Final Form 5500 Question

[bzorc]

An employer has maintained multiple 401(k) plans for various nursing homes over the years. It was decided to merge all of these plans into a multiple employer plan with an effective date of 1-1-16.

The TPA of the employer, hoping to make the 2015 audit of 5 of the plans that are merging the final audit of the plan (in a sense trying to avoid a one day audit for 2016), has indicated that the assets "merged" on 1-1-16. At 12/31/15, the assets were still invested in the various mutual funds maintained by the old plans, as they were to transfer in-kind on 1-1-16.

The TPA, in filling out the 2015 Form 5500, is maintaining that this is the final return for the old plans, and is trying to show, on Schedule H, the assets as of 12/31/15, with a liability "due to new plan" in the same amount, thus zeroing out the assets as of the end of the plan year. Their software is rejecting this treatment. Both the TPA and plan auditor is maintaining that the 2015 Form 5500 filing and certified audit are to be considered "final".

I have seen this happen in the past, but it was many years ago. What are folks opinion of the above scenario? Thanks for any replies.

[My 2 cents]

Not sure about the software for 5500 preparation, but if 5 plans with 5 investment funds merge into one as of a given date, after that date, all 5 investment funds belong to the post-merger plan. Whether the assets are moved or not does not change this.

[Bird]

If the merger paperwork said the plans were merged on 1/1, then there is a one day year needing a return(s).

I'm not sure anyone cares though, and if the auditor signs off on the merger effectively being 12/31, that might provide enough cover to go ahead and do it.

I agree that physical movement of the assets is not necessary for a plan to cease to exist.

FWIW the software problem may be related to the following contradictions:

The TPA of the employer, hoping to make the 2015 audit of 5 of the plans that are merging the final audit of the plan (in a sense trying to avoid a one day audit for 2016), has indicated that the assets "merged" on 1-1-16.

The TPA, in filling out the 2015 Form 5500, is maintaining that this is the final return for the old plans, and is trying to show, on Schedule H, the assets as of 12/31/15, with a liability "due to new plan" in the same amount, thus zeroing out the assets as of the end of the plan year.