Established a Plan but no assets

[TPA Bob]

Have a new client that established a 401(k) plan in 2015. There were no contributions for 2015 (no idea why)(no deferrals) and to date in October 2016 still no assets.

I cannot find guidance on this. Presume that there is a filing requirement for 2015. Any thoughts?

[RatherBeGolfing]

If it is a non-EZ plan and you have participants, there is no exemption to the filing requirement simply because you had no contributions / no assets.

File the 5500 and move on.

[Peter Gulia]

Filing a Form 5500 report might be desirable because the IRS counts a plan trust's Federal income tax statute of limitations from that filing.

IRS Announcement 2007-63, 2007-30 Internal Revenue Bulletin (July 23, 2007).
https://www.irs.gov/irb/2007-30_IRB/ar18.html?_ga=1.225184222.516109692.1475756708

[Flyboyjohn]

Just to be contrarian I'll take the opposite position and say that it looks like this "plan" may never have assets and was a mistake to begin with.

Has the client paid your standard TPA fee for 2015 work? Did you file a 5558? If the answers are yes to both then you might as well go ahead and file a "no activity" 5500 otherwise I'd throw it back to the "client" and have them make the decision.

[TPA Bob]

Thanks to all. Flyboy - we have not "engaged" by the client as of now although we will be shortly. They are in a squabble with the existing provider that needs to be resolved first. We will quote them a fee to do a no activity return for 2015. We hope that the prior provider did an extension of time to file. Plan will fund a non elective profit sharing contribution for 2016.

Thanks again.

[jpod]

Depending upon the plan language, wouldn't you have an operational violation if an elective deferral opportunity to employees was not offered? However, if that was the case I guess you'd just treat the plan as disqualified and "terminate" it (with no adverse tax results to anyone) and start a new plan, that is if you really wanted a plan.

[TPA Bob]

Will be a question we will be asking.

[Mike Preston]

Terminating and starting a new 401(k) is precluded by the successor plan rules.

[jpod]

But, Mike, isn't it only that the termination is not a distributable event (and in this case there is nothing to distribute) if you start up a new plan?

[BG5150]

Terminating and starting a new 401(k) is precluded by the successor plan rules.

I thought it was 1 year after the last 401(k) funds left the plan. In this case, there were no 401(k) funds.

Can you terminate a plan that was never qualified? What exactly goes into declaring a plan unqualified? Do you fill out a form or something? (I have never had to go through this).

That said, I think terminating a plan and starting a new one would be much more costly than just filing a "blank" 5500.

[Mike Preston]

Do you really want to be arguing that point with an IRS auditor? It would seem to me that if the terminated plan were to stop filing 5500's it is implicitly stating that the distributions (of zero dollars) were in fact made. If faced with retroactive analysis, though, I would argue the opposite.

[jpod]

Huh? Are you saying that you risk disqualification because you've made an impermissible distribution of $0?

[Mike Preston]

On review, it looks like the successor plan rules do, in fact, affix to the terminated plan, not the successor plan. It still wouldn't surprise me to have to explain all of this to an IRS auditor gunning for the successor plan.