so clear that a Form 5500 report would be too much burden or plan-administration expense?

If the plan had only 75 participants as at the first day of a plan year and the plan's one asset is derived from assets that were qualifying assets, perhaps no independent qualified public accountant's report should be required.

While there might be a recordkeeper's or TPA's fee to prepare a report, it should be not imprudent to incur a reasonable fee for what's necessary to file a report required by the statute.

[Bill Presson]

To do a simple 5500 for one year might not be much of a burden. But what about the intervening years? And the DOL/IRS correspondence that would result?

No telling what kind of black hole that might be.

[Peter Gulia]

Could the administrator omit a report on each of 2013 and 2014 based on an interpretation that the plan had no reportable asset on any day in either year?

(Because none of us knows the facts about the "expense recovery", I'm imagining the possibility that the situation that did not produce a payment until 2015 might be one that generally accepted accounting principles might treat as one that had no value to be recorded as at 2013 or 2014.)

And could filing Form 5500 reports (perhaps with lots of zero entries for 2013 and 2014) and furnishing summary annual reports to participants help protect the administrator and perhaps other fiduciaries by setting up knowledge to run a statute-of-limitations period?

I would at least ask the client to decide what accounting to participants and regulators the client prefers.