terminated plan, final 5500

[WCC]

Plan sponsor sells its business via an asset sale. All employees terminate and are hired by the purchasing company. Plan sponsor files bankruptcy. During this process trustees signed plan termination amendments and all benefits were paid to participants. The plan has $0 assets remaining. Plan is a large filer. The plan sponsor has no assets to pay for the audit nor do they have anyone left behind that will work with auditors. Therefore, the final 5500 will not be filed.

When the DOL realizes this, they will send letters. When the DOL receives no response, what is going to happen? Do we go into the abandoned plan rules even with no assets in the plan?

Thank you

[david rigby]

Depends on who you are, and your relationship to the ER and/or the plan.

- Is this a DB or DC plan?

- Are you the record-keeper?

- What does the plan auditor say?

- What does your attorney say is your responsibility?

- Does your service agreement include your preparation of the 5500 (and have you already been paid for it)?

Note the last one: it's possible you are on the hook for 5500 preparation now. (Probably not your responsibility to worry about the audit.)

[jpod]

This is a compliance question and a penalty exposure for the plan administrator. Who is the plan administrator? If it is the plan sponsor this is now the Bankruptcy Trustee's issue to worry about.

As a side issue, you said "trustees sign plan termination amendments." I assume you meant the plan trustees, not the Bankruptcy Trustee. Did the plan trustees have authority to amend the plan?

[WCC]

Depends on who you are, and your relationship to the ER and/or the plan.

- Is this a DB or DC plan?

- Are you the record-keeper?

- What does the plan auditor say?

- What does your attorney say is your responsibility?

- Does your service agreement include your preparation of the 5500 (and have you already been paid for it)?

Note the last one: it's possible you are on the hook for 5500 preparation now. (Probably not your responsibility to worry about the audit.)

I am the investment consultant/advisor

DC plan. plan auditor has not been engaged. The auditor who has been involved in prior years knows they won't get paid so they have avoided the plan and are not interested in being involved. Their attorney (not an ERISA attorney) is taking the stance they have no money so let the DOL come investigate and fine them. We are not responsible for the 5500 but it will of course come back to me at some point in the future and someone will look to point fingers. The plan is with a large national provider and is bundled. Both us and the recorded keeper have sent CYA letters detailing the sponsors responsibilities.

[WCC]

This is a compliance question and a penalty exposure for the plan administrator. Who is the plan administrator? If it is the plan sponsor this is now the Bankruptcy Trustee's issue to worry about.

As a side issue, you said "trustees sign plan termination amendments." I assume you meant the plan trustees, not the Bankruptcy Trustee. Did the plan trustees have authority to amend the plan?

Plan sponsor is the administrator. Yes, the plan trustees signed all the termination amendments before the bankruptcy process started. Yes, they had authority to do so at the time.

[jpod]

Oh, so you mean that the Plan document says that the Plan may be amended by the Plan Trustees. Ok(?).

[WCC]

Oh, so you mean that the Plan document says that the Plan may be amended by the Plan Trustees. Ok(?).

Sorry, I am using the terms interchangeably when I should not. Plan administrator signed termination amendments.

[Tom Poje]

I suppose you could file showing final, assets to 0 and in place of auditors report a note saying

company bankrupt, all assets have been out, etc

that way when the DOL looks they have something (which turns out to be 'nothing' to go on)

maybe include a note from mom indicating you couldn't think of any thing better to do.

[Peter Gulia]

Bankruptcy is not necessarily an excuse from a plan administrator’s duty to file an annual report, including an independent qualified public accountant’s report.

Administrative Law Judges have upheld such a position.

https://www.dol.gov/ebsa/newsroom/2010/ebsa011510.html

[jpod]

FGC, obviously bankruptcy excuses nothing, but the facts stated are that the PA/Plan Sponsor has no assets. So, is there some individual who would have exposure to penalties or sanctions by not causing the PA to file, or to file but without an audit report? The Bankruptcy Trustee personally perhaps?

[Peter Gulia]

The Bankruptcy Code in its section 704(a)(11) states:

The [bankruptcy] trustee shall ... if, at the time of the commencement of the case, the debtor (or any entity designated by the debtor) served as the administrator (as defined in section 3 of the Employee Retirement Income Security Act of 1974) of an employee benefit plan, continue to perform the obligations required of the administrator[.]

There are steps a bankruptcy trustee may take to administer a plan and meet an administrator's ERISA duties. These might include using the plan's assets to defray reasonable expenses of administering the plan.

Or if a bankruptcy trustee is in doubt about whether engaging and paying an independent qualified public account and other service providers is prudent and otherwise consistent with ERISA's exclusive purpose, he or she may bring a civil action "to obtain other appropriate equitable relief", which might include an Article III court's approval of one or more plan-administration expenses.

One recognizes that difficult circumstances can make unclear exactly what a fiduciary must or should do. But there are ways to find out.