short plan year

[thepensionmaven]

Plan originally set up as calendar year plan, when we took over, the client tells me they are a fiscal ending 10/31.

Plan has a corporate resolution changing plan year to 11/1 to 10/31 for 2015 and the 2015 5500s have not yet been filed.

Plan was restated for PPA effective 1/1/2016.

Question is the 2015 5500s - if we do a short 5500 for 1/1/- 10/31/2015, how do we handle the 5500s for 11/1/15-10/31/2016 as that would be two sets of 5500s for 2015.

Won't IRS and/or DOL send out a Notice or Letter??

[david rigby]

Not answering your question, just a warning: To change a plan year, the amendment/resolution/etc. must be signed on or before the end of the (new) short year. If your resolution was signed after 10/31/15, oops.

[Belgarath]

Shouldn't cause any problem. Very common to have two forms for the same year in such a situation.

Note that I say "shouldn't." Impossible to guarantee that a change won't cause some sort of question. I can say that when I've done it, no problems/questions.

[thepensionmaven]

Thanks, the resolution was dated prior to 10/31.

Wouldn't IRS look at this as the plan year being more than 12 months?

That's my only concern at this point.

[ETA Consulting LLC]

Thanks, the resolution was dated prior to 10/31.

Wouldn't IRS look at this as the plan year being more than 12 months?

That's my only concern at this point.

This is a non-issue. So, you have a short plan year 1/1/2015 - 10/31/2015 and another 12 month plan year 11/1/2015 - 10/31/2016. You have two distinct plan 2015 plan years, but neither of them exceeds 12 months.

As for the PPA restatement being effective 1/1/2016; it's another non-issue. The restatement effective date may fall within a plan year. Merely restating plan onto a new adoption agreement doesn't mean that you're changing any plan provisions at the time of restatement. You're merely drafting the current provisions onto an updated document.

I don't see an issue :-)

Good Luck!

[My 2 cents]

There is no such thing as a long plan year. They are not permitted. If there is any change made to the plan year, you have a short plan year followed by a regular 12 month plan year starting on the new first day. Example: Plan with a December 20 to December 19 plan year is to be changed to the calendar year effective as of 1/1/16. The last plan year ending on December 19 runs from December 20, 2014 to December 19, 2015. You then have a short plan year running from December 20, 2015 to December 31, 2015, with the next plan year running from January 1, 2016 to December 31, 2016.

In that example, if a participant works at least 1,000 hours between December 20, 2015 and December 19, 2016 and also between January 1, 2016 and December 31, 2016 (which would certainly be the case if the participant works 1,000 hours between January 1, 2016 and December 19, 2016), 2 years of vesting service must be recognized between December 20, 2015 and December 31, 2016.